Q1 2024 Summary
Published Jan 10, 2025, 5:10 PM UTC- Meta is increasingly optimistic about its AI capabilities, with CEO Mark Zuckerberg stating they can build leading AI models and be the leading AI company in the world, opening up additional opportunities beyond social and commerce products.
- Core AI work is driving strong returns, improving engagement and ad performance, while strategic bets in AI are expected to create significant long-term value. Meta is enabling businesses to set up AIs for business messaging, aiming to dramatically reduce costs and open new revenue streams.
- Advancements in AI are improving recommendation systems and ad models, leading to increased user engagement and better ad performance. Deploying a new model architecture for Facebook Reels resulted in an 8-10% increase in watch time, and conversions grew at a faster rate than impressions, driving revenue growth.
- Meta expects significant increases in capital expenditures (CapEx) for AI infrastructure over the coming years, which will precede revenue generation from these initiatives, potentially impacting profitability in the near term. They anticipate full year 2024 CapEx to be in the range of $35 billion to $40 billion, increased from the prior range of $30 billion to $37 billion. (, , )
- Reality Labs operating losses are expected to increase meaningfully year-over-year due to ongoing product development efforts and investments to further scale the ecosystem, suggesting continued profitability challenges in this segment. (, )
- Meta is facing increased legal expenses, with G&A expenses increasing by 20% in Q1 due to higher legal-related expenses. They recognized accruals related to ongoing legal matters in Q1, and are not providing full year 2024 revenue guidance, indicating potential uncertainties ahead. (, , )
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Increased AI Investment
Q: What's changed most in your business outlook, and is the AI opportunity requiring more investment?
A: Mark Zuckerberg noted that they've become more optimistic and ambitious about AI. Previously, they were excited about building good AI models for social and commerce products, but now they believe they can build leading AI models and become a leading AI company. This success encourages them to invest more to stay at the forefront of AI technology, even as they scale products before they start generating revenue. -
Capital Allocation & ROI
Q: How do you view returns on capital and the capital spent over the next few years?
A: Susan Li explained that they're measuring ROI on AI investments by categorizing them into core AI work and strategic bets. The core AI work continues to show strong returns, improving engagement and ad performance that translate into revenue gains. Strategic bets like generative AI are earlier in the return curve, requiring investment ahead of revenue generation. They're building systems with flexibility to allocate capacity across different use cases as opportunities arise. -
Reels Monetization Growth
Q: With Reels taking a large share of time spent, what's the next leg of monetization growth?
A: Susan Li stated that Reels revenue continued to grow across Instagram and Facebook, driven by higher engagement and increased monetization efficiency. They see opportunities to improve performance and grow supply, investing in ranking improvements and optimizing ads to feel more native to Reels. Despite increased ad loads, Reels' ad load remains lower than Feed and Stories, offering room for thoughtful growth. -
China Advertiser Contribution
Q: How is spend from China-based advertisers trending?
A: Susan Li reported that growth in spend from China advertisers remained strong, driven by online commerce and gaming. This contributed to the Asia Pacific Advertisers segment being the fastest-growing region at 41% year-over-year in Q1. While they saw strength across other geographies, they expect to lap periods of strong demand over the course of 2024 due to the prior recovery of China-based advertisers. -
Impact of TikTok Ban
Q: How could a TikTok ban affect the U.S. social media landscape and Meta in particular?
A: Susan Li commented that they're closely following events related to TikTok but believe it's too early to assess the impact or what it would mean for Meta's business. -
Advantage+ Adoption
Q: How significant is Advantage+ in terms of platform spend and CPM impact?
A: Susan Li said they're seeing strong traction across the Advantage+ portfolio. Advantage+ audience targeting saw a 28% decrease in cost per click or objective, improving campaign performance. End-to-end automation products like Advantage+ Shopping and App Campaigns have more than doubled in revenue since last year, with significant room for broader adoption. -
Sustaining Growth Rates
Q: Can you maintain growth rates despite tougher comparisons ahead?
A: Susan Li expressed optimism about continuing to grow engagement through investments in AI-based content recommendations and video work. They also expect to drive further ad performance gains, noting that they grew conversions at a faster rate than impressions this quarter, indicating increasing ad effectiveness. -
Shifting Resources to AI
Q: Can you reallocate spending from other areas like the metaverse to fund AI investments?
A: Mark Zuckerberg acknowledged they're shifting resources from other parts of the company to advance AI efforts. While remaining optimistic about long-term investments in platforms like Reality Labs, they're focusing more Reality Labs work on AI goals as well. -
AI Tools for Businesses
Q: How do you see the business model evolving with AI tools for businesses and creators?
A: Mark Zuckerberg believes the biggest opportunity lies in business messaging. They aim to make it easy for businesses and creators to set up AI to engage with their communities for sales, commerce, and support. As AI reduces the cost of engaging with customers, it can unlock new monetization avenues. -
Evolution of AI Experience
Q: How will larger AI models evolve the user experience on Meta platforms?
A: Mark Zuckerberg envisions AI handling more complex tasks, becoming more like agents rather than simple chatbots. These agents can perform multi-turn interactions to accomplish user goals, such as finding products or providing support. He believes this will enable more powerful business use cases and represents a significant long-term investment opportunity.