Thursday, February 22, 2024

Can Threads make more money than Elon Musk’s Twitter?

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Threads, Mark Zuckerberg’s alternative to Twitter, gained approximately 30 million sign-ups within 24 hours of its launch, establishing its credibility as a significant player in the social media landscape. While this figure represents a small fraction of Twitter’s hundreds of millions of users, industry analysts believe it indicates Meta’s potential to attract a portion of its colossal user base of over 3 billion from Facebook, Instagram, and WhatsApp to the new platform, along with advertisers.

Given Meta’s exceptional track record in advertising sales, with more than $117 billion in revenue generated last year, Zuckerberg is well-positioned to entice advertisers to Threads. In contrast, Musk has shown disdain for advertising at Tesla, his electric car company, and has been exploring alternative funding methods for Twitter.

Initially, Mark Zuckerberg stated that Threads would not feature ads, allowing the company to refine the app, which offers users the ability to endlessly scroll through text-based posts.

“Our approach will be the same as all our other products: make the product work well first, then see if we can get it on a clear path to 1 billion people, and only then think about monetization at that point,” he wrote.

According to Justin Patterson, an equity research analyst at KeyBanc Capital Markets, Threads’ advertisements have the potential to contribute between 1% and 5% to Meta’s overall revenue, amounting to over $6 billion in the most optimistic scenario. While this may not be a massive figure, it holds significance, particularly as Meta seeks solutions to mitigate the impact of reduced ad sales caused by Apple’s stricter privacy regulations.

In terms of comparison, Meta’s potential advertising revenue from Threads puts it in close proximity to Twitter, which generated $4.5 billion in ad revenue in 2021 before experiencing upheaval due to Mr Musk’s involvement.

What about Twitter users?

The frustrations and challenges faced by Twitter users have created a strong demand for an alternative platform. Many individuals have grown weary of issues such as harassment, toxic behavior, and the spread of misinformation on Twitter. As a result, Meta’s promise of providing a “saner, kinder place” than Twitter has resonated with users and played a significant role in driving the initial surge in sign-ups for Threads.

People are eager for a platform that offers a more positive and respectful social environment. They are seeking a space where they can freely express their opinions, engage in meaningful conversations, and connect with others without being subjected to the same level of negativity and hostility often found on Twitter.

This desire for change has been “supercharged,” as described by Insider Intelligence analyst Jasmine Enberg. The concept of a more welcoming and compassionate online community has struck a chord with users who have grown tired of the current dynamics on social media platforms.

Meta’s ability to tap into this sentiment and position Threads as an alternative that addresses these concerns is a key factor in its initial success. By emphasizing the creation of a healthier digital space. Meta has managed to capture the attention and interest of users who are looking for an alternative social media experience.

However, the success of Threads will ultimately depend on how well it delivers on its promises. Meta needs to ensure that the platform lives up to the expectations set forth and actively cultivates a positive and inclusive community. Sustaining this “saner, kinder” environment will be crucial for retaining users and encouraging ongoing engagement.

As Threads continues to evolve and mature, Meta will need to address any potential challenges, such as content moderation, privacy concerns, and the prevention of abuse or misinformation. By effectively navigating these issues and delivering on its promises, Meta has the opportunity to establish Threads as a viable alternative to Twitter and attract a significant user base seeking a more positive online experience.

“Posting. With optimism,” quipped Sex and the City star Sarah Jessica Parker, one of the celebrities jumping into the fray alongside Shakira, Oprah and Khloe Kardashian.

Success will depend on winning over Twitter’s power users or people who never signed up for the app in the first place – no sure bet, analysts said.

While fashion and lifestyle content, which is predominant on Instagram, may be appealing to advertisers, it remains uncertain whether there is a pressing need for yet another platform dedicated to such content. Additionally, Mark Zuckerberg’s relationship with news is complex, as he has expressed that user’s desire less news on the platforms he oversees. In fact, Meta is even preparing to block local news in Canada rather than compensating news providers for their content.

It is worth noting that news plays a significant role on Twitter, serving as one of its primary functions. This creates a potential challenge for Meta, as news enthusiasts and dedicated Twitter users are less likely to switch platforms. To sustain the momentum and interest in Threads, Meta will need to ensure it remains engaging and captivating beyond the initial novelty phase.

Jasmine Enberg, an analyst at Insider Intelligence, suggests that news enthusiasts and committed Twitter users are unlikely to defect to Threads. She also highlights that Mark Zuckerberg has faced criticism in the past for creating copycat products and has encountered difficulties with innovation.

Is the risk of regulation present?

Advertisers will undoubtedly seek assurance that their investments on a platform are not exposed to risks associated with issues such as misinformation and privacy concerns.

Under Mr. Musk’s leadership, Twitter has faced challenges in terms of profitability and has alienated advertisers through sudden changes in content moderation and limitations on post visibility. This has resulted in Meta, the parent company of Threads, reportedly benefiting from Twitter’s loss of business as advertisers look for alternative platforms.

However, it’s important to note that Mr. Zuckerberg and Meta have their own set of concerns. The company has had ongoing disputes with marketers regarding data transparency and accuracy. Additionally, Meta’s handling of user data and its struggle with combating misinformation has received significant criticism.

These issues highlight the need for Meta to address advertiser concerns and establish trust in the platform. Advertisers will require confidence that their brand’s reputation will not be compromised by associating with a platform that has a history of data controversies and struggles with misinformation.

To attract advertisers and maintain their trust, Meta will need to demonstrate a commitment to transparency, data accuracy, robust content moderation practices, and privacy protection. By actively addressing these concerns and implementing necessary safeguards, Meta can mitigate risks and appeal to advertisers who are seeking a reliable and responsible advertising platform.

“Advertisers want a clean … well-lit environment where content is moderated on the terms and conditions agreed to, on a consistent basis”

said marketing veteran Lou Paskalis, chief executive of AJL Advisory. “Overall right now social media is a bit of a dumpster fire.”

Meta shares popped 4% on Wednesday ahead of the launch – a sign of investor confidence that Mr Zuckerberg has the ability to make it work, despite flops like Facebook Dating.

But replicating the way that news breaks on Twitter will be difficult, Mr Paskalis said, leaving room for both platforms to exist.

Or, he suggested, the presence of a serious threat could prove a “wake-up call” for Mr Musk.

“One of the keys will be how long will Threads eschew advertising,” Mr Paskalis said. “Whatever that period of time is, that’s the period of time that Twitter has to right that ship.”

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