Is $META going to benefit from Threads?

One of the questions that many META shareholders have is, what is the impact of Threads on the company’s value?

The answer isn’t simple, and I’ll try to break down the components and share my thoughts.

Mark Zuckerberg shared that monetization options would be explored once Threads hits one billion users (As am I writing this, there are over 83 million users. For comparison, Twitter has close to 400 million).

From Meta’s point of view, the so-called family of Apps includes two social media platforms – Facebook and Instagram. Both of these platforms are in mature monetization stages, where both the revenue per user and the margins are incredibly high.

If we take a look at the big picture, all social media companies make money by selling advertisements. The formula behind that is simple:

Number of users X Time spent on the platform X Advertisement revenue

The time that is being spent is limited, every one of us has 24 hours in a day and decides how to use (or waste) it.

Part of the Facebook/Instagram users will use part of their time using Threads and the impact is obvious. If we take a look at the formula above, it is quite clear that the time spent on Facebook/Instagram will be lower, hence, the revenue generated there is expected to decrease. In addition, as Threads is not monetized, it will only bring additional expenses for keeping the platform up and running. In the short run, there shouldn’t be high expectations for Meta when it comes to the financials.

Whether Threads will generate value, in the long run, depends on a few factors:

– The # of users that join Threads, from Twitter.

– The monetization per user of Threads, and how far it will be compared to Facebook/Instagram (So far, Twitter didn’t use its potential)

– The outcome of the cease-and-desist letter sent to Meta by Spiro (Elon’s lawyer) for creating a “copycat” app.

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Meta's value will increase, only if:

– The total number of users (Facebook/Instagram/Threads) increases at the expense of Twitter, and;

– The revenue generated is higher and can cover the additional expenses for running Threads.

I personally, do not think the new platform is creating a lot of value for Meta.