Can Threads make more money than Elon Musk’s Twitter?
Mark Zuckerberg and Elon Musk have joked about setting up a cage match. Business has already begun to fight.
With more than 30 million sign-ups in less than 24 hours, Facebook’s alternative to Twitter, Threads, has now established itself as a serious contender in the social media world.
There are hundreds of millions of Twitter users, so that’s a small fraction.
Nevertheless, analysts believe it’s a sign that Mr Zuckerberg’s Meta has a good chance of attracting its gigantic 3 billion-plus Facebook, Instagram and WhatsApp users – and advertisers too.
Since Mr Zuckerberg’s Meta made more than $117 billion last year, he has a monster track record when it comes to selling ads – and he hasn’t shown the same qualms as Mr Musk, who has been looking for alternative funding for Twitter, despite disdaining advertising at Tesla.
Threads, which allows users to scroll endlessly through text-based posts, will initially have no advertisements, Mr Zuckerberg said.
He wrote, “Our approach will be the same as all of our other products: make the product work well first, then see if we can get it to 1 billion people, and then think about monetization.”
In the most optimistic scenario, Threads ads could generate more than $6 billion in revenue for Meta, according to Justin Patterson, equity research analyst at KeyBanc Capital Markets.
There’s nothing huge about that. However, it is not nothing, especially since Apple’s stricter privacy rules have affected ad sales.
The company is well within striking distance of Twitter, which generated $4.5bn in advertising revenue in 2021 before Mr Musk’s takeover.
Will users stay?
In the weeks and months to come, Threads will determine whether that money materializes.
According to reports, Musk threatened Meta with legal action for stealing trade secrets on Thursday.
Insider Intelligence analyst Jasmine Enberg said that Twitter’s frustrations have left many people hungry for alternatives, and Meta’s promise of a “kinder, sane place” “supercharged” early sign-ups.
Sarah Jessica Parker, a star of Sex and the City, joined Shakira, Oprah and Khloe Kardashian in the fray.
Analysts say winning over Twitter’s power users or new users will be the key to success.
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In spite of the fact that fashion and lifestyle content are Instagram’s bread and butter, it is not clear the world needs another platform for consuming it.
One of Twitter’s main functions is news, which Mr Zuckerberg also has a complicated relationship with.
According to him, surveys show users want less local reporting on the platforms he runs, and in Canada, his company is planning to block local reporting rather than pay news providers there.
Despite the novelty wears off, Ms Enberg said Threads will need to remain interesting for Meta to maintain momentum once the novelty wears off, adding that Mr Zuckerberg has “stuggled” with innovation since he was skewered for creating copycat products in the past.
Regulatory risk
Furthermore, advertisers will want to know if a platform exposes them to privacy or misinformation risks before spending money on it.
With abrupt changes to how content is moderated and more recently, a limit on how many posts audiences can see on Twitter, which has struggled to be profitable, Mr Musk has alienated advertisers.
The loss of Twitter business has already benefitted Meta, according to analysts.
However, Zuckerberg isn’t coming to the table with a clean record either.
Its handling of user data and misinformation has prompted widespread criticism from marketers for years due to its transparency and accuracy.
Marketing veteran Lou Paskalis, chief executive of AJL Advisory, said advertisers want a clean, well-lit environment where content is moderated consistently according to the terms and conditions agreed upon. In general, social media is in a bit of a mess right now.
Investors seem confident that Zuckerberg has the ability to make it work, despite failures like Facebook Dating. Meta shares rose 4% on Wednesday ahead of the launch.
According to Paskalis, replicating Twitter’s news breaking style will be difficult, leaving space for both platforms.
Or, Musk might be woken up by a serious threat, he suggested.
The key will be how long Threads will eschew advertising, according to Mr Paskalis. Whenever that period is, that’s the period Twitter needs to right the ship.”