Elon Musk and Mark Zuckerberg’s social-media smackdown

Elon Musk and Mark Zuckerberg’s social-media smackdown

Tech News

The bout may never happen. Neither the Italian government nor Mr Musk’s mother seems keen. But the new-media moguls are simultaneously limbering up for a more consequential fight. On July 6th Meta, Mr Zuckerberg’s firm, will add a new app to its suite of social-media platforms. Threads, a new text-based network, bears a remarkable resemblance to Twitter, the app that Mr Musk bought last October for $44bn. The rumble in Rome may be all talk. But an almighty social-media smackdown is about to begin.

(Graphic: The Economist)

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(Graphic: The Economist)

Mr Musk’s eight months in charge of Twitter have been bruising for many parties. About 80% of the nearly 8,000 employees he inherited have been laid off, to cut costs. Amid a glitchy service, users have started to drift away, believes eMarketer, a research company (see chart). The introduction on July 1st of a paywall, limiting the number of tweets that can be seen by those who do not cough up $8 a month, may repel more. Advertisers have fled in even greater numbers: Twitter’s ad revenue this year will be 28% lower than last, forecasts eMarketer. All this has hurt investors. In May Fidelity, a financial-services firm, estimated that the company had lost about two-thirds of its value since Mr Musk agreed to buy it.

From 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 irked investors by using his all-powerful position at the firm to pour billions into the metaverse, an unproven passion project that still looks years away from making money. On July 4th two years ago he attracted ridicule after posting a video of himself vaingloriously surfing a hydrofoil while holding an American flag. It was hard to find anyone in Silicon Valley more polarising.

Now it is not so difficult. Mr Musk’s erratic management of Twitter makes Mr Zuckerberg’s stewardship of Meta look like a model of good governance. And although Twitter’s new freewheeling approach to content moderation has delighted some conservatives—including Ron DeSantis, who launched his presidential bid in a glitch-filled live audio session on the app, and Tucker Carlson, who started broadcasting on Twitter in June after parting ways with Fox News—liberals find it increasingly hard to stomach. Mr Musk remains more popular than Mr Zuckerberg among Americans (who also fancy him to win the cage match), according to polls from YouGov. But as the controversies at Twitter have rumbled on, and as politicians have turned their fire on another social app, the Chinese-owned TikTok, Mr Zuckerberg’s approval rating has quietly risen to its highest level in over three years.

Meta now sees an opportunity for another, commercial victory. Various startups have tried to capitalise on Twitter’s travails, with little success. Mastodon, a decentralised social network with a single employee, said that by November it had added more than 2m members since the Twitter deal closed. But people found it fiddly and by last month it had 61% fewer users than at its November peak, estimates Sensor Tower, another data company. Truth Social, Donald Trump’s conservative social network, has failed to gain traction, especially since Mr Musk steered Twitter rightwards. The latest pretender, Bluesky, faces the same struggle to achieve critical mass.

Meta’s effort, Threads, has a better chance. For one thing, cloning rivals is what Meta does best. In 2016, as Snapchat’s disappearing posts known as “stories” became popular, Mr Zuckerberg unveiled Instagram Stories, an eerily similar product which helped to keep Instagram on top. Last year, as TikTok’s short videos became a threat, Meta rolled out Reels, a near-identical video format that lives within Instagram and Facebook. It too has been a hit: in April Mr Zuckerberg said Reels had helped to increase the time spent on Instagram by nearly a quarter.

Threads also has a head start in achieving scale. Unlike Reels, it will be an app in its own right. But it will let those with an Instagram account use their existing login details and follow all the same people with a single click. Some 87% of Twitter users already use Instagram, according to DataReportal, a research firm, so most now have a near-frictionless alternative to Twitter. Will they bother to switch? For some, it may be enough simply to have a network that is “sanely run”, as Meta’s chief product officer put it recently. Others will need a shove. By announcing a paywall just days before Threads’ launch, Mr Musk may have provided one.

Twitter’s business is tiny by Meta’s standards, with barely an eighth as many users as Facebook, the world’s largest social network. In 2021, the last year before Mr Musk took it private, Twitter’s revenue was $5.1bn, against Meta’s $116bn. And with those meagre earnings come big problems. Few platforms attract as many angry oddballs as Twitter. In recent years Meta has shied away from promoting news, which brings political controversy and seems not to delight users; in Canada it has said it will stop showing 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 why Mr Zuckerberg may think Threads is nevertheless worth the headache. One is advertising. Twitter has never made much money out of its users because it knows little about them. Between half and two-thirds of those who read tweets are not even logged in, estimates Simon Kemp of DataReportal. Many registered users are “lurkers”, who view others’ feeds but seldom engage. Meta, by contrast, already knows a lot about its users from its other apps, so can hit them with well-targeted ads in Threads from day one. And the brand-focused advertising that works best on Twitter would complement the direct-response ads that Facebook and Instagram specialise in. Threads “feels very complementary” to Meta’s current portfolio, says Mark Shmulik of Bernstein, a broker.

Meta’s other possible motive relates to large language models, which ingest text from the internet to produce human-like responses in artificial-intelligence (AI) apps like ChatGPT. This technology places a premium on big troves of text. Online forums such as Reddit are scrambling to monetise the billions of words that they hold. Mr Musk has said that 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 has been conceived as much more than an advertising platform,” believes Mr Kemp. “Zuck is playing the AI content-feeding game.” Whether Meta licensed such data to others or used it in its own AI projects, it would be a new growth story to tell investors while they wait for the metaverse to materialise.

Threads faces formidable challenges. Launching a new social network is notoriously hard. Even with its 3.8bn existing users Meta has had its share of failures: Facebook Dating remains unloved and the company’s gaming and shopping initiatives have yet to take off. But as Twitter bleeds users and advertisers, and as Mr Musk’s management continues on its eccentric path, the opportunity is becoming bigger. Regardless of which billionaire prevails in the cage, Mr Zuckerberg may come away with the spoils.

© 2023, The Economist Newspaper Limited. All rights reserved. From The Economist, published under licence. The original content can be found on www.economist.com

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Updated: 05 Jul 2023, 02:06 PM IST

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