Twitter, Threads and Billionaire Cage Fights

Imagine launching a new product and getting 97 million users in less than a week. That’s what Meta’s new Twitter clone ‘Threads’ had achieved as of Monday morning, making it the most rapidly downloaded app ever – and that’s before it has even been launched in the European Union, a market of 450 million consumers.

Granted, Meta isn't starting from scratch like Instagram did, or even ChatGPT – it has an audience of 3.6 billion people to whom it can directly market the new service. If there was any thought of Mastodon or other Twitter clones taking the mantle, they have now been quashed. And while it seems like no one, other than Mark Zuckerberg, really needs or wants the Metaverse, the numbers indicate a text-based linking platform akin to Twitter is something the market does want.

This clearly points to a lack of real choice for consumers, but it also provides a clear playbook for investors, which sounds a lot like the past 20 years or so.

Illusion of Choice

Stop and think for a moment about the digital services or apps you use every day. You’ll notice two things. There’s only a handful of apps you actually use, and the large majority come from Big Tech. Statistically, the average user has 80 apps on their smartphone, uses nine daily, and 30 across a month. Of the eight apps I use every day, five come from Big Tech. I currently have 137 apps on my phone and most have digital tumbleweeds blowing through them.

This illusion of choice is great news for investors in an economy where the scarcest resource is attention itself. We can tell where attention is being directed long before it impacts earnings reports.

Twitter was once an indispensable commercial tool for me. I used it to connect with thought leaders, promote my work, find news faster than any other web forum, stay in tune with pop culture, and even used it as a real-time tool for things like local earthquakes. I even had a blue-check verification as a media commentator and TV host. Yet, like many others, I agree that Musk’s antics impacted the utility of the tool. The app has become glitchy, my feed became less useful, and many of those I followed who had valuable tweets exited the platform. In the pursuit of free speech, it seems to be filled with greater amounts of vitriolic content. And while I’m no Zuckerberg fan, having a reliable, real-time, content utility app is something I want – regardless of where it comes from.

Immediate Utility

The ease with which I could get Threads on my phone was of particular interest to investors, not just users. Once you download the app, you can log into Threads using your Instagram account. No need for a new username, password, profile summary, or photo — a classic example of leveraging an existing corporate power base. It also means that users gain immediate utility, having a cohort of followers and fans creating immediate engagement.

What is noticeable, however, is how different my Twitter feed was compared to my Threads feed. By using Instagram as a base, it doesn't quite fit. Instagram is largely visual. And while I do have some news and tech accounts I follow, it’s mostly filled with lots of pictures of surfing, architecture, cars, and memes. Not exactly the perfect fit for a news-style feed – but given the utility of a Twitter-like service, I’ll persevere and curate it to be what Twitter once was.

Missing Link

And this is where the genius in the Zuckerberg play lies. The only missing link in his social media empire is a news-centric text feed. In this instance, Zuckerberg has gone back to the strategy which has served him best, either buying nascent competitors or copying others' ideas with exceptional execution. This is where Meta has done best. It took the idea of disappearing messages from Snap Inc for Instagram stories. It created Reels in response to the growth of TikTok, and now he’s cloned Twitter at what seems to be exceptional timing: firstly, when the app is losing users and relevance; and secondly, it’s just in time for the US election where news feeds are all-important.

It seems the Musk-Zuckerberg cage match will be fought, albeit in their natural habitats of digital forums and courtrooms. Musk has already threatened legal action asserting that Meta used trade secrets and ex-Twitter staff to build Threads – which is quite frankly laughable. What remains to be seen is if Threads will maintain a level of civility, which is attractive to advertisers.

Advertising Edge

In the past 12 months since Musk’s ownership of Twitter, advertising revenue has declined 28 per cent year on year. And annual month to month comparisons are even worse, with April ad sales in 2023 down 59 per cent compared to 2022. The advantage Meta has is that it can direct advertising onto Threads, via the option it provides advertisers to choose which of the Meta platforms the ads run on.

The early success of this move would be a relief for Meta investors. The share market has responded positively to Zuckerberg’s mantra of 2023 being “the year of efficiency” for Meta. After an additional 10,000 job cuts in April, Meta has indicated it will save $US3-5 billion a year, and thankfully is less focused on its Metaverse fever dream. The market has responded. It is among the best-performing stocks with 33 per cent capital growth YTD, and a market cap now sitting at $US745 billion.

If we’ve learned anything about investing in digital and Big Tech it’s this; nothing is more powerful than network effects. The ability Big Tech has to leverage user bases, reduce barriers to entry, and create walled gardens is very rewarding to investors. And quite frankly, I can’t see that changing any time soon.