Threads o Threats... that is the question

Ever since Elon Musk set his sights on Twitter in mid-2022 and later turned his interest into a multi-billion dollar acquisition of $44 billion at the end of last year, it seems that storm clouds have settled over the little bird's social network.

foto: Illustration by Kelly Caminero / The Daily Beast / Getty

Twitter was born back in 2006 (almost turning 20 years old!) and, although it experienced exponential growth during its first four years, it entered a phase of stagnation and even slight decline from 2011 onwards, which has been maintained over the years. In other words, it lost its glamour or hype, but it's still here.

Initially, Twitter was the territory of techies, tech enthusiasts, and marketers (early adopters). Later, even your grandmother could be found using it. In recent years, it has become a fertile ground for media outlets, politicians, top voices, and self-proclaimed "experts" on all topics.

What hasn't changed over the years is Twitter's inability to develop a "solid" business model that generates a steady stream of revenue to ensure the social network's profitability. Neither advertising services, subscriptions (super-follows), data partnerships, nor the verified account certification have proven to be consistently successful.

However, let's not overlook the fact that Twitter's revenue in 2022 was $4.4 billion (an 11% decrease YoY), with 90% of the income coming from advertising services. More than 54% of its revenue comes from the American market. But this is not enough to cover Twitter's operating costs, and in 2021, the company incurred losses of over $220 million (compared to $1.13 billion in 2020).

fuente: Statista

With Elon Musk's arrival at Twitter in mid-2022 and his subsequent purchase of the platform for a whopping $44 billion at the end of last year, changes were expected. Setting aside his controversial style, Elon Musk is a successful entrepreneur, a business shark, and it's evident that he didn't invest such a huge sum of money just to do nothing.

It was foreseeable that Elon Musk would streamline the organization and start considering changes in strategy and business models. His latest move triggered a tsunami of reactions.

So, what was this move all about? It's a very common approach in the digital business world—shifting to a "freemium" model, where basic users continue to enjoy the service for free (with generous limits for personal use, 600 tweets per day and 300 for new accounts), while advanced users, those who derive clear benefits from the solution, have different service tiers (i.e., they pay for higher usage levels).

Thus, the paid accounts, known as "Twitter Blue," initially have a limit of 6,000 tweets per day (a limit that the platform may modify based on usage analysis). The pricing ranges from $8 per month for the web version to $11 per month ($84 and $115 annually), with slight variations between countries. So, if we "abuse" the daily limit, the cost per tweet becomes almost negligible, especially when considering a professional use case.

From a business perspective, if you look at the Total Addressable Market (TAM), assuming complete conversion, we are talking about a potential business of $41.4 billion. In the digital business realm, such "Captain Assumptions" are quite common.

On the other hand, users perceive that they had something "free" for a long time, and now they face restrictions, which inevitably generates rejection. However, we have seen similar situations with other businesses like Skype and Spotify—these are known as micro-annoyances that push users to consider paid options.

Moreover, there's the eternal debate of whether Twitter is what it is because of the content we provide, and without us, it would be nothing. Users argue that it's not "fair" to charge them for their content. This is the ethical dilemma when something is free, and users become the product. However, we should consider the value these services provide. Content is critical, but a platform, an audience, and the creation of consumption dynamics also have a cost. If we don't see this, we can always "leave" since no one forces us to be there, and there are alternative platforms.

Indeed, alternatives have emerged, as is usual when something is attractive and dominant. Clones like Mastodon, Bluesky, Parler, Plurk, Hive Social, Counter Social, among others, have appeared. However, beyond the noise generated by those who feel "hurt" or adverse to Twitter, none of these alternatives has managed to gain significant traction or pose a potential threat to the Twitter platform. They make a lot of noise, but offer little substance. The dynamics of social media are such that it's not just about technology or a value proposition that targets the weaknesses of the rival (security, freedom, etc.). There are social dynamics at play—users are where others are, and generating transfer movements once a certain market share is achieved is genuinely complex (invisible exit barriers).

Gráfico: Google Trends

Amidst all this "noise," one of the big Social Players, META, decided to take advantage of the situation and enter the fray by launching THREADS, which is essentially a clone of Twitter (the similarities are striking), but also a clever extension of Instagram.

By doing this, META ensures an easy migration of users, even if many of them just join to check it out without fully consolidating their presence. However, as I mentioned earlier, the main challenge for a social platform is to generate that critical mass of users that mobilizes the rest (we've seen examples like WhatsApp versus Telegram or Strava versus Runkeeper).

The timing for the launch of THREADS seems to have been right, and within the context of the technological cannibalism we experience as a society, it has broken records again, becoming the digital solution that reached 100 million users in the shortest amount of time.

Infografía: Visual Capitalist

"However, not everything was going to be easy for THREADS. They had a clear hype at the beginning of July, but it quickly faded, mainly because the access and deployment were not done globally. Instead, they decided to phase it (logical for testing, but not when it's too delayed). Additionally, an unexpected legal problem arose.

The European Union, supposedly in its strategy to protect citizens in the digital environment, put serious barriers to THREADS to the extent that META decided to suspend the application's deployment in European territory indefinitely.

The critical point is a classic one, concerning the flow of data between European users and companies with their operations based in the USA. Moreover, THREADS shares information with other META applications. This is what's called "invasive privacy policy," and it's an ongoing battle between the EU and the USA, which not only affects META but has been impacting Google (News, GA4), and other big American tech players for some time.

And with all this... what do I see for the future? Taking out my crystal ball, I dare say that the changes implemented by Elon Musk will be successful. There will be some complaints, but the benefits Twitter offers versus the associated costs are high, and the new model will also kick out those who misuse the platform. For the average user, the change is irrelevant.

Can THREADS be a serious competitor? It has the basics—technology, functionality, social resentment against the dominant competitor—but I believe that its target user (and I'm not talking about Facebook but Instagram) is not looking for a text-based social service. The world of the younger generations is more visual and interactive, and there, neither Twitter, Mastodon, nor Threads perform well.

So, I think Twitter has a long life ahead. Its user base is deeply rooted (Ego is a great "glue"), and I find it unlikely that these totems of the Twitterverse will take the risk of change. Without them, there won't be a significant transition. Another issue is whether THREADS can find its place with a new, younger user niche, more fun and less formal. However, the big challenge here is that this new target audience shies away from text and prefers images, videos, or audio.

What do you all think?"