Meta Platforms Inc, parent company of social media giants Facebook and Instagram, is set to see a boost in its ad sales thanks to the incorporation of AI technology.
In a recent conference call, CEO Mark Zuckerberg announced that AI is helping the company to increase traffic to its platforms and earn more from ad sales. The announcement led to a surge in Meta’s shares, with a 12% increase in after-hours trading and a market value boost of over $50 billion.
The incorporation of AI technology into the company’s core business has been a long time coming, as Meta has been slow to adopt AI-friendly hardware and software systems. The company has carried out several expensive overhauls to bolster its core business, including a massive project to upgrade its AI capacity.
But, as Zuckerberg noted, the company is no longer behind in building out its AI infrastructure and is now able to do leading work in this space at scale.
The impact of AI on Meta’s business has been significant, with AI recommendations increasing time spent on Instagram by 24% in the January-March quarter, according to the company. Meta’s investments in AI have also gone into the advertiser side of the business, allowing the company to use more advanced algorithms to maintain a certain level of ad targeting.
In addition to integrating AI technology, Meta has initiated a vigorous drive to reduce costs, which includes getting rid of 21,000 jobs and streamlining its middle-management hierarchy. These efforts are aligned with Zuckerberg’s objective of making 2023 the year of efficacy.
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Coming Out of the Woods
The results of the cost-cutting drive have been positive, with Meta beating expectations for first-quarter profit and revenue, which rose for the first time in nearly a year.
Meta’s strong guidance for Q2 revenue is more indicator that the company may be starting to come out of the woods after a difficult 2022. The pandemic-era e-commerce boom sputtered, while rivals like TikTok captured young users and Apple Inc’s privacy updates cut access to the user data around which Meta built its ads business.
However, the results indicate that Meta’s austerity drive is “off to a stronger than expected start,” according to Insider Intelligence principal analyst Debra Aho Williamson.
In conclusion, the incorporation of AI technology into Meta’s core business is set to boost ad sales and increase traffic to Facebook and Instagram. The company’s aggressive cost-cutting drive has also had a positive impact on its financial results. With strong guidance for Q2 revenue, Meta may be starting to come out of the woods after a difficult 2022.
In its latest earnings call, Meta Platforms Inc. announced that it is focusing on cost control, as the company continues to invest heavily in AI and the metaverse. The announcement is revealed as the social media giant reported better-than-expected earnings for the first quarter, with quarterly revenue rising 3% to $28.65 billion, beating analysts’ estimates.
Mark Zuckerberg, the CEO of Meta, announced that the company has revised its annual expenditure projection to a range of $86 billion to $90 billion, which is lower than the previously predicted range of $86 billion to $92 billion, which was announced during the second round of layoffs in March.
The company is also kicking off an aggressive cost-cutting drive, with plans to eliminate 21,000 jobs and flatten its middle-management structure.
Despite the cost-cutting measures, Meta’s spending on AI retooling has spiked the company’s capital expenditures, which came in slightly under expectations at $7.1 billion for the quarter.
Meta did not rule out the option of increasing its capital expenditures as it works on developing products related to generative AI, which is an emerging technology that has the capability to create content such as writing and art that resembles human creations.
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Metaverse-Oriented
Zuckerberg said that he remained committed to investments in the metaverse-oriented Reality Labs unit, which lost $13.7 billion last year, and added that the company will continue to focus on both AI and the metaverse.
“A narrative has developed that we’re somehow moving away from focusing on the metaverse vision. I just want to say upfront: that’s not accurate,” he said. “We’ve been focusing on both AI and the metaverse for years now, and we will continue to focus on both.”
According to Refinitiv data, Meta’s price per ad decreased by 17% in the quarter compared to the previous year. The company expects revenue for the current quarter to be between $29.5 billion and $32 billion, which is slightly higher than analysts’ estimates of $29.53 billion. Although the net profit for the first three months of the year decreased from $2.72 per share to $2.20 per share compared to the previous year, it exceeded the expected earnings of $2.03 per share.
The social media giant faced a challenging 2022 as a pandemic-era e-commerce boom sputtered, while rivals like TikTok captured young users and Apple Inc.’s privacy updates cut access to the user data around which it built its ads business. Despite these challenges, Meta’s strong guidance for Q2 revenue suggests that the company may be starting to come out of the woods.
Artificial Intelligence (AI) has been transforming various industries, from healthcare and finance to transportation and entertainment. AI refers to the simulation of human intelligence in machines that are programmed to perform tasks that typically require human-like reasoning, learning, and problem-solving.
One of the most significant impacts of AI is in the realm of data analysis. With the advent of big data, traditional methods of data analysis are no longer sufficient to make sense of the vast amounts of information available.
AI algorithms can analyze and interpret data on a scale that would be impossible for humans, providing insights and patterns that are not easily detectable through traditional analysis.
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