In one corner is Mark Zuckerberg: 39 years old, 1.70 meters tall and, if we listen to his selfies, a jiujitsu phenomenon. In the other, Musk: 13 years older, 15 centimeters taller and considerably heavier, with a special move known as the walrus (“I lie on top of my opponent and do nothing”). The two billionaires have agreed to face each other in a cage fight; Musk added on June 29 that the fight could take place in the Roman Colosseum.
That Roman skirmish may never take place. Neither the Italian government nor Musk's mother seem very supportive of his celebration. If anything, the new social media moguls are preparing for another, bigger fight as well. On July 5th, Zuckerberg's company Meta added a new app to its social networking empire. Threads, a text-based network, is a lot like Twitter, the app that Musk bought last October for $44 billion. A formidable fight is about to start on social networks.
Musk's tenure at Twitter has been painful for many parties. About 80% of the nearly 8,000 employees Musk inherited have been laid off to cut costs. Users have started to move away from the platform as a result of service failures, according to research firm eMarketer (see chart). The introduction on July 1 of a paywall, which limits the number of tweets that can be seen by those who don't pay $8 a month, may turn off more users. Advertisers have fled: Ad sales this year will be 28% lower than last year, according to eMarketer forecasts. In May, Fidelity, a financial services company, estimated that the company had lost about two-thirds of its value since Musk decided to buy it.
Out of all this chaos, the clear winner is Zuckerberg. By 2021, his company had become synonymous with misinformation and insults. He then riled investors for using his all-powerful position at the company to pour billions into the metaverse, a personal project that he hasn't come to fruition and seems a long way from making money. Two years ago, on July 4, he made a fool of himself by posting a video of himself boastfully surfing a hydrofoil with an American flag in hand. No one in Silicon Valley has been more polarizing.
Today Musk's erratic management of Twitter makes Zuckerberg's stewardship of Meta look like a model of good corporate governance. And while Twitter's new, permissive approach to content moderation has charmed some conservatives (including Florida Gov. Ron DeSantis, who launched his presidential bid in a flawed livestream), liberals find it increasingly increasingly difficult to digest that orientation. According to YouGov polls, Musk is still more popular than Zuckerberg among Americans (who also believe in the possibility of him in the cage). Yet as controversy over Twitter mounts and politicians focus on another social app, Chinese-owned TikTok, Zuckerberg's approval rating is now the highest it has been in more than three years.
Meta has its sights set on another victory, a commercial victory. Several startups have tried to capitalize, with little success, on Twitter's difficulties. Mastodon, a decentralized social network with a single employee, claimed in November to have added more than 2 million members since the Twitter purchase. However, users find its operation complicated. In June, it had 61% fewer users than at its peak in November, estimates Sensor Tower, another data company. Truth Social, Donald Trump's conservative social network, has failed; especially since the swerve to the right imparted by Musk on Twitter. The latest contender, Bluesky, is in the same struggle to reach critical mass.
Meta's effort Threads has a better chance. Cloning rivals is what that company does best. In 2016, when Snapchat's disappearing “stories” became popular, Zuckerberg introduced Instagram Stories, a similar product that helped keep Instagram on top. Last year, when short TikTok videos became a threat, Meta launched Reels, a nearly identical format integrated within Instagram and Facebook. In April, Zuckerberg declared that Reels had helped increase time spent on Instagram by almost a quarter.
Threads also has an advantage. Unlike Reels, it is a standalone app. However, it allows Instagram users to use the same login details and follow the same people with a single click. 87% of Twitter users already use Instagram, according to DataReportal, a research company; now they have a nearly frictionless alternative to Twitter. Will users switch to it? For some it may be enough to have a “sensibly managed” network, as Meta's product manager recently put it. For the rest, Musk may have given a little push by announcing a paywall just days before Threads launched.
By Meta standards, Twitter's business is minuscule, since it has one-eighth as many users as Facebook, the world's largest social network. In 2021, Twitter's revenue was $5.1 billion, versus Meta's $116 billion. And that meager income brings big problems. Few platforms attract as many angry weirdos as Twitter. Lately Meta has avoided promoting news coverage, something that carries political controversy and users don't seem to like. News is an important part of what Twitter does.
So why does Zuckerberg think Threads is worth the effort? One of the reasons is advertising. Twitter has never made much money from its users because it knows little about them. According to Simon Kemp of DataReportal, between half and two-thirds of those who read the tweets are not registered. Many of the registered users are simple "peepers": they see the messages of others but rarely participate. Knowing its users well from other apps, Meta can serve them well-targeted ads on Threads from day one. And brand-focused advertising, which works best on Twitter, will complement the direct response ads that Facebook and Instagram specialize in.
Another possible motive for Meta is related to artificial intelligence. The models behind human-like apps like ChatGPT place a high value on large amounts of text. Online forums like Reddit are scrambling to monetize the billions of words they host. Musk has stated that Twitter's paywall is a response to "EXTREME levels of data mining" by AI companies. By creating a text-based network alongside the visual feeds of Facebook and Instagram, Meta gains a source of valuable linguistic data. Threads is much more than an advertising platform, Kemp says. "Zuck is playing the game of feeding content to artificial intelligence." Whether Meta licenses the data to third parties or uses it in its own AI projects, this is a new growth story for investors.
Launching a social network is not easy. Even with its 3.8 billion users, Meta has had its share of flops: Facebook Dating has yet to win hearts, and the company's gaming and shopping initiatives have yet to take off. Now, as Twitter loses users and advertisers and Musk's leadership continues on its eccentric course, the opportunity is growing. Regardless of who prevails in the cage, the trophy may end up taking Zuckerberg.
© 2023 The Economist Newspaper Limited. All rights reserved
Translation: Juan Gabriel López Guix
