Threads' threats and growth opportunities
Threads' threats and growth opportunities
At first, I didn't want to write another take on Threads because I thought it wouldn’t fit onto the playing field of Organic Growth. But the fastest-growing consumer app to reach 100M sign-ups warrants some thoughts about Product-led Growth, internet platforms and attention shifts. And some people like Morgan Brown, who was one of my leads at Shopify and now runs community growth at Meta, voiced interest in my take.
So, here it is. You wanted it. You got it!
3,000 words about Threads’ growth and impact on the web ecosystem.
TL;DR
Threads’ success is a mix of Twitter’s failure, good timing and a smart Growth strategy
Threads had to be its own product to thrive
Gen Z used Twitter quite a lot, making Threads the right fit under the Instagram brand
Besides the economic opportunity, Meta has a chance to redeem itself and gain cultural relevance
Threads is unlikely to kill Twitter, but a lot of smaller contenders like Post, Mastodon or Bluesky
There is a chance Threads can fill Reddit’s vacuum
Meta’s true advantages are the infrastructure they already built for other products and the advertiser base they already have
Threads might have an opportunity to rank in Google’s new Perspectives tab if they can surface posts by topics
Retention might be better than most people think
The biggest threat to Threads is contamination with fake news, fake content, and polarization
ActivityPub might be a defense against regulation
AI moves the tectonic plates of the web
Warning: this is not a guide for growing your following on Threads.
Twitter’s failure paved the way for Threads’ success
Even with one of the biggest cash accounts and some of the best Tech talent, most Meta product attempts failed. Let’s look at the graveyard of failed Meta copies:
Lasso → answer to TikTok
Hobbi → Pinterest
Poke → Snapchat
Riff → Vine
FB Questions → Quora / Reddit
Bonfire → Houseparty
That’s because consumer products are sexy and lucrative but also hard to build. A good idea and strong execution are often not enough.
The fact that a barebones copy of Twitter drove over 150M sign-ups to its platform to date goes to show that Meta didn’t only deliver, but Twitter also opened the door. Threads is so successful in part because Twitter is melting.
The value destruction at Camp Blue Bird is quite impressive. In a recent interview, Musk cited Indigo Montoya’s “Offer me money. Offer me power. I don’t care.” as a response to whether he understood that his Tweets damage the platform. “I can say whatever I want.” True, but his public display of free speech might cost him much more than just the $44b he paid for Twitter. (Source)
One example of the impact of Musk’s freedom of speech is the decline in active users. Over the course of 8 months, DAU (Daily Active Users) tanked by -17% and MAU (Monthly Active Users) by -13.5%.
When Musk introduced rate limits on July 1st, organic traffic briefly dipped by -21% since it blocked Google from displaying Tweets and Twitter carousels.
The Google partnership seems critical for new user acquisition. Where else would Twitter get new users that haven’t already heard about Twitter?
Since Musk took over, Twitter app downloads visibly declined.
When Musk took value destruction to a new level with rate limits (viewers were limited by how many Tweets they saw, even when they paid for Twitter Blue), the Threads team saw and seized a unique opportunity. When Threads launched on July 5th, Twitter traffic started to decline.
There are executives, like Linkedin’s CEO Ryan Roslansky, who have a large following on the platform they lead and don’t behave like a 13-year-old teenage boy. Linkedin is thriving.
In November 2022, Mark Zuckerberg was still less popular than Donald Trump (let that sink in) and Elon Musk. 8 months later, the world view on Musk has changed from genius and savior of humanity to rightwing conspiracy promoter. While Zuckerberg’s public image didn’t stunt Meta’s growth, Musk’s behavior damaged the platform from the get-go. (source)
Twitter is a broadcasting network with one-to-many relationships. Musk has the largest Twitter account and used it many times to influence the image of the platform. Facebook is a network of one-to-one relationships. I can’t even see how many followers Zuckerberg has, and his posts don’t automatically appear on my timeline.
The fact that Meta is thriving despite Zuckerberg’s bad image and Twitter is falling apart is a testament to the different types of network effects at play here. That’s why Threads had to be its own app and couldn’t live as another feature on Facebook or Instagram (in an interview with Casey Newton, Head of Instagram, Adam Mosseri mentioned the design choice to raise comments to the same level as posts also made Threads more suitable to an independent app instead of a Facebook feature [source]).
Why build a text-based social network?
What is it for, and who is it for? (Seth Godin)
Q: Why build another Twitter when it's failing? A: Young people, profit and cultural relevance.
