Despite a dazzling debut as the fastest growing app in history even surpassing ChatGPT’s record of reaching 100 million users in two months, WSJ reported that Threads, a text-based conversational app, has continued to fall for a second week in a row after an initial surge in sign ups. The number of daily active users declined on Threads, falling to 13 million, down about 70% from its July 7 peak, according to market intelligence firm Sensor Tower.

User engagement on the iOS and Android apps has also decreased to four minutes from 19 minutes. Meanwhile, Twitter’s daily active users remain steady at about 200 million, and user engagement is at 30 minutes a day, according to Sensor Tower estimates. Despite dismal trends, it’s far too soon to rule out Threads. By other metrics, the app is growing its user base and traction in global markets particularly India and Brazil, which, in time, could also boost its usage—especially as the app’s feature set improves.

However, maybe Threads should be judged more harshly because it has the advantage of the network effects of its Instagram integration and the vast resources of its parent company Meta?  “The backing of Meta and the integration with Instagram likely gives Threads a much higher flood than other services, but it will need a more compelling value proposition than simply ‘Twitter, but without Elon Musk,’” Anthony Bartolacci, Managing Director at Sensor Tower told CNBC.

Background

Since Elon Musk’s takeover of Twitter eight months ago, people have been increasingly frustrated with changes he has made which include a loss of verified status, restrictions on feed views without a Twitter Blue subscription, massive layoffs of the bulk of Twitter’s staff, and a rise in hate speech. Given its similarities to Twitter and timely launch, Threads is poised to snap up some of Twitter’s market share. “Twitter’s ‘volatility’ and ‘unpredictability’ under Musk provided the opening to compete,” said Adam Mosseri, Instagram Head in an interview with The Verge.

A Twitter Copycat?

Parent company Meta introduced Threads in its blog as “a new, separate space for real-time updates and public conversations,” which sounds just like Twitter. Like Twitter, Threads is a text-based app that allows users to post short updates with text up to 500 characters, links, photos, and videos up to five minutes in length. It also has buttons to like, repost, reply to, or quote a thread. Each post displays the number of likes and replies below its content. Users can set their audience by choosing between a private or public profile.

Departure from Twitter

Although it’s been deemed  a clone since it has a similar user interface to Twitter, Trends lacks trending stories, hashtags, and direct messaging, which may be a reason for its reduced user engagement since it launched. These features may be added soon though.

The two social media platforms have different visions. While Twitter’s goal has been to be the virtual town square for breaking news and events, Taylor Hatmaker of TechCrunch said, “Threads is apparently actively disinterested in cultivating its new app into a useful hub of  breaking news and world events. Meta’s vision for Threads is more mega-mall than public square.”

Mosseri threaded, “Meta’s goal isn’t to replace Twitter, but rather “to create a public square for communities on Instagram that never really embraced Twitter and for communities on Twitter (and other platforms) that are interested in a less angry place for conversations, but not all of Twitter. He went on to say, “Politics and hard news are important; I don’t want to imply otherwise. But my take is, from a platform’s perspective, any incremental engagement or revenue they might drive is not at all worth the scrutiny, negativity (let’s be honest), or integrity risks that come along with them. There are more than enough amazing communities—sports, music, fashion, beauty, entertainment, etc.—to make a vibrant platform without needing to get into politics or hard news.”

It’s a Decentralized Social Media Platform

The Meta blog also stated that Threads will be compatible with ActivityPub, an open, decentralized social media protocol, making it interoperable with other apps that also support the ActivityPub protocol, such as Mastodon and WordPress—allowing new types of connections that are not possible on most social apps today. ActivityPub is designed to enable “the Fediverse,” or a series of decentralized social networks. “Our vision is that people using compatible apps will be able to follow and interact with people on Threads without having a Threads account, and vice versa, ushering in a new era of diverse and interconnected networks. We believe this decentralized approach, like the protocols governing email and the web itself, will play an important role in the future of online platforms.”

