Digital Platform Policy Highlights - Digest 37
The FINAL Q2 2024 and Q3 2024 policy highlights: Platforms are tweaking their policies to squeeze extra value from users who are willing to pay more for certain premium features.
This post is part twelve of a series documenting policy changes and feature improvements introduced by platforms in Q1 2024 to Q3 2024.
TL; DR→ Here are policy changes to extract surplus from a subgroup of users who value some specific features:
Microsoft offers AI features to consumers through Copilot Pro
Snapchat ranks friends for premium users, sparking mental health concerns
TikTok’s E-commerce Commission Hike
TikTok's US commission hike from 2% to 8% through the year signals a classic platform monetization playbook - trading early growth for profitability. This seemed quite similar to another giant US seller who gradually increased fulfillment fees once seller lock-in was achieved. The timing seemed fascinating but predictable- as Congress pushes for a ban or forced sale, TikTok appears to be accelerating its revenue strategy despite the risk of seller exodus. The real question isn't just whether sellers will absorb these costs (most will pass it on to buyers, of course), but whether TikTok jeopardized the network effects before potential regulatory action, instead of strengthening its position against political headwinds with more subsidies (link)
Microsoft offers AI features to consumers through Copilot Pro
Microsoft's $20 Copilot Pro subscription is pretty much an expansion of the GitHub Copilot program using their alliance with OpenAI as the moat. This subscription leverages Microsoft’s strength in Office apps, as the company aggressively searches for new ways to monetize AI (and recoup the billions of dollars it has invested on OpenAI). Given how Apple and Google are diving deeper into GenAI integration with day-to-day activities, AI offerings and subscription seem like a way to fortify their ecosystems (link)
Epic changes pricing for Unreal Engine
Non-game developers who use Epic tools are charged an annual subscription of $1,850 to access Unreal Engine, Twinmotion, and RealityCapture. This move doesn’t apply to game developers (who will continue to pay royalties), as well as small businesses, educators, and students. The new pricing scheme signals Epic's segmenting its platform between creative and gaming uses: royalties from game developers and a subscription fee from non-game developers using Unreal Engine for things like theme-park rides. (link)
Reddit Restores Award System After User Backlash
Reddit's reversal on the award system highlights how entrenched user behaviors shape platform monetization options. The platform admitted it "messed up" by removing the popular feature and is compensating users who lost their coin balances with exclusive awards. It is unlikely that Reddit expected digital currencies and rewards systems to become load-bearing walls in their community platform. As one of my working papers shows, most social platforms must build upon, not replace, established community value systems (link)
X removes option for premium users to hide checkmarks
X's removal of checkmark-hiding signals an evolution in its premium feature strategy. This mirrors how LinkedIn handled its premium badge display - transitioning from optional to mandatory as the product matured. The interesting angle isn't the visibility requirement, but how X is repositioning premium features from individual utility to network signaling. Whereas this indicates a shift in the platform subscription models, I wonder if there are still a large number of users who want all the perks of premium subscription without visible markers (link)
Snapchat ranks friends for premium users, sparking mental health concerns
Snapchat's new premium friend-ranking system represents a bold monetization of social anxiety. The fascinating part isn't just the astronomical metaphor-whether you are a “Mercury” in your friend’s orbit or a “Neptune”-but how it gamifies social validation for revenue. Naturally, this has raised mental health concerns given that Snapchat predominantly has teen users. Snapchat has no plans to remove the feature, though regulators restricting social media accessibility to minors may make the platform reconsider. As an academic, I have to appreciate the efficiency - nothing motivates me to prioritize paper revision over writing a Substack post like discovering I’m a Neptune in my collaborators' orbits :) (link)
Spotify Moves Lyrics Feature Behind Paywall
Spotify's paywall move for lyrics offers an interesting test of feature elasticity in music platforms. This could frustrate users losing this basic feature, but I see this as Spotify probing user tolerance for basic feature monetization. Just like most music, lyrics is “freely” available on Internet. But Spotify fairly expects users to be paid subscribers if they want conveniences such as reading the lyrics along. I believe Spotify’s bet here is that convenience will outweigh the availability of free alternatives. (link)
Research help from Marshall Singer, Anantesh Mohapatra, Jennifer Xie, Anna Li and John Mai (Thanks a ton, folks!)
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