Shares of Meta Platforms, Inc. (NASDAQ: META) experienced a significant rise today, increasing by 3.28% as of 3:28 p.m. ET. This surge is noteworthy given the overall decline in major stock indices at the same time.
Investors are showing excitement over Meta’s plans to unveil a new microblogging rival named Threads, set to be launched tomorrow. While Threads may not dramatically impact Meta’s overall value, it could provide a positive boost to the company and enhance its data-gathering capabilities.
The success of Threads remains uncertain, but any level of achievement would mean incremental revenue for Meta, which already boasts a staggering market cap of $755 billion, making investors optimistic.
Meta’s Chance to Erode Twitter’s Dominance with Threads
Meta appears to have several advantageous factors working in its favor. First, Twitter has faced numerous controversies under its CEO Elon Musk, who acquired the platform in October last year. Recent controversies include limiting users’ daily post visibility for a brief period, introducing fees for a blue “verified” checkmark, and Musk’s controversial and politically charged tweets. These issues prompted some advertisers to reduce their spending or abandon Twitter.
Furthermore, Meta possesses an extensive user base, boasting 3.81 billion monthly active users across its apps, including Facebook, Instagram, and WhatsApp. In comparison, Twitter has an estimated 363.7 million monthly active users, highlighting Meta’s significant advantage.
Leveraging its sizable user base and strong advertising partnerships, Meta has a good chance of attracting Twitter users to Threads or diverting their attention. This potential migration could partially erode Twitter’s dominance in the social media landscape.
The Threads platform also offers Meta an opportunity to collect more user data, especially after it faced restrictions on gathering internet-usage data from iOS users following privacy changes by Apple in 2021. The resulting reduced-targeting capabilities cost Meta billions in revenue. However, recent advancements in AI tools have partially restored Meta’s ad-targeting capabilities. A successful microblogging site like Threads could provide Meta with valuable insights, enhancing future ad targeting efforts.
Nevertheless, convincing users to switch from Twitter may prove challenging. Twitter’s first-mover advantage and network effects present significant obstacles for competitors. The battle between Meta, a large and operationally successful company, and Twitter’s established dominance will be intriguing. It represents a clash between an unstoppable force and an immovable object.
Threads Launch: Shifting Narrative for Meta’s Growth
Despite being 25% below its all-time high, Meta Platforms has seen a remarkable appreciation of 237% since hitting lows last October.
Investors have been buoyed by the recovering economy, increased optimism in advertising spending, and Meta’s successful utilization of AI, demonstrated by products like Reels, which have effectively fended off competition from TikTok.
Now with the imminent launch of Threads, the narrative surrounding Meta may shift further toward growth and opportunity, replacing concerns about declining revenues and competitive challenges.
Although Meta’s stock is no longer as inexpensive as before and carries inherent risks, it appears well-positioned to succeed in an era of artificial intelligence, where large user bases and access to proprietary data serve as significant advantages.
Edward Cooke is a financial analyst, freelance writer, and editor. He has six years of experience in financial journalism. He has an in-depth understanding of equities markets, tracking major indices and providing real-time analysis on stock price movements, corporate earnings, and market sentiment.
