Meta Platforms made headlines last week with the launch of Threads , a text-based social media app challenging Twitter and pitting two heavyweight technology leaders against one another. Threads kicked off with a bang , amassing 100 million users in its first five days, Meta CEO Mark Zuckerberg said in a post Monday, and that was before the platform’s introduction in the European Union . That success translated into Threads outpacing even ChatGPT, the OpenAI chatbot that set off the latest artificial intelligence boom, in the speed at which it attracted new users. Meta now appears to be making strides in building engagement, but how it actually makes money from Threads will play a key role in the platform’s long-term success, investors and analysts said. Meta hasn’t shared any advertising strategy yet, and Instagram head Adam Mosseri has said in various interviews that it’s focused first on building up the offering. Its entry comes after many advertisers in recent months departed or temporarily halted campaigns on Twitter amid reports of increased hate speech. To be clear, Threads is only in the early innings of a multi-year ball game, and without a clear-cut monetization plan, investors say it’s too early to decipher the long-term threat that Threads poses. But there’s no doubt that Twitter faces the most significant headwinds. “It’s a land grab right now, right now, it’s PR,” said Paul Meeks, portfolio manager at Independent Solutions Wealth Management. “Definitely a huge win for Meta, a huge loss for Twitter. Let’s see what happens to Meta financially.” Too early to weigh financial success Despite a jaw-dropping start, Wall Street says it’s too early to truly determine how profitable Threads can become. So far, Meta hasn’t shared a monetization strategy, including how it will create a stream of advertising revenue for Threads that can mirror what Facebook and Instagram generate. “It’s all about credibility, and I don’t think anybody, even an aggressive Meta analyst, would be able to say that it’s going to be a financial boost anytime soon,” Meeks said. Evercore ISI’s Mark Mahaney wrote in a recent note that Threads “poses very little downside” risk to Meta’s business, offering “upside optionality” for revenues and profits. He views the app as a smart way to take advantage of Twitter’s “turbulent execution” and tap into a strong, active user base. Near-term financial upswings appear uncertain, but Mahaney forecasts that Threads can attract 200 million daily active users and generate $8 billion in annual revenue — adding 5% upside — to Meta’s 2025 estimates. That would add an additional $1.50 in EPS, he wrote. With a clear-cut monetization strategy likely years in the future, many investors simply remain focused on engagement, a key metric that can eventually lure advertisers. Strong numbers may foreshadow long-term success. Deepwater Asset Management’s Gene Munster, for example, views Threads as a way for Meta to gather more data to harness for its own ad attribution model, and offer more insights to lure advertisers from competitors over time. “You may never see ads on Threads, but the data they’re collecting is insanely valuable, and I think substantially more valuable than what Meta doesn’t need, which is more ad space to sell,” Mark Douglas, founder and CEO of MNTN recently told CNBC’s ” The Exchange .” “They’re not supply constrained, they’re demand constrained.” Even so, Meeks warns that an advertising boon for Threads could “cannibalize” Meta’s popular Instagram and Facebook platforms, diverting resources from what are already money-making machines. Headwinds to Twitter Morfe broadly, Threads may rattle the social media industry and, over the long haul, snatch up some competitor’s cherished advertisers. But its entry poses the biggest risk to Elon Musk’s Twitter, according to Wall Street. The social networking services company, taken private by the Tesla CEO for $44 billion last year , is already seen to be fumbling. Cloudflare CEO Matthew Prince shared in a screenshot posted to the platform Sunday that traffic on Twitter appears to be “tanking” as Threads gains steam. Data from web analytics company Similarweb suggests Twitter traffic fell 5% during the first two days of Threads’ availability, and is down 11% compared with the same period in 2022. Last week, Musk’s longtime lawyer Alex Spiro wrote a letter to Meta accusing it of “unlawful misappropriation” of trade secrets. In a constantly innovating industry with few protected patents, Meeks sees few paths for Musk and others to slow the rise of Threads, especially as it taps into Meta’s existing database of 2 billion customers. The platform is easy-to-use, enabling users to seamlessly convert Instagram followers, and offers user interface skills that companies such as Snap and Pinterest would struggle to replicate, he added. To be sure, Elevation Partners co-founder Roger McNamee said Meta and Threads face a long, uphill climb. The early Facebook and Google investor told CNBC’s ” Squawk on the Street ” this week that he views the past success of Twitter as a “fluke,” born of “being in the right place at the right time.” He referred to the platform as “never a great product,” one which struggled with an array of content moderation not to mention profitability issues. “For Meta to do better than that, I think is entirely realistic because I think the people are smarter than the people who’ve been running Twitter over the years,” he said. “But I don’t know how big that market is and whether it’s enough to make a really big difference on Meta’s income statement, which is so much bigger than Twitter’s.”
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What Meta’s Threads means for Twitter and the social media industry
