Topics may attract advertisers from Elon Musk’s Twitter, but it’s still early days, analysts say

Topics may attract advertisers from Elon Musk’s Twitter, but it’s still early days, analysts say

Threads, the Meta Platform side of Twitter, is seen by some advertisers as less contentious and more predictable than Elon Musk’s platform, and analysts say it could pull in marketing budgets — eventually.

Launched on July 5, Threads has become the fastest growing social media platform, reaching 100 million users, the first apparent serious threat to Twitter’s dominant microblogging app. On Sunday, Musk said Twitter would rebrand itself and change its logo to an X.

Threads saw a dip in downloads and engagement in the week after its debut, according to research firm Sensor Tower, and is currently not open to advertising.

But analysts predicted high targets for ad spending – with the caveat that they depend on user retention.

If the app manages to retain users, Threads could reach US$5 billion (about Rs. 40,909 crore) in annual ad revenue, matching what Twitter earned in 2021, Bernstein said in a July 18 note.

“The unprecedented adoption of … Threads now also gives Meta some buds of material to be excited about,” they said, while warning that it was still early days and other newcomers like Clubhouse had failed.

Morningstar analysts said on 11 July that Threads could add between US$2 billion (Rs. 16,362 crore) and US$3 billion (approximately Rs. 24,544 crore) to Meta’s revenue every year between 2024 and 2027. Evercore ISI analysts estimated on 9 July that Threads could generate US$8 billion (approximately Rs. 65) 451 crore) in annual revenue by 2025, a small part of the USD 156 billion (approximately Rs. 12,76,374 crore) revenue that analysts expect for Meta that year, according to Refinitiv.

In hopes that Threads will flourish — thanks to Meta’s deep pockets and successful experience on Instagram and Facebook — and in anticipation that it will eventually introduce advertising, some brands may already be considering how much money to set aside for future in-app marketing campaigns, analysts and ad industry executives said.

Taylor Michelle Gerard, a senior executive at content marketing firm Blue Hour Studios, said some of her clients are considering adding a Threads post along with TikTok or Instagram posts as part of sponsored deals with influencers.

“It’s a good way to work Threads into an existing campaign,” she said.

Once Threads ads are available, brands will transfer their ad spend from Twitter “without question,” said Matt Yanofsky, co-founder of Moment Lab, a brand marketing and advertising agency.

He said some of his clients, whose names he wouldn’t reveal, are already considering whether to add a budget for Threads ads later this year.

Meta has not commented for this article.

First days

Some advertisers have already turned away from Twitter due to concerns over the tone of speech and abrupt policy changes since Musk bought the company last year, said Andrew La Fond, vice president of advertising agency R/GA, who has worked with Nike.

Twitter did not respond to an email seeking comment. He said he doesn’t promote content that might violate his policies, and that 99.99% of tweet impressions or views are of “healthy” content.

He acknowledged the drop in ad sales – last week Musk said it had dropped by 50%, although it was not clear what time period he was referring to.

In response, he did some outreach to advertisers. Two days after Threads launched, Twitter sent an email to a major ad-buying company, reminding them of the incentives the company was offering advertisers and noting that the company has spent less on ads on Twitter this year, according to the email seen by Reuters.

Threads still has a long way to go before it matches Twitter’s reach, however. Twitter had nearly 240 million monetizable daily active users as of July last year, according to the company’s latest public disclosure.

Meta head Mark Zuckerberg said the company would only consider monetizing Threads when there was a clear path to 1 billion users.

Tens of millions of users return to Threads daily, and the team will focus the rest of the year on “improving the basics and retention,” Zuckerberg posted on Threads last week.

After being slow to adopt AI-enabled hardware and software systems for its core business, Meta invested to upgrade its AI capability to increase Facebook and Instagram traffic and increase ad sales. It also lowered its cost outlook for the year after the pandemic-era excesses.

On Wednesday, when Meta reports April-June results, the company is expected to post an 8% increase in quarterly revenue to $31.1 billion, its best growth in six quarters.

Threads doesn’t yet support direct messages, hashtags or keyword searches, which limits its appeal to advertisers and its usefulness as a place to follow events in real time, as users often do on Twitter.

However, many brands are experimenting with Threads, which “has made social media fun again,” said Liz Bartges, director of brand engagement at communications agency FerebeeLane.

“We’re reliving the glory days of Twitter,” she said of Threads. “I’m excited to see where this can go.”

© Thomson Reuters 2023

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