Elon Musk and Mark Zuckerberg’s social-media smackdown

There can never be competition. Neither the Italian government nor Mr Musk’s mother seem keen. But the new media mogul is gearing up for a more consequential battle together. On July 6 Mr Zuckerberg’s company Meta will add a new app to its social-media platform. Threads, a new text-based network, bears striking resemblance to Twitter, the app Mr Musk bought last October for $44 billion. There may be talk of thunder in Rome. But an almighty social-media smackdown is about to begin.

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Mr Musk’s eight months in charge of Twitter has been tumultuous for many parties. About 80% of the approximately 8,000 employees he inherited have been laid off to cut costs. A research company eMarketer believes that amid the glitchy service, users have started drifting away (see chart). The paywall, introduced on July 1, limits the number of tweets that can be viewed by people who don’t earn $8 a month, and can disallow more. Advertisers have fled in even greater numbers: eMarketer estimates that Twitter’s advertising revenue this year will be down 28% from last year. Most of these investors have suffered losses. In May the financial-services firm Fidelity estimated the company had lost about two-thirds of its value since Mr Musk agreed to buy it.

Out of this chaos, the clearest winner has been Mr. Zuckerberg. By 2021 his business had become synonymous with privacy invasion, misinformation and bile – so much so that he changed its name from Facebook to Meta. He then uses his omnipotent position at the firm to upset investors by pouring billions of dollars into the Metaverse, an unproven passion project that still looks years away from making money. Two years ago, on July 4, he was ridiculed after posting a video of himself proudly surfing on a hydrofoil holding an American flag. It was hard to find someone more polarizing in Silicon Valley.

Now it is not that difficult. Mr. Musk’s erratic management of Twitter makes Mr. Zuckerberg’s meta-management look like a model of good governance. And although Twitter’s new freewheeling approach to content moderation has pleased some conservatives — including Ron DeSantis, who launched his presidential bid in a guffaw-filled live audio session on the app, and Tucker Carlson, who in June Started broadcasting after being separated from Twitter. Fox News-It’s getting harder for liberals to digest. According to YouGov polls, Mr. Musk is more popular among Americans than Mr. Zuckerberg (who also expects him to win a cage match). But as controversy rages on Twitter, and as politicians take their anger out on another social app, the Chinese-owned TIC TocMr Zuckerberg’s approval rating has quietly risen to its highest level in three years.

Meta now sees an opportunity for another business win. Diverse startup Tried to take advantage of Twitter’s woes, but with little success. Mastodon, a decentralized social network with a single employee, said it had added more than 2 million members as of November after the Twitter deal closed. But people found it strange and Sensor Tower, another data company, estimates that as of last month it had 61% fewer users than at its November peak. Truth Social, Donald Trump’s conservative social network, has failed to gain traction, especially since Mr Musk has steered Twitter to the right. The latest contender, BlueSky, faces a similar struggle to attain critical mass.

Meta tries, threads have a better chance. For one thing, the cloning meta of rivals works best. In 2016, as Snapchat’s disappearing posts known as “stories” became popular, Mr. Zuckerberg unveiled Instagram Stories, a similar product that helped propel Instagram to the top. Last year, as TikTok’s short videos became a threat, Meta launched Reels, a nearly identical video format that lives within Instagram and Facebook. It’s also been a hit: In April Mr Zuckerberg said Reels had helped increase time spent on Instagram by about a quarter.

Threads is also a leader in achieving scale. Unlike Reels, this will be an app in itself. But it will let people with an Instagram account use their existing login details and follow all the same people in a single click. According to Datareports, a research firm, about 87% of Twitter users already use Instagram, so most now have a nearly friction-free alternative to Twitter. Would they bother to switch? For some, having a network that is “run intelligently” may be enough, as Meta’s chief product officer recently put it. One.

Twitter is a tiny business by Meta’s standards, with barely one-eighth the number of users of Facebook, the world’s largest social network. In 2021, before Mr. Musk took it private, Twitter had revenue of $5.1 billion, while Meta had revenue of $116 billion. And with that little income comes big problems. Few platforms attract as many angry weirdos as Twitter. In recent years Meta has avoided promoting news, which brings political controversy and does not please users; In Canada it has said it will stop showing the news altogether, in response to a law that would force it to pay publishers. News is a big part of what Twitter does.

There are two reasons Mr. Zuckerberg might think Threads is still worth the headache. One is advertising. Twitter has never made much money from its users because it knows very little about them. Datareport’s Simon Kemp estimates that between half and two-thirds of people who read Tweets are not even logged in. Many registered users are “hidden”, viewing the feeds of others but rarely engaging. In contrast, Meta already knows a lot about its users from its other apps, so it can hit them with well-targeted ads in threads from day one. And the brand-focused advertising that works best on Twitter will complement the direct-response advertising that Facebook and Instagram specialize in. Mark Schmulick of broker Bernstein says that Threads “seems very complementary” to Meta’s current portfolio.

Meta’s other possible purpose relates to larger language models, which ingest text from the Internet to generate human-like responses in artificial-intelligence (AI) apps. chatgpt, This technique gives priority to large repositories of text. Online forums like Reddit are struggling to monetize the billions of words they contain. Mr Musk has said Twitter’s new paywall is a response to “extreme levels of data scraping” by AI firms. In setting up a text-based network to complement the more visual feeds of Facebook and Instagram, Meta will have its own source of rich language data. “Threads is conceived as much more than an advertising platform,” believes Mr. Kemp. “Zuck is playing the AI ​​content-feeding game.” Whether Meta licenses such data to others or uses it in its own AI projects, it will be a new growth story to tell investors while they wait for the Metaverse to be realized.

Threads face formidable challenges. Launching a new social network is notoriously difficult. Even with its 3.8 billion existing users, Meta has suffered setbacks: Facebook Dating is still unpopular and the company’s gaming and shopping initiatives still haven’t taken off. But as Twitter continues to bleed users and advertisers, and as Mr. Musk’s management continues on its singular path, the opportunity looms large. Whichever billionaire is in the cage, Mr. Zuckerberg can come away with the loot.

© 2023, The Economist Newspaper Limited. All rights reserved. From The Economist, published under license. Original content can be found at www.economist.com

UPDATE: July 05, 2023, 02:06 PM IST