Meta’s Threads App Challenges Twitter, but Monetization Plan Key to Long-Term Success
Meta Platforms made headlines last week with the launch of Threads, a text-based social media app that aims to compete with Twitter. The app has already gained 100 million users in its first five days, surpassing the speed at which the popular OpenAI chatbot, ChatGPT, attracted new users. While Meta appears to be making progress in building engagement, how it plans to monetize Threads will be crucial to its long-term success, according to investors and analysts.
Uncertainty Surrounds Monetization Strategy
Currently, Meta has not disclosed its advertising strategy for Threads. Instagram head Adam Mosseri has stated that the company is focused on building up the app’s features before considering monetization. This approach comes at a time when advertisers have been pulling back from Twitter due to concerns over hate speech. It remains too early to determine the long-term threat that Threads poses, but Twitter seems to be facing significant challenges.
Wall Street Cautious About Financial Success
Despite Threads’ impressive start, it is still too early for Wall Street to predict its profitability. Meta has yet to present a clear monetization plan that can generate advertising revenue comparable to Facebook and Instagram. It will take time to establish credibility and financial success. Nevertheless, some analysts, such as Mark Mahaney from Evercore ISI, believe that Threads has the potential to attract 200 million daily active users and generate $8 billion in annual revenue by 2025—adding 5% upside to Meta’s estimates.
Engagement and Data Collection as Key Metrics
Since a monetization strategy for Threads is likely years away, investors are currently focused on engagement. Strong user numbers suggest the potential for long-term success. Deepwater Asset Management’s Gene Munster suggests that Threads can gather valuable data for Meta’s own ad attribution model, which could attract advertisers in the future. However, there is a concern that advertising success on Threads might cannibalize Meta’s existing platforms, Instagram and Facebook.
Threads Poses Biggest Risk to Twitter
Among social media platforms, Twitter is considered the most vulnerable to the impact of Threads. Web analytics company Similarweb observed a 5% drop in Twitter traffic during the first two days after Threads’ launch, with an 11% decrease compared to the same period last year. Moreover, Threads is built on Meta’s existing database of 2 billion customers, making it easier for users to convert their Instagram followers to the new app. With its user-friendly interface, Threads presents a challenge that platforms like Snap and Pinterest would struggle to replicate.
The Long Road Ahead
Elevation Partners co-founder Roger McNamee believes Meta and Threads have a tough road ahead. While Twitter’s past success may have been a stroke of luck, McNamee sees an opportunity for Meta to outperform Twitter due to its smarter leadership. However, the overall market size and impact on Meta’s income statement remain uncertain.