It’s one thing to copy or borrow (some might say steal) someone else’s IP. in fact, many “creators” would argue that generative AI does exactly that (see Sarah Silverman sues Meta, OpenAI for copyright infringement | Reuters).  However, it’s a whole other ball game to successfully execute a business strategy and dominate a market. 

Back when I was an investment banker, we used to marvel at how Goldman rarely generated the initial insights but almost always ended up dominating new products, categories, and M&As — quickly pouncing to exploit their relationships to land at the top of the league tables.   

Were we jealous?  Of course, we were!   

Apple is the same – since the iPhone first debuted in 2007, they have largely been second to move on a new idea – taking their competitors innovations and doing it better, leveraging their massive ecosystem and design and supply chain advantages. The success has been nothing but historical – the first $3 trillion market capitalization, (to name just one that is a pretty good overall measure). 

These are the Early Adopters, a category of company-specific inflection that drives our research efforts in the search for accelerating growth.  Let someone else do the heavy lifting – establishing a market, creating a new product, etc. — then adopt their product/model, improve upon it, and move with blinding speed and overwhelming resources to monetize the opportunity. 

Meta did it with Stories and Reels, clones of Snapchat and Tik Tok, respectively.  Now two of the most important ad platforms and growth engines for Meta.  Can they do the same thing with Threads?  Who knows?  But it looked likely when they surprised the market with an accelerated launch that garnered 100 million downloads in the first five days (compared to Twitter’s 354 million users) sending the stock soaring 10.5% in the first two weeks after the launch, in part, on the extrapolation of the TAM (total addressable market) implied by this growth trajectory. 

But wait… 

This week it was reported by The Messenger that Threads had seen a 50% drop off in traffic in the two weeks since its launch, down to 23.6 million users.  Don’t get us wrong — that’s still a lot.  But maybe not the immediate needle mover anticipated by the market as reflected in the stock price.  For its part, Meta remains unphased.  Here’s what Mark Zuckerburg said over Threads on Monday,  

“I’m very optimistic about how the Threads community is coming together….[It’s] way ahead of what we expected…. We’ve run this playbook many times (FB, IG, Stories, Reels, etc.) and I’m confident Threads is on a good path too.” 

We’ve said it before and we’ll say it again.  Execution is hard and no outcome is ordained, no matter how insurmountable the built-in advantage, capital base, technological lead, or historical track record (or the hubris of the teams trying to capitalize on them, for that matter). 

Millions Of Users Abandon Mark Zuckerberg’s Latest Toy Just Two Weeks After Launch (msn.com) 

 Are you a Financial Professional? Then check out our new portal and get all kinds of tools and resources on multi-strategy investing, and growth. 

IMPORTANT DISCLOSURE: 

Securities highlighted or discussed in this blog have been selected to illustrate Validus’s investment approach and/or market outlook and are not intended to represent any strategy or portfolio performance or be an indicator for how strategy or portfolio have performed or may perform in the future. Each security discussed in this blog has been selected solely for this purpose and has not been selected on the basis of performance or any performance-related criteria. The securities discussed herein do not represent an entire portfolio and, in aggregate, may only represent a small percentage of a strategy or portfolio holdings. The strategies and portfolios are actively managed, and securities discussed in this blog may or may not be held in such strategies or portfolios at any given time. These individual securities do not represent all the securities purchased, sold, or recommended and the reader should not assume that investments in the securities identified and discussed were or will be profitable. Nothing in this blog shall constitute a recommendation or endorsement to buy or sell any security or other financial instrument referenced in this letter. 

Validus Growth Investors, LLC seeks to invest in companies at every stage of their growth. From startups to publicly traded companies, our research identifies inflection points that have the potential to produce meaningful growth and income for the clients we serve. 

Investment Advisory Services are offered through Validus Growth Investors, LLC (“Validus”), an SEC Registered Investment Adviser. No offer is made to buy or sell any security or investment product. This is not a solicitation to invest in any security or any investment product of Validus. Validus does not provide tax or legal advice. Consult with your tax advisor or attorney regarding specific situations. Intended for educational purposes only and not intended as individualized advice or a guarantee that you will achieve a desired result. Opinions expressed are subject to change without notice. Investing involves risk, including the potential loss of principal. No investment can guarantee a profit or protect against loss in periods of declining value. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Opinions and projections are as of the date of their first inclusion herein and are subject to change without notice to the reader. As with any analysis of economic and market data, it is important to remember that past performance is no guarantee of future results.