Meta, Facebook's owner, will shovel the mountains of money it makes from advertising into winning the race to dominate the world of AI.
The social media giant rocketed to record growth, posting a 27% increase in revenue to $US36.46 billion for the March quarter.
Ad impressions delivered across Meta’s platforms increased by 20% and the average price per ad was up by 6%.
The revenue rise was impressive but the market didn't like that Meta is now going to spend $10 billion in extra cash on the race to have the best AI tools. Meta shares were down more than 10%.
But founder Mark Zuckerberg is determined to pursue his vision.
He expects a multi‐year investment cycle before Meta AI is fully scaled into profitable services.
"Historically, investing to build these new scaled experiences in our apps has been a very good long term investment for us and for investors who have stuck with us," he said.
Building the leading AI will also be a larger undertaking than the other Meta has done, he said.
"Once our new AI services reach scale, we have a strong track record of monetizing them effectively," he told a briefing of analysts.
"There are several ways to build a massive business here, including scaling business messaging, introducing ads or paid content into AI interactions, and enabling people to pay to use bigger AI models and access more compute.
"And on top of those, AI is already helping us improve app engagement which naturally leads to seeing more ads, and improving ads directly to deliver more value.
"So if the technology and products evolve in the way that we hope, each of those will unlock massive amounts of value for people and business for us over time."
Already bout 30% of the posts on Facebook feed are delivered by an AI recommendation system, up two times over the last couple of years.
And more than 50% of the content people see on Instagram is now AI recommended.
"AI has also always been a huge part of how we create value for advertisers by showing people more relevant ads," said Zuckerberg .
"If you look at our two end-to-end AI-powered tools, Advantage+ Shopping and Advantage+ App Campaigns, revenue flowing through those has more than doubled since last year."
Meta's Llama 3, its smartest AI assistant, arrived in Australia this month. The AI can provide real-time information and generate photorealistic images from a text prompt on Facebook, Instagram, WhatsApp and Messenger.
Meta expects 2024 capital expenditures to be a massive $35 billion to $40 billion as it accelerates infrastructure investments to support the artificial intelligence (AI) roadmap.
“While we are not providing guidance for years beyond 2024, we expect capital expenditures will continue to increase next year as we invest aggressively to support our ambitious AI research and product development efforts,” the company told shareholders.
In the meantime, the company continues to seek lean. Headcount was 10% down in the March quarter to 69,329.
Forrester VP and research director Mike Proulx says there’s no doubt that Meta is all in on AI but to achieve its vision, the company must make big investments in infrastructure.
"Mark Zuckerberg’s ‘heads up’ was reminiscent of what he once said about the metaverse," he said.
"That didn’t exactly go so well, but this is different than Meta’s metaverse gamble because AI has real and practical use cases now.
"The question remains whether Meta can contend in the AI race while maintaining a strong financial position. To do this, expect to see more ‘metaverse’ resources diverted from Reality Labs to Meta’s AI initiatives."
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