24 July (Reuters) – Metaplatform’s (META.O) Twitter broadside thread is seen by some advertisers as less controversial and more predictable than Elon Musk’s platform, and analysts say it could ultimately steal marketing budgets.
Threads, which launched on July 5, has become the fastest-growing social media platform to reach 100 million users, clearly posing the first serious threat to the dominant microblogging Twitter app. Musk said on Sunday that he would rebrand Twitter and change its logo to an X.
According to research firm Sensor Tower, Threads saw a drop in downloads and engagement a week after its viral debut and is no longer accepting ads.
Analysts, however, are projecting higher ad spending targets given that it depends on users sticking around.
In a July 18 memo, Bernstein said that if the app can retain users, Threads could hit $5 billion in annual ad revenue, comparable to what Twitter made in 2021.
“With its unprecedented adoption of Thread, Meta also has the buds to get excited about,” they said, warning that it’s still in its early stages and other upstarts like Clubhouse have fizzled out.
Morningstar analysts said on July 11 that Threads could add $2 billion to $3 billion in meta revenue each year from 2024 to 2027. Analysts at Evercore ISI calculated on July 9 that Threads could generate $8 billion in annual revenue by 2025, a mere fraction of Meta’s projected $156 billion in revenue for the same year, according to Refinitiv.
Analysts and ad-industry executives hope Threads will thrive thanks to Meta’s deep funding and successful experience running Instagram and Facebook, and they hope to eventually introduce advertising, with some brands likely already considering how much money to set aside for future marketing campaigns on the app, said analysts and ad industry executives.
Taylor Michelle Gerrard, senior executive at content marketing firm Blue Hour Studios, said some of her clients are looking to add Threads posts alongside their TikTok and Instagram posts as part of sponsorship deals with influencers.
“This is a great way to incorporate threads into existing campaigns,” she says.
Matt Yanofsky, co-founder of brand marketing and advertising agency Moment Labs, said brands will “definitely” shift ad spend away from Twitter once threaded ads become available.
He said some of his clients, who didn’t want to be named, are already considering additional Threads ad budgets later this year.
Mehta declined to comment for this article.
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Andrew Lafon, vice president of advertising agency R/GA, which has partnered with Nike (NKE.N), said some advertisers had already turned away from Twitter over concerns about the tone and the sudden change in policy since Musk bought the company last year.
Twitter did not respond to an email requesting comment. The company does not promote content that may violate its policies, and said 99.99% of tweet impressions or views are “healthy” content.
The company has acknowledged a decline in ad sales, but Musk said last week that ad sales were down 50%, though it wasn’t clear what period he was referring to.
In response, the company reached out to advertisers. Two days after the thread was launched, Twitter sent an email to a large ad-buying company reminding them of the incentives it offers advertisers and noting that the company has spent less on Twitter ads this year, according to an email seen by Reuters.
However, Threads still has a long way to go before it can match Twitter’s reach. According to the company’s latest public disclosure, Twitter had about 240 million monetizable daily active users as of July last year.
Metabos’ Mark Zuckerberg said the company will only consider monetizing Threads if it sees a clear path to one billion users.
With tens of millions of users returning to Threads every day, Zuckerberg posted to Threads last week that the team will focus on “basics and retention” for the rest of the year.
Meta has been slow to adopt AI-enabled hardware and software systems in its core business, so it has invested in upgrading its AI capabilities to drive more traffic to Facebook and Instagram and boost ad sales. The cost outlook for the year was also reduced following pandemic-era overruns.
When Meta reports its April-June quarter results on Wednesday, the company’s quarterly revenue is expected to rise 8% to $31.1 billion, the best growth in six quarters.
Threads does not yet support direct messaging, hashtags, or keyword searches, which limits its appeal to advertisers and its usefulness as a place to follow real-time events like the ones people often do on Twitter.
Nonetheless, many brands are experimenting with Threads, which “makes social media feel fun again,” said Liz Bertjess, director of brand engagement at communications agency FerebeeLane.
“We’re reliving the heyday of Twitter,” she said of Threads. “I’m looking forward to seeing how far it develops.”
Bengaluru was reported by Akash Sriram and Samrita Arunasalam, and Dallas by Sheela Dunn.Editing: Sayantani Ghosh and Rosalva O’Brien
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