On July 6, Meta Platforms Inc. (META, Financial) announced the launch of Threads, the latest addition to the tech giant’s stable of social media and messaging platforms. Currently, Threads could best be described as a Twitter clone, and Meta CEO Mark Zuckerberg has made it clear it is designed specifically to compete with the popular microblogging platform.
While a growing number of tech market players, analysts and investors have signaled they think Twitter’s business is vulnerable to disruption, Meta is the first to take the plunge.
Strong launch, but still a work in progress
Threads started out with the strong advantage of being built on an existing social media platform, Instagram. In a news release, Meta made its ambition clear:
“Our vision with Threads is to take what Instagram does best and expand that to text, creating a positive and creative space to express your ideas. Just like on Instagram, with Threads you can follow and connect with friends and creators who share your interests — including the people you follow on Instagram and beyond.”
By capitalizing on Meta’s vast subscriber network, Threads was able to deliver the most successful social media product launch in history on a membership basis. In just its first four days, the platform brought in more than 100 million subscribers. That figure has since increased to an estimated 114 million. Network effects are key to success for social media platforms, so scale and growth are essential. Zuckerberg, in one of the first-ever Threads posts, made his case directly to users:
“There should be a public conversations app with 1 billion-plus people on it. Twitter has had the opportunity to do this but hasn't nailed it. Hopefully we will.”
Much is still a work in progress. Meta is still working on building out the advertising side of Threads, so it is too early to tell whether it will offer a better product for advertisers than Twitter. However, as it will be built out from the Meta Business Suite, the company's established advertising management system, it is safe to assume it will be quite seamless and comparable to the experience of advertising on Facebook and Instagram. Moreover, because Threads is a truly green field, some potential advertisers may seek early adopter advantages, especially since these tend to be magnified if a platform takes off in earnest. One simple advantage is in user name selection, which may allow some brands and companies to secure a handle that best works for them, rather than having to take whatever it can get in the existing Twitter ecosystem.
Taking advantage of Twitter’s weakness
More than anything, the Threads launch underscores the problems facing Twitter since October of last year, when Elon Musk took the company private in a highly publicized, and highly fractious, takeover deal. Twitter has struggled since Musk’s takeover thanks largely to questionable decisions from the top, both internally and externally. Major internal moves, such as firing large swathes of staff and refusing to pay bills, have sparked considerable controversy. Recent user-facing changes, including allowing any user to buy “verified” status and restricting the number of posts users can see each day, have also negatively impacted the platform and undermined its credibility as a news source.
The chaos roiling Twitter has had serious negative effects. For example, its advertising suffered severely in the initial months following the change of ownership, as advertisers fled the platform amidst growing uncertainty. While Musk claimed in April that most of these advertisers had returned to the platform, advertising revenue has failed to recover significantly, according to a June 5 report by the New York Times:
“Elon Musk recently said Twitter’s advertising business was on the upswing. 'Almost all advertisers have come back,' he asserted, adding that the social media company could soon become profitable. But Twitter’s U.S. advertising revenue for the five weeks from April 1 to the first week of May was $88 million, down 59 percent from a year earlier, according to an internal presentation obtained by The New York Times. The company has regularly fallen short of its U.S. weekly sales projections, sometimes by as much as 30 percent, the document said. That performance is unlikely to improve anytime soon, according to the documents and seven current and former Twitter employees.”
Those advertising dollars will have to go somewhere. Meta clearly hopes that Threads can tap into that pent-up demand.
My take
Rather than address its new competition on a quality or service basis, Twitter’s initial reaction to the Threads launch was to threaten legal action against Meta, alleging intellectual property infringement. Meta has denied any wrongdoing, and the market has thus far shrugged at Twitter’s threat.
Meta has an opportunity to own yet another important piece of social media real estate. Whether Meta’s offering will succeed in supplanting Twitter as the preferred platform for journalists, political commentators and public figures remains to be seen. Regardless, Twitter offers a powerful lesson worth taking to heart: Unforced errors and short-sighted decisions can create long-term problems—and even open the door to serious new competition.
