Zuckerberg seems keen to steal at least some of Musk’s lunch. What are his chances of success?
Long-time readers will know my investing strategy — invest a sizeable chunk of my excess income into blue chips within a SIPP, and the rest into high-risk small-cap shares in an ISA. I usually cover the small caps because as a general rule these see little coverage and the articles tend to be filled with fresh ideas and information.
I do however cover the blue chips where I feel that I can add value, and Meta Platforms — owner of Facebook, Instagram, and WhatsApp — is one of those. Meta shares have trebled since my initial investment in early November 2022, and will likely continue to rise in value.
Why? Its apps boast circa 3 billion monthly active users, which is 60% of everybody in the world with internet access. If you exclude China, which has banned the apps from passing through the Great Firewall, it’s an even higher proportion. You can laugh about TikTok stealing its market share or a declining userbase, but the reality is that Meta’s apps have massive reach and power.
There are many variables that could affect Meta’s fortunes — continued Apple privacy changes, the inevitable TikTok ban, the eventual Metaverse investment pay-off (and yes, I’m certain that this $1 billion per month outlay will ultimately be worth it) — but the latest wheeze seems to be to copy Twitter and replace it with a new app — codenamed Project92 — called ‘Threads.’
Given that a series of Tweets is already called a thread, this name is likely to be subject to litigation, and in a best case scenario is hardly inspired. But the question is this: can Zuckerberg steal Musk’s favourite toy?
TikTok is undeniably stealing market share from both Meta and Alphabet’s YouTube — and both have responded with copycats — Reels and Shorts. Both of these are pale imitations of the real thing, and despite far larger creator funds, most content makers are staying on TikTok for the unique userbase and marketing power.
It’s easy to say that Zuckerberg’s Threads will suffer the same fate when it clashes with Twitter. But before I write off the attempt before it even begins, it’s worth noting that Zuck already has masses on customer data and seemingly limitless cash to make it work.
And Twitter is not the place it was. Some changes have been positive, with a better focus on free speech and less nannying of adults. But many changes have not been so constructive — firing 80% of staff may save a lot of money, but that’s a lot of institutional knowledge and back office engineering which has sauntered out of the door. These staff may now make their way to Meta as the tech jobs market continues to decline.
And Twitter will continue to be buggy and annoying. There’s rarely a week where something doesn’t work, whether a timeline lockout, missing analytics, or even a total website blackout. Then there’s the speech issue — the problem with free speech is that there is now plenty of what might be perceived to be ‘hate’ speech.
I’m not going to try to define what constitutes hate, but instead highlight some concrete problems that can’t be disputed:
- Foad Dabiri — Twitter engineering chief — left after four years of service, the day after Ron DeSantis’ Presidential campaign launch experienced huge technical glitches on Twitter Spaces.
- Despite Musk’s insistence that ‘almost all advertisers have come back,’ the NYT was handed an internal presentation that shows that advertising revenue for the five weeks from 1 April to the first week of May was $88 million, down 59% over the past year. Some of this can be attributed to a slower global economy, but not all.
- Ella Irwin — Twitter head of trust and safety — recently resigned after Musk criticised Twitter’s handling of The Daily Wire’s documentary concerning transgender medical treatment for under-18s. Musk noted that flagging ‘What is a woman?’ as hate speech was ‘a mistake made by many people at Twitter.’
- New Twitter CEO Linda Yaccarino is very experienced but also has ties to the World Economic Forum, which has many users questioning whether she can truly be impartial as the regulator of speech at the internet’s ‘town hall.’
- The blue tick — or verification — used to be a definitive sign that a famous person or entity was who they said they were. This is now a paid for service and the initial transfer was handled awfully, with individuals impersonating companies for a handful of dollars. There are still many people who refuse to pay to be verified, so actual certainty is gone.
There are effectively two overarching problems at Twitter — the first is profitability. The site is not profitable, and efforts to cut back on staff have gone too far. While many staff were clearly not necessary, continued technical glitches and bots are becoming a problem.
The second is content oversight.
‘Sed quis custodiet ipsos custodes?’ has been a problem since time at least 127AD, but Twitter seems to be constantly reacting to potential hate speech through Musk’s personal opinion rather than having an objective policy to proactively filter content. This isn’t a comment on what should or shouldn’t be allowed, but rather a note that the process of decision-making is itself flawed.
For balance, it’s clear that free speech was clearly overregulated before Musk stepped up.
But these issues are to some extent less problematic at Meta. Facebook has clear content guidelines which will presumably be enforced at Threads. And the company generated $116.6 billion in revenue in 2022, a year when its share price dived to its lowest in years. It can comfortably support a new app, including the marketing needed to get users on board.
The Verge has reported that Meta CPO Chris Cox considers Threads Meta’s ‘response to Twitter,’ after ‘hearing from creators and public figures who are interested in having a platform that is sanely run, that they believe that they can trust and rely upon for distribution.’ Cox is in discussions with heavy hitters including Oprah Winfrey and the Dalai Lama.
Coding for the new app began in January, and a launch seems imminent. In bad news for Twitter, it seems that Threads will utilise ActivityPub tech so that new users can simply port their accounts from Facebook and Instagram to the new app.
Under Musk, Twitter has seen all-time highs of 250 million daily active users, but Fidelity considers that the site is now worth circa $15 billion, a third of the $44 billion price tag paid. Of course, the billionaire has in reality bought a marketing department for Tesla and SpaceX. Betting against the man who shot an electric car into space on his own rocket hasn’t ended well for most.
But Meta is gunning for its users. And it might find at least some initial success.
This article has been prepared for information purposes only by Charles Archer. It does not constitute advice, and no party accepts any liability for either accuracy or for investing decisions made using the information provided.
Further, it is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.