Meta’s Threads Ad Expansion: A Global Gamble with Long-Term Potential
14min read Meta’s decision to roll out advertising on its Threads platform across over 30 global markets marks a pivotal moment in its quest to diversify revenue streams and counter rivals like X (formerly Twitter). Yet, this move is as much a strategic bet on long-term growth as it is a short-term revenue play. Let’s unpack the implications for investors.
The Expansion Play: A Strategic Pivot
Threads, launched in July 2023, has already amassed 320 million monthly active users, fueled by its Instagram-linked ecosystem and algorithmic feed design. Meta now aims to monetize this user base by introducing ads in select markets, starting with the U.S. and Japan in 2024 before expanding further. The ads will appear seamlessly in user feeds, leveraging Meta’s existing ad infrastructure—such as its Advantage+ and Manual Placements tools—to ensure brand safety and targeting precision.
The phased rollout prioritizes user experience, with Meta emphasizing that three in four Threads users already follow at least one business. This pre-existing audience creates a fertile ground for advertisers, especially local businesses seeking to tap into a fast-growing platform.
Financial Realities: Growth vs. Immediate Returns
While the ad expansion is a bold move, Meta’s CFO, Susan Li, has been clear about its financial timeline. During Q4 2024 earnings calls, Li stated that Threads’ ad revenue would not meaningfully impact Meta’s overall earnings until after 2025. This cautious stance reflects the challenges of scaling a new ad platform.
Meta’s revenue guidance for Q1 2025 projects growth of 8-15% year-over-year, driven primarily by its core apps (Facebook, Instagram). Threads’ contribution, by contrast, will be marginal in the near term. Even with 320 million users, the platform’s ad inventory and advertiser adoption are still nascent.
Investors should note that Meta’s total expenses in 2025 are projected to hit $114–119 billion, with infrastructure and AI investments taking precedence over Threads monetization. The company is prioritizing user growth and platform stability—a strategy that may delay short-term profits but could pay off as Threads scales.
The Competitive Landscape: Threads vs. X and Beyond
Threads’ ad launch is not just about monetization but also about positioning itself as a safer, more advertiser-friendly alternative to X. Unlike X, Threads integrates Meta’s robust brand-safety tools, including inventory filters to avoid ads near offensive content. This could attract brands wary of X’s recent struggles with moderation.
However, Threads faces hurdles. Its adoption of decentralized features like ActivityPub (from Mastodon) and Bluesky’s starter packs may appeal to niche users, but it retains algorithmic feed defaults, which could alienate purists. Meanwhile, X’s entrenched user base and ad infrastructure remain formidable competitors.
Regulatory and Legal Risks
Meta’s antitrust trial looms large. If the FTC succeeds in forcing Meta to divest Instagram or WhatsApp, Threads’ growth could be stunted, as the platform relies on Instagram’s social graph to onboard users. Additionally, EU privacy laws and U.S. antitrust scrutiny may complicate Meta’s ability to fully leverage Threads’ data for ad targeting.
Conclusion: Threads is a Long Game, but the Odds Are Favorable
Meta’s Threads ad expansion is a calculated risk with high upside. With 320 million users and a roadmap to hit 1 billion users “within several years” (Zuckerberg’s projection), the platform’s potential ad revenue could rival X’s current $5 billion annual ad revenue.
While 2025 earnings won’t see a material impact, the groundwork being laid now—phased ad rollouts, brand partnerships, and user engagement—positions Threads to become a major revenue driver by 2026 or 2027. Investors should focus on Meta’s long-term vision:
- User Growth: Threads’ MAU count has surged by 1,000% since its launch. Sustaining this momentum is critical.
- Ad Inventory Scaling: As more businesses adopt Threads, ad supply will expand, boosting revenue per user.
- Competitive Edge: Meta’s ad tech and brand-safety tools give Threads an edge over X’s chaotic moderation environment.
In short, Threads’ ad expansion is a bet on the future. For investors willing to look beyond 2025, it’s a compelling one—provided Meta navigates regulatory headwinds and maintains user trust. The real payoff may come not in the next fiscal quarter but in the next five years.
