Twitter inflates its API prices amid tanking ad revenue

Twitter has announced its new API pricing model amid tanking advertising revenue following Elon Musk’s takeover of the platform in October 2022.

First reported by Bloomberg, Twitter’s advertising dollars have fallen 89% since October last year, resulting in a 50% decrease in revenue as advertisers have been hesitant to return to the app due to its billionaire owner’s erratic behaviour, regularly tweeting distasteful content that fails to align with many brands’ values.

Upon purchase of the platform, Musk gutted the company’s personnel, reducing it by 75% to less than 2,000 staff and almost completely removing the content management team. The company was last valued at $20bn, less than half what Musk paid for it.

Advertisers appear to have lost confidence in the platform, pulling the majority of their dollars with no signs of reinvesting. According to data cited by Bloomberg from Pathmatics, just $7.6m was spent on Twitter ads in the past two months - an 89% decline from the $71m spent by Twitter’s top 10 advertisers in September and October 2022.

With half of the company’s top 100 advertisers having pulled out since Musk’s takeover, including the likes of Ford, HBO, Coca Cola and fellow billionaire Jeff Bezos’ Amazon, the social media app has reframed its API pricing model for third-party developers in the hopes of reclaiming some lost revenue.

New API pricing tiers

Last week, Twitter confirmed some of the details surrounding its new application programming interface (API) pricing model, introducing a tiered system for developers with Twitter-based apps.

A free tier will continue to exist on the platform, however, compared to its predecessor, functionality is limited, allowing just 1,500 tweets a month and no access to others’ tweets. For comparison, the previous free tier gave developers access to 2 million tweets per month.

For $100 a month, Twitter “hobbyists” can access 10,000 tweets a month and post 50,000 times through the ‘Basic’ plan. The next tier, Twitter’s ‘Enterprise’ plan, will cost developers $42,000 per month - a $41,900 leap between tiers.

Musk has stated the new pricing model is aimed at weeding out bots but experts are concerned the giant leap in cost will kill-off indie app developers as they find themselves hamstrung between the basic and enterprise tiers and cause trouble for Twitter’s long-term revenue prospects.

Jack Penzer, Senior Data Scientist at Capture Intelligence said: “We all knew Twitter API changes were coming, but the three categories as they are currently do not make much sense. This will definitely have a stifling effect on both SMEs and personal developers who build products around the API.”

Mike Tapp, Capture Intelligence’s Data Director, added: "It's a very myopic policy which patches a short-term revenue hole but might stifle long term developer adoption. The enterprise pricing is a drop in the ocean for larger developers who have built successful products around it but present a significant barrier for small and medium enterprises looking to scale and innovate.

“Twitter would have to put real work into their core user product as well as their data product to avoid facing a funnel problem further down the line."

Dmitry Sverdlik, CEO and Founder of Xenoss, was more sympathetic towards Twitter, citing a need to understand that social media platforms are becoming hamstrung between business models.

He said: “The shift towards monetizing APIs and controlling access to user data is part of a broader evolution of the business model of social media platforms.

"For years, these platforms have enjoyed a hub-and-spoke model, serving as warehouses of behavioural signal data for third-party developers and businesses. However, this model is becoming obsolete due to privacy regulations and changing attitudes toward data sharing - platforms have to change gears on the fly and monetize access to their data through APIs."

Several indie and small-scale developers have already announced they will be forced to abandon the platform due to pricing constraints.

It is presumed the new API tiers will make Twitter’s older APIs defunct, as the company announced they would be deprecated over the next 30 days. It’s currently unclear if more tiers will be introduced in the future but the higher-priced and stripped down functionality of the new APIs will likely see many small-scale third-party developers switch to more affordable developers for help.

This shift could potentially increase the popularity of Twitter’s social media competitors should these developer’s successfully use the alternative platforms to create the tools users are demanding.