Twitter's Survival as a Subscription Service Depends on Apple and Google

Assuming Twitter Inc. can weather its chaotic start under Elon Musk, the platform is poised to become more of a subscription business-with far leaner operations and less moderation. But that sets the stage for yet another challenge: a possible standoff with Apple Inc. and Alphabet Inc.'s Google over fees and content.

The vast majority of users access Twitter on iPhones and Android devices. Apple and Google safeguard those products and run the payment systems on their respective app marketplaces. After a botched debut, Twitter plans to relaunch Twitter Blue-a subscription plan that offers verification to any paying customer-at $8 per month on Nov. 29.

That means Apple and Google both stand to benefit: The new Twitter Blue costs $3 more per month than the last version, will likely be heavily marketed and-ideally-offer features that many users will deem worthwhile. That includes Twitter's famous blue check and the ability to appear higher in search results. If the rollout goes well, it will drive more revenue to Twitter but also to the tech giants.

That's because both Apple and Google take a commission on subscriptions purchased on their platforms. For Apple, that's a 30% cut (reduced to 15% after year one per subscriber). For Google, that's a 15% slice from the beginning.

Twitter is trending toward 250 million daily active users. Let's assume that 1% of that user base-2.5 million people-subscribe on either iOS or Android. Excluding added subscription products within Twitter, which adds up to $72 million in year one revenue for Apple and $36 million for Google.

That figure is obviously immaterial financially to either Apple or Google but could be seen as a costly commission to Musk, who has acknowledged that he overpaid for the social network. The fees, therefore, could put Musk at odds with the app store operators.The billionaire has long criticized Apple's fees, calling them a "tax on the internet" and saying they are "10 times higher" than they should be. Even within the last few days, he tweeted that "app store fees are obviously too high due to the iOS/Android duopoly."

For now, though, Musk has enough to worry about at Twitter without tangling with Apple or Google. The last thing he needs is a battle with trillion-dollar companies.

If he can get Twitter in a more stable condition, I'd expect a war of words to flare up. It may even lead to his company offering Twitter Blue subscriptions via the web, bypassing the required fees when users sign up via the iPhone and Android apps.

Apple already allowed Netflix and business apps to take signups that way, but it hasn't made the provision for social media. So, what happens if Musk tries to circumvent Apple's in-app purchasing with Twitter Blue? Such a scenario could set off a Fortnite-like battle.While Twitter is arguably more critical to society than offerings from Fortnite maker Epic Games Inc., Apple and Google haven't been afraid in the past to pull apps that defy their rules.

When Apple removed the Fortnite game from its app store-because Epic was skirting in-app commissions-the company showed it was willing to part with a source of revenue that had generated more than $100 million.

But there's an even bigger issue than fees that could irk Apple and Google: content moderation. Twitter has fired many of the contractors who worked on policing misinformation and hate speech, and executives overseeing that effort have either fled or been laid off. Musk has been clear about his desire to increase free speech on Twitter, but that's brought a downside. In just the last few weeks, some users have seen an increase in racism, antisemitic rhetoric and scams on Twitter.

And Musk's decision to give verification badges to any paying user-with no real approval process-led to a wave of impersonation. There were fake LeBron James trade requests, an announcement from an imposter Eli Lilly that insulin is now free, and many people pretending to be Musk himself.With Twitter Blue set for a reboot later this month, the company is trying to iron out these problems. That includes requiring new accounts to wait 90 days to subscribe to Twitter Blue, meaning a troll can't hop on the platform and instantly start using a blue check to impersonate someone.

But if Twitter can't get its content-moderation house in order, Apple and Google may step in as gatekeepers. After all, they've previously removed social networks, including Parler, from their platforms for that reason. In the case of Parler, the app was ultimately restored to both app stores after the social network followed a series of steps to ensure it was moderating content.So, there are two potential scenarios in which the app stores block Twitter: if it tries to circumvent in-app purchases and if it doesn't police its content to the satisfaction of Apple and Google. That means the road to Musk creating a successful subscription service runs right through those two tech giants.

Still, I expect Apple and Google to give Twitter an unusual amount of leeway. Twitter's brand and importance remain strong, and alienating hundreds of millions of users-who are glued to their devices because of the app-would be a losing situation. As would upset Musk, who runs two other influential companies, Tesla Inc. and SpaceX. That makes it in everyone's interest to avoid an all-out digital war.