Meta’s substantial investment in artificial intelligence is yielding impressive results, as evidenced by a robust 22% increase in advertising sales during the second quarter, eclipsing the growth rate of its rival, Google.
In a recent earnings call, CEO Mark Zuckerberg and CFO Susan Li explained how AI improvements have boosted Meta’s business operations. AI is not only enhancing recommendations and helping users find better content, but it’s also refining the advertising experience, making it more effective and profitable.
Meta’s revenue for the second quarter reached $39.07 billion, with a staggering 98% of sales stemming from advertising on platforms like Facebook and Instagram. This growth rate is double that of Google’s ad business, which saw an 11% increase, bringing in $64.6 billion in the same period. Meta’s performance also outpaced smaller competitors like Pinterest and Spotify, which reported growth rates of 21% and 20%, respectively.
Li highlighted that Meta’s advertising success is largely driven by sectors such as online commerce, gaming, and media and entertainment, with the Asia-Pacific region showing particularly strong growth. Improved ad performance has helped increase overall ad prices, despite a slowdown in growth within that region.
Zuckerberg attributes Meta’s renewed advertising prowess to AI-powered innovations. After Apple’s 2021 iOS privacy update, which hindered social media companies’ ability to target users, Meta rebuilt its ad tech stack using AI. This overhaul has resulted in greater user engagement and, consequently, higher revenue and profits.
Meta’s shares surged by 7% following the earnings report, which also included an optimistic forecast for the current quarter. This performance is a testament to the effectiveness of Meta’s AI strategy, which has already started showing returns.
Despite significant spending on AI and the metaverse, Meta remains committed to these investments. For 2024, the company has raised its capital expenditure forecast to between $37 billion and $40 billion. Li emphasized that Meta’s AI strategy is dual-faceted: “core AI” is currently enhancing the advertising platform and driving user engagement, while “generative AI” represents a long-term bet expected to open new revenue opportunities in the future.
Meta’s ability to navigate challenges and integrate AI seamlessly across its ecosystem is proving to be a key differentiator, positioning the company well ahead of its peers in the competitive digital advertising landscape.