Meta’s Threads isn’t worth 11 Twitters
Public shareholders may have migrated to Meta once Twitter went private.
NEW YORK, July 7 (Reuters Breakingviews) - Since Meta Platforms' close competitor Twitter was taken off the public market by Elon Musk nine months ago, the equity value of the social media company has soared. But that isn’t enough for boss Mark Zuckerberg. On Wednesday, he launched a Twitter competitor, Threads, promptly encouraging Twitter to threaten to sue. Zuckerberg isn’t doing shareholders any favors.
There’s no better proof that the Facebook operator has already bested its much smaller competitor than financial performance. Shares in Zuckerberg’s company have more than tripled since Nov. 4, 2022, a few days after Musk closed his $44 billion deal for Twitter, bringing its market capitalization to $750 billion. That compares to 40% increases at Alphabet and Apple.
Zuckerberg has made changes at Meta which have helped. Cost cuts will plump up EBITDA margins this year to 50%, according to Refinitiv estimates. Analysts are projecting Meta grows its revenue almost 9% this year, a big improvement from a decline last year. Profitability should jump 35%.
But some of that share price boost does come from accruing value from Twitter. Public shareholders may have migrated to Meta once Twitter went private, for example. Meta’s Facebook and Instagram have likely gained advertisers. And at least according to a letter from Twitter’s lawyers on Thursday, Meta has picked off some plum coders from Musk’s company.
It’s less clear if Twitter’s users have moved, but in that sense, Threads may hurt Meta more than it helps. The platform is easily downloaded via Instagram, and while the microblogging site feels like Twitter, the curation of Threads’ content is based, at least initially, on followers from Instagram. Any new user on Threads would have to do some heavy-lifting to create the same experience as they receive on Twitter.
It suggests people might use Threads at the expense of Instagram. Even if Threads were to put Twitter out of business, that exercise isn’t worth 11 Twitters. And even if it were, Zuckerberg, whose own net worth has risen $70 billion since last fall, has already received the benefit.
The Meta enterprise trades at a multiple of EBITDA a fifth higher than Alphabet’s, despite that the latter is focused on the more promising initiative of artificial intelligence. Zuckerberg may be eager to take on Musk. Launching a business competitor, though, is a little better than a cage match.
