Meta, formerly known as Facebook, reported a 22% year-over-year increase in revenue to $39 billion in the second quarter of the year, surpassing Wall Street’s expectations. The company’s ad impressions across its app ecosystem, which includes Facebook and Instagram, grew by 10% compared to the previous year. Additionally, the average price-per-ad also increased by 10%. Meta executives pointed to the e-commerce, gaming, entertainment, and media verticals as the main drivers of growth among advertisers.
Looking ahead to the third quarter, Meta forecasts revenue to fall between $38.5 billion and $41 billion, indicating a strong outlook for the company. One of the key areas of focus for Meta is artificial intelligence (AI), which the company believes is enhancing marketing performance and has the potential to reshape its advertising fundamentals in the future.
Meta’s vision for AI in marketing was further elaborated in the earnings report, with the company dividing AI into two categories: core AI, which has been supporting its ecosystem for years, and generative AI, a newer technology that is still in development and not yet a significant revenue driver. Meta CEO Mark Zuckerberg highlighted the potential of AI in generating creative content for advertisers and personalizing it for viewers. He envisions a future where advertisers can simply provide a business objective and budget, leaving the rest to AI.
While generative AI holds promise for digital ad platforms, some analysts express concerns about relying too heavily on automation. Marketers may be hesitant to relinquish control as envisioned by Zuckerberg. Mike Proulx, vice president and research director at Forrester, emphasized the importance of maintaining a human touch in the advertising process alongside AI advancements.
Currently, Meta’s AI efforts are largely behind the scenes, with tools like Meta Lattice improving ad efficiency and performance. The company’s Advantage+ suite of AI-powered ad products offers optimization tools for different ad formats and surfaces. Meta’s Meta AI assistant, made widely available in the previous quarter, is on track to become the most-used offering in its category by the end of 2024.
AI also plays a crucial role in Meta’s long-term goal of building the metaverse. However, the reality Labs division, responsible for developing augmented and virtual reality hardware and software, incurred significant expenses in the second quarter. While the metaverse remains a strategic focus for Meta, the division’s high operating losses raise questions about its scalability and consumer adoption.
In Q2, Meta made strides in streamlining its ad business by optimizing ad placements across its platforms and unifying video recommendations on Facebook. E-commerce brands, particularly those based in China, continued to invest heavily in Meta’s advertising services to reach new audiences. Ad impression growth was driven primarily by regions like Asia-Pacific and other global markets.
As Meta continues to leverage AI to enhance its advertising capabilities and pursue its metaverse ambitions, the company faces challenges in balancing innovation with financial sustainability. With a strong revenue forecast for the third quarter and ongoing investments in AI technology, Meta remains a key player in the digital advertising landscape.