Dive summary:
- Meta’s revenue increased 22% year over year to $39 billion in the second quarter, according to a statement of resultsThe results exceeded Wall Street expectations.
- Ad impressions served across the app ecosystem of Facebook and Instagram owners increased 10% year over year, while the average price per ad also increased 10%. Executives cited e-commerce, gaming and entertainment, and media as the biggest growth drivers among advertisers.
- Meta said third-quarter revenue is expected to be between $38.5 billion and $41 billion, a solid forecast. The company continues to focus on artificial intelligence (AI), which it says improves marketing performance and could ultimately reshape its advertising fundamentals.
Dive Overview:
Meta provided more details on its vision for AI in marketing as part of a second-quarter earnings report that beat analyst estimates. The tech giant currently divides AI into two areas: core AI, or the systems it has used to support its ecosystem for years, and generative AI, a newer technology that is expensive to develop and not yet a significant revenue source but which executives see as transformative.
“In the coming years, AI will also be able to generate creative for advertisers and will also be able to personalize it as people see it,” Meta CEO Mark Zuckerberg said on a conference call. discuss the results with investors. “In the long term, advertisers will simply be able to tell us a business goal and a budget, and we will do the rest for them. We will get there gradually over time, but I think it will be a very important step.”
Analysts see generative AI as a potentially powerful tool for digital advertising platforms, though some worry about delegating too much work to automation. Marketers themselves may be reluctant to remove the level of surveillance Zuckerberg envisions.
“Meta is well positioned to create value with genAI for advertisers, but let’s be clear: It will be some time, if ever, before CMOs hand over the keys to an AI agent that will autonomously generate ad creative on their behalf,” Mike Proulx, vice president and research director at Forrester, said in emailed comments. “As genAI’s technical capabilities mature significantly at an accelerated pace, Meta cannot lose sight of the responsibility and importance of the human touch in the advertising process.”
Much of Meta’s AI work is happening behind the scenes right now. Meta Lattice, the company’s ad ranking framework, helped improve ad efficiency and performance in the second quarter, according to CFO Susan Li. More advertisers are also using Advantage+, a suite of AI-powered ad products that includes tools that optimize ads for different formats and surfaces. In terms of user-facing AI experiences, Meta boasted that its Meta AI Assistant, made widely available last quarter, is on track to become the most widely used offering in its category by the end of 2024.
AI is also a key part of Meta’s plans to realize the metaverse, one of its long-term strategic goals. But the metaverse continues to be a huge money loser: Reality Labs, Meta’s division that develops augmented and virtual reality hardware and software, incurred expenses of $4.8 billion in the second quarter, up 21% from a year earlier. The unit generated revenue of $353 million in the period, its biggest operating loss in two years, and become a bit of a sore point as scalable consumer use cases remain elusive while costs skyrocket.
“It would seem prudent at this point for Meta to pivot its metaverse ambitions to a much narrower focus,” Proulx said.
Meta made progress streamlining other aspects of its ad business in the second quarter. The company tweaked the ads it shows users as they move between properties like Facebook and Instagram, which can increase conversions and revenue without increasing ad load. It also recently unified video recommendations on Facebook, bringing together Reels, long-form videos and TikTok-like livestreams into a single experience.
On the advertiser demand side, e-commerce brands continued to invest money in Meta to reach new users. China-based marketplaces like Temu and Shein attracted droves of U.S. shoppers with aggressive social media marketingAsia Pacific and other regions around the world were the main drivers of ad impression growth in the second quarter, Li said.
