Diving brief:
- Meta Platforms grew its revenue 19% year-over-year to $40.59 billion in the third quarter. according to a results report. This marks a slowdown in revenue growth compared to the same time last yeareven though the advertising statistics were solid.
- Ad impressions across the company’s family of apps increased 7% year-over-year, while the average price per ad jumped 11%, signaling healthy demand. E-commerce remained the most active advertiser vertical, followed by healthcare, entertainment and media.
- Looking ahead to the fourth quarter, Meta forecasts revenue between $45 billion and $48 billion. The company is in the midst of an intense race to win with artificial intelligence (AI), a technology that executives say improves the effectiveness and efficiency of advertising.
Dive overview:
Meta’s third-quarter earnings are consistent with the company’s broader narrative this year: advertising demand remains robust, largely thanks to emergence of newcomers in e-commerce abroadbut the costs are also high as the social media giant attempts to stake its claim in the burgeoning AI landscape and pursues a long-term vision of realizing the metaverse.
Consumers and brands are becoming more interested in Meta’s AI products. Meta AI, a virtual assistant that appears natively in apps like Facebook and InstagramNears 500 Million Monthly Active Users, CEO Mark Zuckerberg said while discussing third quarter results with investors. The inherent popularity of Meta’s social media platforms, which can require hours of screen time per day, could contribute to AI adoption. Daily active users of the Meta family of apps averaged 3.29 billion in September, an increase of 5% year-over-year. Meta is currently focused on improving the user experience for Meta AI, but said monetization opportunities will arise later.
Meta’s bets on AI have also pushed it into new territories that have implications for advertisers. The Information reported earlier this week that Meta is develop an AI-powered search engine to compete with Google and Microsoft’s Bing. Google’s search engine has made the tech giant the leader in digital advertising. It is research and other segments increased revenue 12% year-over-year to $49.39 billion in the third quarter.
In addition to influencing user-facing applications, AI has become a more important part of Meta’s advertisers’ toolkit. The company has prioritized the development of its Advantage+ suite of advertising products that leverage automation, as well as a Lattice framework to predict and optimize campaign performance. Meta debuted in May image and text generators which can produce tons of designs, and these offerings seem to be gaining traction. Similar technology related to AI-powered video and animation is currently in testing and should be more widely available early next year.
“More than 1 million advertisers used our (generative AI) tools to create more than 15 million ads in the last month, and we estimate that companies using image generation are seeing an increase in 7% of conversions – and there are even more benefits here,” Zuckerberg said in conversation with investors.
A significant portion of Meta’s advertiser base is made up of small and mid-sized brands who might find AI useful because it reduces the need to manually produce costly and resource-intensive marketing assets. On the other hand, greater reliance on automation created headaches for some Meta advertisers and amplified concerns about transparency.
