With a lot of publicity this week, Meta Platforms (NASDAQ:META) launched Threads. This new application is very similar to Twitter, in that users can share short-form messages and thoughts. Given the expansion of Meta over the years away from just the flagship Facebook offering, should investors see this as a green light for the Meta share price to rally?
Building up the new app
The new Threads app is currently available in 100 countries, with over 50m users having signed up already. When you consider that Facebook has almost 2bn daily active users, Threads clearly has a way to go before it merits serious conversations about value.
However, it’ll be interesting to monitor the take up of the app in the coming weeks. For the moment, it doesn’t appear to have adverts on it. This model is traditional from Meta management, in that it builds up a platform without revenue to get scale. When it reaches scale, adverts and other data tools are used to extract value and generate revenue for the company.
In fact, there’s already some concerns about the data stripping of the app and the amount of access it will have to users’ information. Given that this is a key source of value for Meta, the company will need to tread carefully to avoid a tussle with regulators around the world.
Modelling value from Twitter
It’s true that the features of the app are very similar to Twitter. We won’t go into the specifics now, but when you consider that Elon Musk paid $44bn for Twitter, it’s clear that this type of app can be very powerful.
Meta will be hoping that the app takes off to such an extent that there’s significant value within the new division. The overall company has a market cap of $748bn, so if we mirror the value of Twitter, it could add around 6% to the business in the future, as a best case scenario.
When you think of it that way, there probably isn’t a huge amount of benefit for the Meta share price for investors right now. The stock is up 7% over the past month (70% over past year), and I feel some of this is due to optimism around the Threads launch.
Meta has more important things to focus on
I believe artificial intelligence is going to be the key for further gains for Meta shares going forward. The company is already investing heavily in this area.
The value that investors place on AI can be noted from the surge of over $100bn that was added to the Nvidia market cap in just one day following positive results in this space.
When I weigh up this potential gain versus the value from Threads, I don’t feel the new app is a game changer for the stock.
