Meta's advertising business thrives thanks to AI, becoming the milk that feeds metavers

At its quarterly earnings call, the Facebook-owned company estimated that revenue could grow by as much as 20% in the current quarter. In the second quarter of 2023, Meta recorded $32 billion in revenue, higher than the $31.1 billion forecast by Wall Street experts.

After cutting thousands of employees and improving advertising efficiency through artificial intelligence (AI), Mark Zuckerberg continues to spend heavily on metaverse ambitions (virtual universe), as well as AI development.

Digital advertising revenue helps Mark Zuckerberg continue to nurture his metaverse ambitions.

“The company hopes to maintain the discipline and habits built during this productive year to focus investments on the key opportunities ahead, including AI and the metaverse,” said chief financial officer Susan Li.

Meanwhile, Angelo Zino, an analyst at CFRA, said Meta has many opportunities to leverage AI to increase revenue, such as improving its recommendation and ranking processes as well as using generative AI to develop new products.

In addition to AI, Meta’s ad revenue recovery is also thanks to Reels (short-form video) on Instagram and Facebook — a feature similar to the TikTok app. The company said Reels revenue is growing, reaching an annual rate of up to $ 10 billion / year, up from $ 3 billion in the third quarter of 2022.

Shares of the social media giant also rose 7% after the results were announced, with revenue growth providing Zuckerberg with a commitment to continue pursuing his virtual space ambitions.

The latest figures show that Reality Labs, the division responsible for developing the metaverse, is reporting an operating loss of $3.7 billion.

Big cloud companies impose AI usage fees

Meta Platforms announced that it will charge a “resale” fee for its large language model Llama 2 to leading cloud computing providers such as Microsoft, Amazon, and Google.

Cloud service operators like Google will have to pay Meta if they want to use the Llama 2 large language model.

Meta's move is in stark contrast to last week's announcement by parent company Facebook that it would make the technology available for free.

Specifically, on July 18, Meta said it is partnering with Microsoft and Amazon to provide large language models for commercial purposes on partner cloud computing platforms without charging for access or usage.

The company's rationale is that providing the technology for free and opening the source code will help the model receive constructive contributions from the wider development community.

“Companies like Microsoft, Amazon, or Google will essentially resell services related to Meta’s large language model, so we need to get some revenue from that,” CEO Mark Zuckerberg said on the quarterly earnings call, but said he didn’t expect “it to be a big revenue stream in the near term.”

(According to Reuters)

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