Reason #1: Twitter is the 6th most popular social network among Gen Z, with 37% saying they use it. In comparison, 37% of Gen Z say they use Facebook and 62% Instagram. (source)
You would think young people aren’t using Twitter as much, and Threads is mostly for older generations. But that’s not true. Gen Z uses Twitter, and it’s likely to use Threads as well. Meta can build another bridge to younger generations that don’t care about Facebook but very much about IG and Threads.
Reason #2: as of Q1 2023, Facebook’s ARPU (average revenue per user) sits at a comfortable $9.54 USD, which is likely to be the highest amongst all social platforms. Twitter’s ARPU (last time it was reported in 2022) was about half: $4.96. Meta has the ad infrastructure to reach Twitter’s ARPU quickly. If the Threads team can turn 150m sign-ups into 150m DAU over the next 12-24 months (which should be the short-term goal, imho), it would generate about $750m ARR (Annual Recurring Revenue). Not bad for a team that’s rumored to be under 10 people. To make a dent in Meta’s total revenue, though, Threads needs to grow larger than Twitter, which means it needs to be more than Twitter.
Reason #3: Something worth more to Meta than $1b ARR is cultural relevance. Nothing reflects Twitter’s central role in society better than how the media clung to every Tweet of Donald Trump. If Threads replaces Twitter’s position in society, it could redeem Meta’s poor image. It could become cool again. But success is not enough, Threads needs to land moderation and privacy right as well.
It’s counter-intuitive that a text-based app becomes the fastest-growing consumer product in history after image and video-based platforms like Instagram and TikTok were supposed to be the future. Until now, I thought all attention gradually moved to visual formats. Could some use cases / situations always be a better experience in text? Should I take my hope to write a book one day out of the trash can?
The answer: there is room for a multi-billion dollar revenue-generating lightweight text-sharing app where users can broadcast into the world. Society needs a place to discuss the current thing without much friction, a.k.a. text, from second-screening The Bachelor or debating the impact of a pandemic on kids. The fact that 150m people couldn’t wait to see what that might look like proves there is a place for it. The result: a shift in the constellation of web platforms.
What does the success of Threads mean for the web ecosystem?
What’s the secret to building a successful consumer app?
First, build a great product. Second, have another app with 3 billion users.
It’s unlikely Threads will kill Twitter completely. Musk could sponsor Twitter indefinitely, though it will keep eating away at Tesla and SpaceX because has to finance Twitter by selling shares in his other companies, which creates a negative sentiment around the stock, he’s distracted, and his Tweets destroy his image.
Instead, it’s likely Threads kills a lot of smaller contenders like Post, Mastodon or Bluesky. Those smaller players just lost a lot of appeal as Twitter alternatives. Mastodon’s complexity is a big barrier to entry that prevents fast adoption. Decentralization is the opposite of a broadcasting app, and frankly, most people don’t care enough about it to use Mastodon. Post never reached critical mass. Bluesky banks on scarcity tactics like invite-only, which only work when a crowd of cool kids is already at the party.
Threads doesn’t have that problem because Instagram already has a user base of +2 billion people. Broadcasting apps are most interesting when there are lots of people to broadcast to, and Threads already has as many sign-ups as TikTok has total users in the US. People are at the party. (source)
Another platform that’s struggling for similar reasons as Twitter is Reddit. And there is another connection between the two: both fulfill the job of getting information from other humans (ideally, experts). Reddit, the OG forum, is one of the only places left on the web where you can reliably get good information without wondering if the person answering truly knows what they’re talking about (with exceptions). If Threads gets the connection-based (“following”) feed right and is able to group posts around topics to a very granular degree, it could even fill the vacuum Reddit is leaving right now.
Threads’ Product Growth
We actually just looked at a lot of data, we measured a lot of stuff, we tested a lot of stuff, and we tried a lot of stuff. (Chamath Palihapitiya: How we put Facebook on the path to 1 billion users)
50% of Threads’ growth is good timing. The other 40% are leveraging Instagram’s +2 billion users, and 10% are smart Product Growth decisions. In my own and the experience of other users, portability from Twitter to Threads hasn’t been great, but it doesn’t have to be. Threads doesn’t have to deal with the Cold Start Problem the same way as other Twitter contenders because the barrier to entry from Instagram to Threads was close to zero. You could sign up to Threads with your IG profile and get started in seconds, which had two important effects: if you’re just curious, you could peek into the club without much friction, and a lot of people were already at the party when you joined.
But Instagram’s user base is not even Meta’s biggest advantage. The hidden but more powerful advantages are:
Hosting: there were no reported outages even though 100M users flooded the gates
Moderation: Meta already has moderation teams for Facebook and Instagram, plus more data than any other platform to automate it
Advertising: Meta has one of the best advertising stacks in the business, plus most advertisers already are on Meta, lowering the bar for future Threads ads (Thr-ads?)
