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Could a Twitter Clone Solve Meta Platforms’ Biggest Problem?

admin by admin
May 26, 2023
in Business News


Meta Platforms (META 1.40%) has struggled to generate strong, consistent growth over the past year. In 2023’s first quarter, revenue rose by a modest 3% year over year to $28.6 billion. While the company has billions of users across its platforms, which include WhatsApp, Instagram, Messenger, and Facebook, it’s not the growth machine it once was. Meta could remedy that with the next major app it recently announced plans to launch. Could this new initiative ramp growth back up to prior levels?

Instagram to launch a Twitter rival this summer

According to a report last week from Bloomberg, Meta’s Instagram unit is preparing to launch an app that will be similar to Twitter, and it could be available as early as June. The company is reportedly testing it with influencers as it is looking to get high-profile individuals such as athletes and celebrities to join the platform as quickly as possible.

One of the advantages of the new platform is that it integrates with Instagram. It will be easy for a person’s Instagram followers to also follow someone on the new app. And with 1.3 billion monthly active users, Instagram could help the new app quickly grow its user base. By comparison, Twitter has approximately 550 million monthly active users.

An opportune time for Meta to go head-to-head with Twitter

Last October, Tesla CEO Elon Musk completed his acquisition of Twitter for $44 billion and took the company private. After doing so, he made many changes, some of which have been controversial and led to a partial user exodus. These included requiring “notable” users who wanted their accounts to be verified as authentically theirs (with the famous blue check mark) to pay for the privilege, reinstating some controversial users who had been banned from the platform, and drastically reducing headcount at the company, which now has approximately 1,500 employees, down from nearly 8,000 when he bought it. Among other things, those massive layoffs left Twitter with less capacity for oversight and content moderation.

As a result of all these changes, many advertisers have become concerned about the type of content that is now able to more easily flow through the platform. More than half of its former top 1,000 advertisers reportedly decided to stop spending their ad money on the site, according to marketing intelligence firm Pathmatics.

All of this makes now an opportune time for Meta to launch a Twitter rival. If it can build a strong user base fairly early on, that could potentially provide it with some much-needed growth.

Will this make Meta a better investment?

A rival app to Twitter could bring in more revenue for Meta. But between Twitter, Instagram, and Facebook, there’s already quite a bit of overlap between these social media platforms. While they are far from identical to one another, they do have similarities, and an argument could be made that Meta may not necessarily need to go down this route, especially when it has already been pouring billions of dollars into the metaverse. 

After all, a big problem with Twitter, when it was a public company, was that it wasn’t very profitable. In 2021, for instance, despite generating $5.1 billion in revenue, the company incurred a net loss of $221 million.

As such, at first glance, the Twitter-clone business doesn’t look like all that great a business to be in — not something that would be a game changer for Meta Platforms, and certainly not something that would persuade me to buy the tech stock. The bigger issue for Meta these days is its expensive gamble on the metaverse. Pouring more money into yet another social media platform that may not be all that warranted could put more pressure on an already beaten-up bottom line. In the first quarter, Meta’s net income totaled $5.7 billion, down 24% year over year.

The launch of a new social media app is a development that investors should watch for, but it’s not a reason to buy Meta’s stock.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Tesla. The Motley Fool has a disclosure policy.



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