Meta Platforms, the company behind the new social networking platform called Threads, seems to have a hit on its hands. However, the big question now is how its early popularity will translate into revenue.
Shifting User Time and Revenue Implications
One concern to keep an eye on is whether users will transition from ad-supported platforms like Facebook and Instagram to the ad-free Threads. This shift in user time could have implications for Meta’s revenue growth. Additionally, it remains uncertain how Threads’ popularity will impact Twitter.
Astonishing Debut and Monetization Plans
Over the weekend, Meta CEO Mark Zuckerberg shared on Threads that the platform had surpassed 100 million sign-ups—an impressive start. However, Instagram head Adam Mosseri clarified in recent interviews that Meta currently has no immediate plans for monetizing Threads.
Sign-ups Alone Won’t Attract Advertisers
While the number of sign-ups is promising, it alone won’t be enough to attract advertisers. Advertisers are interested in how much time people will spend on the platform, and it’s still too early to determine that. Zuckerberg believes that Threads can eventually reach one billion users, and if it even comes close, it could significantly boost Meta’s ad revenue and profit.
Untapped Potential at Scale
Zuckerberg expressed his hope for realizing Threads’ full potential: “No one has made this work at the scale of its full potential before. That’s what I hope we get right.” The Tech Trader column this week noted that one billion users would be about four times the number Twitter reported before Elon Musk acquired the company. Musk projects that Twitter will generate around $3 billion in revenue this year, a decrease from $5.1 billion in 2021.
The Size of the Potential Ad Market
Analysts and investors are now pondering the potential ad market size for Threads. If Threads outperforms Twitter and captures all its ad revenue, Meta’s business could benefit, albeit modestly.
In conclusion, Meta’s Threads has made a strong debut, but the focus now shifts to revenue generation. The impact on Meta’s bottom line will depend on user engagement, long-term popularity, and the potential ad market size. Only time will tell if Threads becomes the revenue driver that Meta hopes for.
By Eric J. Savitz
Evercore ISI analyst Mark Mahaney predicts an optimistic future for Twitter’s new platform, Threads. In a recent research note, Mahaney estimates that the platform could attract 200 million daily active users within the next few years. This projection opens up significant possibilities for revenue growth, potentially reaching $8 billion annually. It indicates a promising 5% upside to Mahaney’s current 2025 revenue forecast and a potential 6% to 7% boost to earnings per share.
Mahaney praises Threads as a cleaner, simpler, friendlier, and more authentic alternative to Twitter. However, he also acknowledges some areas where the platform falls short. Notable missing features include full-text search, a “following” feed, and a Web version. Additionally, the platform has yet to launch in Europe due to regulatory concerns regarding privacy regulations imposed by the EU.
One aspect to closely monitor is whether Threads can achieve healthy growth without cannibalizing user engagement on Facebook and Instagram. Meta, the parent company of Instagram and Facebook, has faced similar challenges when introducing new features that compete with or overlap existing ones. For example, Reels, Meta’s TikTok-style short video feature, has not monetized as effectively as other parts of Facebook and Instagram. The company has actively worked towards improving its performance.
While Threads initially taking market share from Twitter is advantageous, the potential shift of users from Instagram to ad-free Threads could pose challenges for Meta and its shareholders. RBC Capital analyst Brad Erickson acknowledges this concern in a research note, acknowledging the impressive start of Threads with 100 million users in less than a week. However, he emphasizes the need to monitor potential signs of cannibalization within Meta’s family of apps as Instagram actively promotes engagement with Threads.
On Monday, Meta shares experienced a modest increase of 1.2%, reaching $294.10.
