On Threads, Meta's Google Plus and one future epic financial fail (again)
Threads launched to great fanfare, but the reality of the business model and thinking leaves a lot to be desired.
Threads. If I’ve ever seen something where the economics doesn’t stack up, it’s got to be Threads. The platform launched to huge fanfare. If you believed the hype, Twitter was dead. Buried. No one would be using Twitter within 30 days.
Now the launch has passed the fanfare, I’m not sure the case for Threads is stacking up. As a brand, I’d be questioning if this was less Instagram and more Google Plus.
As a watcher of these things, I’m not sure the economics or the bet quite stacks up for Meta either. Threads is a way for Zuck to rub Musk’s nose in it, but I can’t yet see the economic case.
Why people use social media
Social media’s usage is where we start in this tale. Social is an annoying beast. People mostly treat it like TV channels and the heuristics are still the same. People talk ‘social creative’ rather than recognising that TikTok and Facebook are about as similar as Radio and TV when it comes to media consumption. Sure, they all have sound, but do they even follow the same pattern?
In short, people use social platforms for radically different use cases. I’d argue social really breaks out into more granular media consumption cases, that you can quite clearly see:
TikTok: short entertainment
Twitter: debates
Instagram: lifestyle
Facebook: News and identity
YouTube: watching things
Or to break out into analogous, rather than first principles, terms:
TikTok: comedy halls
Twitter: water cooler
Instagram: magazines
Facebook: newspaper
YouTube: TV
In a sense, the quest for human behaviour is to constantly reinvent things we already do. Social media is no exception to that rule.
Why advertising improves on social media
Advertising improves on social media because it learns what you respond to within that context. In a sense, the ads get better at figuring out if you’ll actually do something or not. They deeply understand what advertising you react to. How what you post might affect advertising. And so on.
Data fuels advertising in social. It’s no secret.
What social platforms are really doing is building context as to what communication you react to when consuming content through their distribution mechanisms. It’s insanely powerful, because it helps advertisers get more people to consume and interact with more ads. But you can’t just switch this to a new mechanism of consumption overnight.
Behavioural context = effective data
Data builds databases. And the hidden secret of all databases is that, in some way, their structure tends to reflect the real world.
Poor data engineers tend to build databases based on what they want to capture. Brilliant data engineers tend to build databases that reflect real-world dynamics simply.
Clearly, the database and architecture is kind of implicit to the environment. How you consume and act on one social network may not much another, and therefore the advertising response (in some subtle ways) does shift. We often see, for example, ad formats working differently on Facebook versus YouTube.
There’s an amazing example of this: Facebook’s Audience Network. Facebook allows you to target using Facebook Audience Network data off-platform. Yet routinely, this is a pretty junky ad channel. Whilst FB’s algorithms are able to calibrate, you often find that advertising that works in Facebook’s main platforms works like crap when it leaves it.
Which leaves us with Threads
For all Facebook’s prowess, I don’t believe they’ve ever attempted to build a platform that provokes conversation. Instead, their core prowess has always been in link sharing, a contact book, messages and news feeds. They haven’t really owned a platform that’s about conversation, and I suspect that’s because they’re fundamentally different skillsets. Everybody likes to talk about social media ubiquitously, but I think they’re quite different.
Threads is no exception. Whilst it looks and feels similar, creating conversation is a different game I feel to letting people post publicly. That’s a nuance Threads may miss in execution.
Social media’s hidden cost blocks Threads
Of course, then there’s the hidden cost of social media. Swapping networks means swapping currency. Your following built up on Twitter may not translate well to your Instagram crew. The conversations you have won’t be the same. As conversation is at the heart of Twitter, this I think is a big challenge for them. Switching the userbase over doesn’t switch over the years of content, connections and ongoing conversation that Twitter houses.
Financially, this makes the business model hard to make viable in the context of Meta
You can do some back of the hand maths here, but Twitter at it’s peak maybe had $5bn of ad revenue in AUD terms. A lot, but not a huge prize. This is now fragmenting somewhat with other plays.
Broadly, the Threads ‘prize’ is in this. If we assume that it takes maybe 50%, it’s a $2.5bn play to win. Whilst significant, that’s a 8% improvement to Meta’s revenue for a lot of risk. Essentially, it shifts Meta’s focus to 8% that is likely historical - or moving where the puck has been - instead of inventing the future.
To me, that makes it existentially risky business.