Meta: Musk Vs. Zuckerberg; Tweets Vs. Threads

Summary:

• META is launching Threads, which will compete directly with Twitter.
• With over 30 million users already, META has the size and reach to really make a dent in the market.
• Threads could add billions to META’s revenues.

Thesis Summary

Meta Platforms (NASDAQ:META) is launching Threads, which will look to compete with Elon Musk’s Twitter.

Threads has already onboarded 30 million users, and if successful, this could easily be yet another billion-dollar business for META.

The timing could not be better, as Twitter continues to struggle to grow, and users begin to look for alternatives.

I believe META actually has the size and reach necessary to potentially deliver the final blow to Musk’s Twitter.

What are “Threads”?

Meta launched Threads on Wednesday and has already onboarded over 30 million users. But what are threads exactly, and how will they compete with Twitter?

Threads is being advertised as a space for people to have public conversations in real time. The app offers a space for users to share their thoughts, like and comment on people’s threads, and also repost. Sound familiar?

META seems to be opting for simplicity, offering users a separate space to share their thoughts. However, it is important to note that Threads is very tightly tied to Instagram. Users, in fact, need an Instagram account to sign up to Threads, and once you do, all your information regarding likes, follows, and followers is transferred to Threads.

The fact that creating a Threads account can be as easy as clicking a couple of buttons on Instagram has probably contributed to the massive adoption. As of writing this, there are over 30 million registered users, which is impressive, but expected, given that Instagram already boasts 2 billion active users. This has actually raised some eyebrows, as users have discovered that, once a Threads account is created, it can only be eliminated by deleting your whole Instagram account.

Despite the many similarities with Twitter, there are also some key differences we have to consider.

Firstly, Threads does not offer a chronological feed, like Twitter, relying instead on the Instagram-like algorithmic display of Reels. Twitter offers both options through the “For You” and the “Following” section.

Threads, for the time being, is only available on mobile and through the app, so no browser or desktop version.

And lastly, there are no hashtags in Threads, and therefore no such thing as a trending section.

It’s still very early days, and there’s no doubt that a lot can and probably will change as META gathers data and insights post-release.

How Much Can META Make From This?

The launch of this new app comes at a great time, in my opinion, and it is yet another great move by META to leverage its audience and increase its revenues with very little cost.

The upside potential is huge here. Let’s compare Instagram and Twitter to see just how much the company could stand to benefit from this:

Since acquiring Instagram, it has become META’s most lucrative business. From 2015, it grew from 370 million annual users to 2.27 billion in 2022. Meanwhile, revenues grew from $0.5 billion to $51.4 billion. This represented 45% of META’s revenues in 2022.

Based on these figures, Instagram makes around $22.7 from each of its users. That ‘s about 1.4%.

Now let’s look at Twitter:

In the same time period, 2015-2022, Twitter users went from 304 million to 401 million. Meanwhile, yearly revenues went from $2.22 billion in 2015 to $4.4 billion in 2022.

This means Twitter makes around $11 per user.

So what does this mean for Threads? The user and revenue numbers for Instagram and Twitter can give us a good range in terms of what Threads could potentially achieve.

In the last 24 hours, Threads has already gathered 30 million users.

Realistically, I think we could argue that 10% of adoption amongst Instagram users is a reasonable bet, not to mention that a number of users looking for Twitter alternatives might be looking to sign up.

I believe 250 million users in the first two years is doable. In terms of monetization, somewhere between Twitter’s $11 per user and Instagram’s $22.7 would be appropriate.

Averaging these out gives us $15 per user, which would imply revenues of $3.75 billion.

That’s not a number to scoff at, and best of all. What is there to lose? Launching Threads has probably been relatively inexpensive for META, so there’s not much risk involved here.

Can They Actually Compete?

The potential for profit here is great and comes at only a small cost, and I applaud META for this initiative. However, some investors might be quick to point out that threads will not ever come to replace Twitter or even come close to competing with it.

This may be true. A lot of companies have tried to compete with Twitter (Rumble, BlueSky…), and none have really gathered the momentum necessary to really make a dent.

But Instagram comes from a position of power, and the timing could not be better.

There’s no denying that Musk’s takeover of Twitter has, let’s just say, stirred the pot. He is a controversial figure, and a lot of changes have been implemented since he took over, like paying for Twitter Blue and, more recently, a limit on how many tweets users can read. Due to this and many other reasons, a lot of people have been looking for alternatives. But there aren’t any.

BlueSky and Rumble are perhaps the closest thing to Twitter competition out there. BlueSky has 50 million users, while Rumble has around 78 million on the platform. This is a relatively small number and while these are definitely forms of “media”, they are lacking a bit of the “social” aspect.

And then we have Threads, which has 30 million users in 24 hours and can leverage a network of over 4 billion. These are the kind of numbers, in my opinion, which will actually entice users to turn around and start posting.

Data, scale and plenty of cash are META’s biggest advantages when it comes to defeating Twitter. Let’s not forget, Twitter was still operating at a loss when Musk bought it.

Final Thoughts

I see META’s launch of Threads as a great opportunity for the company. In terms of risk/reward, this seems like a great initiative, and I actually believe threads can gain some traction. The stage is set for a real battle between these two tech giants. Figuratively and literally.

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Analyst’s Disclosure: I/we have a beneficial long position in the shares of META either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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