.svg)
Latest Business News
The Rise of Threads: A Threat to Twitter and a Win for Meta Platforms
The Success of Threads
Last week, Meta Platforms launched Threads, a text-based social media app that has already gained significant traction. With 100 million users in its first five days, Threads has surpassed even ChatGPT, the OpenAI chatbot, in terms of user acquisition speed. This success poses a significant challenge to Twitter, especially considering the recent departure of advertisers due to concerns about hate speech. However, the long-term threat that Threads poses will ultimately depend on its monetization strategy.
The Monetization Challenge
Meta Platforms has yet to unveil its advertising strategy for Threads. The company is currently focused on building up the app's offering and attracting engagement. Without a clear-cut plan for generating advertising revenue, it is too early to gauge the long-term financial success of Threads. Analysts agree that it will take time for the app to become a significant financial boost for Meta. However, there is optimism that Threads has the potential to attract a strong user base and generate substantial revenue in the future.
The Uncertain Path to Financial Success
Wall Street analysts caution that it is too early to determine if Threads will be a profitable venture for Meta Platforms. The absence of a clear monetization strategy makes it challenging to predict how the app will contribute to Meta's business. Mark Mahaney, an analyst at Evercore ISI, believes that Threads offers potential upside optionality for Meta's revenues and profits. His forecast suggests that Threads could attract 200 million daily active users and generate $8 billion in annual revenue by 2025. Despite the uncertain near-term financial outlook, Mahaney predicts that Threads could add an additional $1.50 in earnings per share (EPS) for Meta.
The Value of Data
While the monetization strategy for Threads may be years away, investors are currently focused on engagement as a key metric that can attract advertisers in the future. Gene Munster of Deepwater Asset Management believes that the data collected through Threads is incredibly valuable and could be used to enhance Meta's ad attribution model. This data-driven approach may be more valuable than additional ad space to sell, according to Mark Douglas, the CEO of MNTN. However, there is a concern that an advertising boom on Threads could divert resources from Meta's already successful Instagram and Facebook platforms.
The Threat to Twitter
Some speculate that Threads presents the biggest risk to Twitter among social media platforms. The recent decline in Twitter's traffic as Threads gains steam is indicative of this threat. Elon Musk's involvement with Twitter has not been without its challenges, including accusations of "unlawful misappropriation" of trade secrets by Meta. With Meta's existing database of 2 billion customers, Threads has the advantage of a large and easy-to-convert user base. Its user interface skills also give it a competitive edge over platforms like Snap and Pinterest.
Faceoff Between Meta and Twitter
Roger McNamee, co-founder of Elevation Partners, believes that Meta and Threads face an uphill battle. He criticized Twitter's past success as a "fluke" and described the platform as "never a great product" due to content moderation and profitability issues. McNamee is optimistic that Meta can outperform Twitter, but questions whether the potential market is large enough to make a significant impact on Meta's income statement, considering the company's overall size and revenue.
Conclusion: The Impact of Threads on New Businesses
The rise of Threads as a potential threat to Twitter and a win for Meta Platforms undoubtedly presents opportunities and challenges for new businesses in the social media landscape. While Meta Platforms has achieved remarkable success with Threads in terms of user acquisition, the long-term financial success of the app remains uncertain without a clear monetization strategy. However, analysts and investors see the potential for Threads to attract a strong user base and generate substantial revenue in the future.
For new businesses, particularly those in the social media industry, Threads offers an important lesson about the value of engagement and data. The data collected through Threads is seen as incredibly valuable, which can be leveraged to enhance ad attribution models and attract advertisers. This highlights the importance of prioritizing engagement metrics and data-driven approaches when building a social media platform or app.
Moreover, Threads serves as a reminder that competition in the social media space is intense. The decline in Twitter's traffic as Threads gains steam demonstrates the threat it poses to established platforms. This suggests that new businesses entering the social media market must be innovative and offer a unique user experience to compete effectively.
Overall, while Threads presents opportunities in terms of its potential user base and data-driven approach, it also highlights the challenges and competition new businesses will face when entering the social media industry. Success will depend on striking the right balance between user engagement, data utilization, and building a strong monetization strategy that sustains long-term profitability.
Article First Published at: https://www.cnbc.com/2023/07/13/what-metas-threads-means-for-twitter-and-the-social-media-industry.html