Threads Could Be Great for the Beauty Community

Pre-launch, celebs and influencers were invited to help create the culture. Many beauty brands jumped in early to use it to communicate conversationally with their communities. Early adopters include Kim Kardashian (4.9 million followers), Kylie Jenner (4.8 million followers), Sephora (841,000 followers), Ulta Beauty (269,000 followers), and Rare Beauty (425,000 followers). Mosseri has said that since Threads isn’t focused on news and politics it wants to build communities around beauty, fashion, and sports.

Instagram is launching branded content tools on Threads, a source told Axios, giving marketers a way to get involved with paid promotion on the app, which is very popular with beauty brands. Instagram’s terms of service applies to Threads and includes guidance for sponsored content. Brands that work with influencers are required to use Instagram’s branded content tools, which include paid partnership labels that are only available to eligible brands. Advertising is still off limits on Threads for now. 

Key Takeaways:

1. Threads’ Instagram (IG) integration makes it easy to scale quickly and for users to jump in. 

• It will likely lure beauty brands that historically invested more in IG than Twitter for marketing. 
• Since posts can be shared seamlessly between Threads and IG, this makes it easy for users to use both platforms.

2. Given the popularity of Reddit SkincareAddiction subreddit, it’s clear that text-based conversation in the beauty industry is desired. Threads is a new forum where conversations are the focus rather than comments on pictures and videos. 

• Text-based content is cheaper and faster to create. 
• However, Threads’ users right now are mostly IG users, such as beauty and fashion brands and influencers focused on visual images and videos; they didn’t invest much in Twitter and are not accustomed to short text-based posts. This may be a challenge for many new users and a reason for the drop in daily active users and engagement.

3. For now, achieving a diverse audience initially is difficult. 

• Many accounts on IG are private, and the bar for asking someone to accept you to their private IG is high. By contrast, on Twitter, it is customary to follow accounts of people you don’t know or agree with to be a part of public conversations. 
• Users will need to proactively follow diverse accounts on Threads for a broad range of viewpoints and conversation.

4. The 90-9-1 Rule for Participation Inequality in Social Media and Online Communities applies.

• 90% of users are lurkers who never contribute, 9% of users contribute a little, and 1% of users account for almost all the action. 

5. Threads is touted as a friendlier platform, but Meta failed to create a safe place for teens on IG. 

• Meta’s own researchers found that Instagram is harmful for a sizable percentage of young users and even toxic for teen girls.

6. All social media has had issues of misinformation including Meta-owned platforms Facebook, Whatsapp, and Instagram, so Threads could also suffer from this issue. 

• According to a Statista report, 57.7% of misinformation recommended by Instagram contained content about the coronavirus. Overall, 21.2% of misinformation posts contained content about vaccines, and 12.5% of recommended misinformation was surrounding elections. Overall, over 37% of misinformation came from Instagram's suggested posts feature.

7. Threads’ Fediverse and Metaverse efforts are very unclear and may not bode well for brands and retailers.    

• Fediverse apps aren’t popular for advertisers because it’s impossible to tie ad rates to views beyond one’s own platform. Targeting or segmenting audiences will also be tough. 

8. Threads and Twitter may end up coexisting. 

• “We may end up with two different sites for two audiences and different content,” a former Twitter executive told Fortune on the condition of anonymity. “Sort of like CNN and Fox News. Some people will be on both, and some will pick the one they feel more comfortable with.” 
• Brands and retailers that want to remain politically neutral will need to be on both.

The Bottom Line

Threads’ sign-up numbers aren’t directly comparable to Twitter’s active user numbers since many people signing up are not actively using the app. However, Meta’s other platforms like Instagram, Facebook, and WhatsApp all boast active user bases of more than 2 billion so it can eventually get there.

The viability of Threads hinges on 1.) whether it can maintain user interest and relevance in the future, and 2.) its future business considerations for brands and retailers, such as online advertising and commerce, which are Meta’s specialty. As of now, neither are available in Threads yet.