Tech titans Mark Zuckerberg and Elon Musk have engaged in a playful exchange about a potential cage match, but in the business world, the battle is already underway.
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Within just 24 hours of Zuckerberg’s launch of Threads, his alternative to Twitter, the platform garnered around 30 million sign-ups. While this is still a small fraction of Twitter’s vast user base, analysts believe it demonstrates Meta’s potential to attract a portion of its 3 billion-plus users on Facebook, Instagram, and WhatsApp to the new offering, potentially bringing advertisers along with them. Zuckerberg, whose company Meta generated over $117 billion in sales last year, has a strong track record in selling adverts. In contrast, Musk has expressed disdain for advertising at Tesla and has sought alternative ways to fund Twitter.
Initially, Threads will be ad-free as the company focuses on refining the app, which allows users to scroll through text-based posts endlessly. However, analysts project that ads on Threads could eventually contribute 1% to 5% of Meta’s overall revenue, potentially generating over $6 billion in the most optimistic scenario, according to Justin Patterson, an equity research analyst at KeyBanc Capital Markets.
This revenue boost could be significant for Meta, especially as the company seeks ways to counter the impact of stricter privacy regulations imposed by Apple, which have impacted ad sales. With Twitter generating $4.5 billion in ad revenue in 2021, the prospect of Threads catching up is not out of reach.
The success of Threads will depend on its development in the coming weeks and months. In response, Musk threatened legal action against Meta, alleging the theft of trade secrets. Despite this, many people, frustrated with Twitter, are eager for an alternative. Meta’s promise of a “saner, kinder place” than Twitter has driven early sign-ups, attracting celebrities like Sarah Jessica Parker, Shakira, Oprah, and Khloe Kardashian.
However, analysts caution that winning over Twitter’s power users or those who never signed up in the first place will not be an easy task. While the fashion and lifestyle content on Instagram appeals to advertisers, it remains uncertain whether the world needs another platform for consuming such content.
Moreover, Zuckerberg’s complex relationship with news, one of Twitter’s primary functions, may pose challenges. He has expressed that users want less news on the platforms he oversees and Meta is preparing to block local reporting in Canada rather than pay for news content.
Advertisers will also seek assurance that they are not exposing themselves to risks related to misinformation and privacy. While Twitter has alienated advertisers with abrupt changes to content moderation and post visibility limits, Meta has benefited from Twitter’s loss of business. However, both companies face scrutiny over data transparency, user privacy, and misinformation.
Meta’s shares rose 4% ahead of the Threads launch, indicating investor confidence in Zuckerberg’s ability to make the platform succeed. However, replicating the way news breaks on Twitter will be challenging, potentially leaving room for both platforms to coexist. Alternatively, the emergence of a serious threat could serve as a “wake-up call” for Musk.
The duration during which Threads remains ad-free will be crucial. That period of time will be the window for Twitter to address its own challenges, according to marketing veteran Lou Paskalis, CEO of AJL Advisory. The situation presents an opportunity for Twitter to right its ship.