No. of Recommendations: 15
I only learned today - so belatedly - about Meta's "Threads" app.
I found out about Threads by accident when researching the most downloaded free iPhone applications, as part of my research to decide to what extent Google can maintain its search dominance in the case of losing the court case, with the request to sell its Chrome browser.*
What I wanted to publish here, though, is my astonishment that Meta could in only 2 years:
1. Create a product response to Twitter (now X) on its own rather than relying on acquisition.
2. Feed it into its existing customer network. In investing terms, this is specific case of redirecting earnings back within your existing moat, which is a luxury only the highest quality (from an investment point of view) firms have the opportunity do successfully.
3. Reach 1/3rd of X's monthly users! Think about this - reaching 1/3rd is gigantic, because in "geometric space" you only need to continue growing at the higher rate for a few more years, and you can start to seriously threaten the competitor.
To emphasize, the ability of companies to not just have a strong network effect for present product, but be able to create new products that feed into the same network, is an enormous strength. Meta creating its Threads (a competitor to X) in just two years is an exemplary example of this. It means that if some competitors comes along with a product we can't even imagine today (similarly as TickTok came out of nowhere), Meta doesn't need to acquire (which gets far more attention of anti-monopoly regulators) but can create its own software, and feed that into their existing network.
Meta is trading today at a PE of 24 (forward PE of 23). Google is trading at a forward PE of 19. Both have a net cash of less than 4% of their market cap (I only bother to adjust the PE ratios for cash holding distortion when the cash is 10% or more).
- Manlobbi
* On the Chrome case, even if Google ad to divest Chrome, I would predict it to take another 2-3 years for the final decision, so Chrome would have a lot of time to pivot its search monopoly tactics elsewhere. That is why I was researching the top iPhone apps, and remarkably the "Google" search app was one of the most downloaded apps, and nothing in search came close. If it get have people addicted to its search by means of downloading their Apple, this speaks volumes. The search bar specifically coming from Chrome browsers does generate a lot of Google' ad revenue given Chrome’s 65% browser market share. As part of my research, accounting for network ads, and YouTube ads, the ad revenue related specifically to Chrome-generated might be only 30% or so. This 30% is likely to shrink, as Google tries to direct its monopoly-preservation strategy away from chrome in the 2-3 years that the court case might take, so by the time the decision is made, it isn't even so important as it was last year.
