Threads, the latest offering from Meta Platforms aimed at competing with Twitter, has garnered attention from advertisers who view it as a more stable alternative to Elon Musk’s service. Analysts suggest that it holds the potential to divert marketing dollars in the coming months.
Since its launch on July 5, Threads has rapidly grown, achieving 100 million users within days, positioning itself as a formidable competitor to Twitter. Over the weekend, Musk announced that Twitter would undergo a rebranding and change its logo to something representing ‘X.’
Despite the initial surge in popularity, recent data from Sensor Tower revealed a decline in both downloads and user engagement in the week following its launch. Currently, Threads remains a non-commercial platform, with no advertising options available.
Forecasts indicate promising advertising revenue in the future, though these projections hinge on the app’s ability to maintain its user base. According to Bernstein’s analysis from July 18, if Threads retains its audience, it could potentially generate $5 billion (approximately Rs. 40,909 crore) in annual advertising revenue, matching Twitter’s earnings from 2021.
“The rapid adoption of Threads offers Meta some significant opportunities to explore,” analysts noted, while also cautioning that it’s still early in the app’s journey, referencing past platforms like Clubhouse that have faded after initial success.
Morningstar analysts projected on July 11 that Threads could contribute between $2 billion (Rs. 16,362 crore) and $3 billion (roughly Rs. 24,544 crore) annually to Meta’s revenue from 2024 to 2027. On July 9, Evercore ISI analysts estimated that Threads could reach $8 billion (around Rs. 65,451 crore) in annual revenue by 2025, although this would be a fraction of the anticipated $156 billion (approximately Rs. 12,76,374 crore) revenue for Meta in that same year, as reported by Refinitiv.
As they envision the potential growth of Threads—with Meta’s robust resources and track record managing platforms like Instagram and Facebook—some advertisers are proactively considering budgets for future campaigns on the app, according to industry insights.
Taylor Michelle Gerard, a senior executive at Blue Hour Studios, mentioned that some of her clients are contemplating integrating Threads into their campaigns alongside platforms like TikTok and Instagram as part of influencer partnerships.
“Incorporating Threads could complement existing marketing efforts effectively,” she added.
Once advertising becomes available on Threads, brands are likely to reallocate their ad spending from Twitter without hesitation, according to Matt Yanofsky, co-founder of Moment Lab. He noted that some of his unnamed clients are already considering budget allocations for Threads advertising later this year.
Meta has not provided any comments regarding this article.
In the Initial Stages
Concerns over the tone of discourse and frequent policy changes under Musk’s ownership have prompted some advertisers to distance themselves from Twitter. Andrew La Fond, a vice president at ad agency R/GA, confirmed this trend, noting their firm’s collaborations with clients like Nike.
Twitter has yet to respond to requests for comments. Nonetheless, the platform has asserted that it does not promote content which violates its guidelines, claiming that 99.99 percent of tweet impressions are considered “healthy” content.
Ad sales have reportedly declined significantly, with Musk stating they had dropped by 50 percent, though the timeframe of this estimate remains unclear.
In light of these declines, Twitter has engaged in outreach efforts to advertisers. Notably, just two days post-Threads launch, the platform reached out to a major ad-buying agency, highlighting the incentives available for advertisers and noting reduced ad spending for the year, based on a previewed email.
Despite its current momentum, Threads has a considerable pathway to traverse before it rival Twitter’s extensive reach. Last year, Twitter reported nearly 240 million monetizable daily active users in its last public announcement.
Mark Zuckerberg, Meta’s CEO, indicated that the company would only consider monetizing Threads once it established a clear trajectory towards 1 billion users. Presently, tens of millions of users are returning to Threads daily, and the team’s focus for the rest of 2023 is on improving core functionalities and user retention, as noted by Zuckerberg’s recent post on Threads.
After experiencing challenges in adopting AI-friendly systems, Meta has committed to enhancing its AI capabilities to drive traffic on Facebook and Instagram while boosting ad revenues. The company has also refined its cost projections following pandemic-era spending strategies.
Meta is set to announce its financial results for the second quarter on Wednesday, with expectations of an 8 percent increase in revenue to reach $31.1 billion, marking its best growth performance in six quarters.
Currently, Threads does not support direct messaging, hashtags, or keyword searches, which limits its functionality for advertisers and reduces its value as a platform for real-time event tracking—characteristics that users typically associate with Twitter.
Nevertheless, several brands are testing the waters on Threads, with Liz Bartges, director of brand engagement at FerebeeLane, expressing that the platform has revitalized the social media experience. “It’s reminiscent of the early Twitter days,” she remarked. “I’m eager to see its development.”
© Thomson Reuters 2023
