The news: Bluesky CEO Jay Graber said at a TechCrunch event last week that the platform isn’t ruling out advertising as it mulls different revenue streams. Graber’s statements come after the social media platform picked up millions of new members after the US election, elevating it from a somewhat obscure platform to an emerging competitor to X and Threads.

• “We can't enshittify the network with ads,” Graber said in February; She remained consistent in her concerns at her TechCrunch appearance, saying that ads could possibly appear in search results rather than in users’ feeds.
• Other possible revenue streams mentioned were a marketplace of customized algorithms and subscriptions.
• AI licensing deals are off the table, according to Graber, differentiating Bluesky from platforms like Reddit that have signed lucrative deals with AI firms.

Learning from mistakes: Though Bluesky has a far smaller user base than X and Threads, its recent surge has turned it into a platform of interest for investors and advertisers. Founded by former Twitter founder Jack Dorsey, Bluesky will have to learn from X/Twitter’s missteps to successfully implement advertising.

• Even before Elon Musk took over X, the former Twitter struggled to meaningfully drive revenues from advertising, suggesting that text-based social media wasn’t stimulating advertiser interest.
• Early feedback from major publishers on Bluesky hints at the platform’s potential, though. Several publishers including The Boston Globe and The New York Times have said the platform creates more referral traffic than X.

Our take: Bluesky’s open protocol model allows users to access content from different social platforms across the “fediverse,” making it difficult to integrate in-feed advertising. While that prevents Bluesky from tapping into a straightforward ad format, it also opens the platform up to explore other opportunities.

• Still, there is major competition from Threads and X, both of which have userbases many times larger than Bluesky’s. Threads also allows advertisers to tap into Meta’s vast troves of data from Instagram and Facebook, making it an enticing platform for marketers looking to get maximum value from their budgets.
• While referral traffic and a user surge look promising for Bluesky, investor pressure will force it to increase revenues eventually. The platform must find a way to capitalize on its engagement with unique ad formats to stand out in a crowded field.