Trendy social-media apps come and go. But if a social-networking startup cracks the code to grow an audience while monetizing, there's a better chance it will stick around.
Social-media incumbents like Meta, TikTok, and Snapchat have long relied on advertising dollars to stay afloat. In recent years, especially with advertising budgets fluctuating, these platforms have attempted to expand into subscriptions and other monetization tactics (such as Twitter Blue, Meta Verified, or Snapchat+).
Smaller social companies like Patreon, Discord, and VSCO have leaned more heavily into subscriptions, building their businesses around them. VSCO CEO Eric Wittman recently told Business Insider that the photo- and video-editing app is "capital efficient," and a spokesperson confirmed that it is profitable.
When it comes to newer consumer-social startups, the environment they're entering is turbulent — investor checks have dwindled, users are facing subscription burnout, and successful advertising models require massive scale.
So how are the emerging, buzzy social startups approaching monetization in 2024?
"There's really only two monetization business models for consumer products," said Tiffany "TZ" Zhong, founder of new social platform NoSpace and early-stage VC firm Pineapple Capital. "You either sell to businesses, or you sell to the users."
Zhong said if a startup is focused on selling ads, it's selling to other businesses; and if it's selling subscriptions, memberships, or one-off services, it's selling to users.
By and large, new social companies are trying to rely less on advertising dollars, and have focused more on ways to monetize their user bases. This approach increasingly appeals to VCs, too.
"There's growing interest in hybrid approaches that combine subscription and pay-as-you-go models," said Bianca Ambrosini, an investor at Berlin-based VC firm Best Nights. Ambrosini mentioned the firm's portfolio company 222, which matches strangers to attend dinner parties and events together based on their interests. The platform offers a one-off experience for a fee or allows users to access multiple events a month with a subscription. In this way, it caters to both occasional and regular users.
"Having users paying for the product consistently through time shows a lot about how much they need and love the product," she added. "It's a strong validation point for the business as a whole and a strong basis for growth and expansion."
Marlon Nichols, founding partner at Mac Venture Capital, likes to see social startups "think about alternative revenue models" where the platforms are "not as dependent on clicks or advertising," he said. He pointed to Spill, a social network focused on BIPOC users and founded by ex-Twitter staffers, as an example of this.
"Spill has done this with a couple of movie studios, for instance, around a launch of movies and hosting watch parties at scale," Nichols said.
But advertising is not going anywhere, he added: "Brands want to reach consumers, and social provides them a way to do that at scale."
3 ways new social-networking startups are approaching monetization
While some newer social startups are already monetizing their product, many are still pre-revenue and experimenting with different models to see which will make sense for their product and audience.
Here's a breakdown of how these startups are thinking about monetizing:
1. Advertising
Advertising is no stranger to social networks, and although some newer platforms are hesitant to replicate the ad strategies of industry giants, startups are thinking of ways to incorporate ads in unique ways.
For instance, the social-search platform Diem, which is not yet monetizing, is considering ways to bring in brand partners to its app for sponsored content.
"There are so many ways that you can do it differently where you can still have B2B involvement, but it's less predatory and more consensual," Diem CEO Emma Bates said.
Andrew Kahn, who leads Crush Ventures — the VC arm of talent-management firm Crush Music, which has invested in gaming and social startups — told BI the firm likes free-to-play models that rely on advertising. This lets casual users play a game (or use a social platform) for free, using ads to monetize, while encouraging the core audience to pay to upgrade the experience, similar to a "freemium" model.
2. Subscriptions and memberships
From streaming services to HelloFresh deliveries, subscriptions are part of many consumers' daily lives. And in social, it's becoming more and more common.
IRL social platform 222 is utilizing subscriptions to encourage users to attend multiple events (a one-time event fee costs about $17, while a monthly subscription costs $22).
"We only make money if people go out in real life and actually meet each other and enjoy it enough to keep coming back," 222's COO Danial Hashemi said. "Our incentives are aligned with our consumers."
Queer-community platform The Lo also utilizes a recurring membership model.
3. The 'freemium' model
Social-media apps like VSCO, and nearly every dating app on the market, have a free core product with paid tiers that unlock premium features.
Lex, another queer community app, offers users one-time purchases for tools like changing their location in the app or for giving them an expanded monthly post allowance.
Photo-sharing platform Swsh will also incorporate a freemium model in the future, CEO Alexandra Debow said.
And Verse CEO Bobby Pinckney told BI that the social platform, centered around music, plans to add a premium subscription that will unlock advanced AI tools, analytics, and templates.
