Threads: The Next Big Social Media Platform

The recent launch of Threads, a social-media platform developed by Meta Platforms (parent company of Facebook, WhatsApp, and Instagram), has caught the attention of many. With its similarities to Twitter, Threads allows users to post and engage in discussions, primarily using text-based content.

According to Meta CEO Mark Zuckerberg, Threads has already recorded over 30 million downloads, and this impressive figure has led investors to boost Meta’s stock. While there is speculation that Threads might overshadow Twitter, it is important to consider its actual significance to Meta’s overall business and stock value.

Meta has gained a reputation for emulating successful ideas pioneered by its competitors. For instance, Stories, a feature for sharing photos and short videos, was first introduced by Snap’s Snapchat. Reels, another Meta creation, mirrors the user-generated video app TikTok owned by China’s ByteDance. Now, Facebook sets its sights directly on Twitter, a platform that has struggled financially since Elon Musk acquired it for $44 billion in October.

Despite Threads bearing a striking resemblance to Twitter in terms of appearance, there are noteworthy differences between the two applications. Threads offers only one news feed, which combines content from people you choose to follow and those recommended by the algorithm. In contrast, Twitter allows users to select either one or the other.

In conclusion, Threads has undoubtedly gained significant traction since its launch. However, while Meta’s stock surge suggests the market sees potential in this new platform, it is crucial to recognize its true impact on Meta’s overarching business strategy and stock performance.

Threads: A Unique Experience on Instagram

While Twitter provides a list of trending topics and the option to send direct messages, Instagram’s new feature, Threads, takes a different approach. Currently limited to users outside of Europe, Threads offers a distinct experience with certain key differences.

One noteworthy difference is the absence of advertising on Threads, at least for now. Adam Mosseri, the head of Instagram, stated in an interview with Platformer, a prominent tech newsletter, that the company isn’t currently focused on monetization. Mosseri’s emphasis on this aspect indicates that their immediate priority lies elsewhere.

However, Mark Zuckerberg, the CEO of Meta, has expressed his belief that Threads has the potential to attract 1 billion users. If achieved, this would be a remarkable feat considering Twitter’s user count stood at 238 million before becoming private last year.

It’s worth mentioning that the recent optimism surrounding Meta’s shares among Wall Street analysts doesn’t stem from the launch of Threads. Instead, KeyBanc analyst Justin Patterson reiterated his positive outlook on Meta, raising his target price to $335, a 15% increase above current levels. Patterson’s optimism is driven by improvements in Meta’s core ad business rather than the introduction of Threads.

Threads undoubtedly offers Instagram users a unique experience with its distinct features and limitations. As the platform continues to evolve, it remains to be seen how Threads will contribute to Instagram’s overall growth and user engagement.

Threads: A Potential Boost for Meta

Wells Fargo analyst Ken Gawrelski believes that Threads, a new product by Meta, has the potential to increase profits and revenue by 1% to 3% “at maturity.” However, he notes that since very few advertisers and budgets will be incremental to Threads, driving incremental usage is key. Thus, near-term monetization may be limited.

Elon Musk, CEO of Tesla and an influential figure in the tech industry, predicts that Twitter’s revenue this year will be approximately $3 billion, down from $5.1 billion in 2021. If Meta manages to add an incremental $5 billion in revenue by 2024 (equivalent to the size of an entire Twitter-like business), it would only result in a less than 5% increase in Meta’s total revenue.

It is important to note that Twitter’s current valuation has significantly declined from its acquisition price of $44 billion. Fidelity, a participant in Musk’s deal, has estimated the value of Twitter to be around $15 billion. If Threads is valued similarly, it would only contribute a 2% increase to Meta’s current value. This increase was already anticipated by the market, as evidenced by Meta shares rising 2.9% ahead of the Threads launch on Wednesday.

In essence, Twitter is fundamentally a small business with a much smaller user base compared to any of Meta’s own apps. Threads, although related to Twitter, should not be considered the next Instagram. It is essentially a streamlined version of Twitter and is unlikely to significantly impact Meta’s overall performance.