In the ever-evolving world of technology, artificial intelligence (AI) has emerged as a game-changer. One company that’s leveraging the power of AI to its advantage is Meta. Despite experiencing its first-ever annual revenue decline last year, Meta’s strategic investments in AI are helping to reinvigorate its business.
The Bigger Picture
While Meta’s release of its Llama open source AI models has garnered significant attention, the company’s most crucial use of AI lies in its advertising business. AI technology forms the backbone of Meta’s ad operations, driving engagement and monetization.
A Shift in Focus
Over the past two years, Meta executives have subtly shifted their investor messaging. While the company continues to invest in the far-off metaverse, the focus has increasingly been on how AI can enhance engagement and monetization, thereby boosting the company’s immediate revenue.
During its second quarter earnings call, Meta executives mentioned AI three times as often as they mentioned the metaverse. Analysts, keen on short-term gains, also questioned the tech giant more about its AI investments than its augmented and virtual reality products.
AI at the Forefront
“We’ve invested for years in AI, and it’s now moving to the forefront of our business,” said Justin Osofsky, Meta’s head of online sales, operations, and partnerships. AI is being utilized across the board, from recommendations and ranking models to engagement and monetization.
Overcoming Challenges
Less than two years ago, Meta executives began warning investors that changes to Apple’s privacy policies would significantly impact its ad business, which brought in around $114 billion in 2022. Fears of a recession, coupled with Apple’s changes, led to Meta reporting three consecutive quarters of year-over-year revenue declines in 2022, causing its stock to plummet.
In response, Meta executives worked to rebuild its advertising tools using AI to better target, build, and optimize ad campaigns. The company released a new suite of tools called Advantage+ that leverage AI to automate significant parts of the creative ad process for marketers, allowing them to optimize their ad campaigns faster and more efficiently.
The Current State of Play
Today, nearly every one of Meta’s many millions of advertisers is using at least one of its AI-driven ad tools, most prominently Advantage+. “There’s a lot of the ways in which our investments in AI are paying off to allow people to measure results and to run more effective campaigns,” Osofsky said.
Meta has now reported two consecutive quarters of revenue growth, and executives forecast next quarter its top line will grow by at least 15%.
A Strategic Move
By focusing on AI ads products and ensuring AI recommendations keep its users engaged for longer, Meta can afford to give away access to its generative AI models instead of trying to turn a direct profit from them.
Llama is more of a side play for the company, allowing it to win points with regulators and researchers while acting as a spoiler to competitors including Google and OpenAI.
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Looking Ahead
As a way of spreading its AI bets, Meta is reportedly set to roll out a series of AI agent personas as early as September, with the goal of nudging users to spend more time on its platforms and to help advertisers engage those users.
Conclusion
Meta’s big AI play is a strategic move that showcases the power of AI in revitalizing a business. By leveraging AI in its advertising business, Meta has managed to bounce back from a revenue decline and is now on a growth trajectory. It’s a testament to the transformative potential of AI in the digital advertising landscape.
FAQs
1. How is Meta using AI in its business? Meta is leveraging AI in its advertising business to drive engagement and monetization. It’s also using AI to rebuild its advertising tools and optimize ad campaigns.
2. What is Advantage+? Advantage+ is a suite of tools released by Meta that leverages AI to automate significant parts of the creative ad process for marketers, allowing them to optimize their ad campaigns faster and more efficiently.
3. What is the Llama project? Llama is an open-source AI model released by Meta. It’s a side play for the company, allowing it to win points with regulators and researchers while acting as a spoiler to competitors.
4. What are Meta’s future plans with AI? Meta is reportedly set to roll out a series of AI agent personas as early as September, with the goal of nudging users to spend more time on its platforms and to help advertisers engage those users.
5. How has Meta’s focus shifted over the past two years? Over the past two years, Meta has shifted its focus from the far-off metaverse to how AI can enhance engagement and monetization, thereby boosting the company’s immediate revenue.