Messenger: Meta can easily integrate DMs on Threads with the rest of the Messenger universe
Of course, Meta made smart Product Growth decisions: New users get a badge that shows their number in the sign-up queue, which is very shareable and creates FOMO for non-users. Threads kind of enforces real names by displaying the Instagram name of users, reducing trolls and spam. Users can share Threads directly to IG (or Twitter) to promote their profiles and pull more people over. Threads doesn’t display how many other members a user follows, which prevents weird signaling games about follower vs. following ratios. The fact that Threads didn’t start with a “following” tab might be a signaling strategy because you see all the large accounts and celebrities who joined Threads when you create an account.
For the next stage of growth, Threads needs a feed with content only from users you follow (in the works). I also see an opportunity for Threads to leverage Google’s new Perspectives tab by grouping posts into topical feeds and surfacing valuable content to Google Search.
Threads’ threats
No, I don’t feel shame for this headline. Yes, Threads is by no means a written success story.
Dropping DAU is a Red Herring. An initial spike of users was almost expected, but retention is the true north star for Product-Market Fit. News about Threads’ dropping DAUs that call for early obituaries and draw comparisons between Clubhouse and Google+ miss the fact that a spike in sign-ups was to be expected, and it ultimately comes down to retention. Threads’ retention is better for a social app than most think:
For the top 10 Apps, Day 3 retention is around 75%. Threads' Day 5/6 retention is an implied 80%. This puts it in the top decile of apps in terms of retention after launch - an incredible feat considering its scale. (source)
Google+ came from a company that’s consistently bad at social and had the purpose of defeating Facebook (which failed). Clubhouse became successful during and due to the pandemic. It was the right product for the right situation, but then the situation changed.
The biggest threat to Threads is contamination with fake news, fake content, and polarization. Once the public loses trust in the validity or safety of the content, the platform loses stickiness.
Linkedin, one of my favorite platforms right now, is contaminated with comment spam. AI tools make it easy to comment with fluff on someone’s post. It’s fake engagement that doesn’t add value but crowds and clogs the platform. Reddit doesn’t have that problem because moderators and the community weed such things out. Threads needs to quickly build and solidify systems that prevent shallow and fake content.
The second biggest threat to Threads is regulation. The more successful Meta is, the more scrutiny it faces from regulators - as it should be. The dichotomy of Threads is that the more successful it is, the more scrutiny it will attract. I think that’s why Threads comes with ActivityPub, a decentralized protocol that provides an API for porting data between social networks. It allows users to take their followers and move them to another platform, say Mastodon, seamlessly. It could theoretically lead to WordPress posts showing up in your Threads timeline (remember my thought about Reddit?). Just like Google’s defense of being called a monopoly has always been “competition is just a click away”, Threads could defend itself from regulators by saying users are free to leave and take their followers with them.
The third biggest threat to Threads is missing the train on creators. The list of options for monetizing attention is growing for creators, even without Twitter. Threads needs to figure out a rev share model that incentivizes good content, which typically comes from professional creators. The fact that Twitter responded to the launch of Threads with rev share, which I suggested in my article 9 Growth ideas for Twitter, hints at the importance of creators, even though Twitter doesn’t have much revenue to share (ad revenue is down 50%). Instagram started sharing revenue with a similar setup as Youtube. Though the impact has been low so far, it’s the right direction and should be offered on Threads with the rollout of ads.
The big picture: AI, of course
AI threatens the value of many platforms either by replacing them or using their content for training:
Twitter: struggles to monetize its content that was used to train AI
Reddit: struggles to monetize its content that was used to train AI
Quora: fights for survival from the threat of AI with its own chatbot, Poe
Linkedin: tests AI content generation tools for users
Google: disrupts itself with AI search (SGE)
Facebook: publishes open-source generative AI models
Youtube: not yet affected by AI, but likely working on protection systems against fake videos
Instagram: not yet affected by AI, using it for content moderation
While knowledge platforms need to figure out how to compete with AI, engagement platforms just need to filter it out. Twitter and Reddit closed their APIs or massively raised prices to capture some of the value their user base provides. Threads doesn’t have that problem because it can monetize its user base much more effectively with Meta’s ad ecosystem. It could even use Threads to train its own AI models.
To take this point a step further, Threads has a chance to fill the hole Google (SGE threatens content monetization) and Facebook leave for publishers. Adam Mosseri said Threads isn’t focused on news, but if Threads can foster an environment where creators / journalists can thrive and make a buck, it could alleviate at least some pain for publishers.
Oh ya, follow me on Threads.