Meta starts a new chapter: ‘AI definitely an area we’re doubling down on’
After a difficult year, Meta’s latest earnings report suggests that brighter days may lie ahead. We spoke with Nicola Mendelsohn – Meta’s vice-president of global business group – to learn more about the company’s expanded focus on AI, Facebook’s recent 2bn-user milestone and why 2023 will be the ‘year of efficiency’.
Mark Zuckerberg changed the name of his company from Facebook to Meta in October, 2021. / Adobe Stock
Meta has kicked off 2023 on a high note.
Yesterday, the tech company released its earnings report for the final quarter of 2022, which doubled as a financial overview of the entire year. Though its revenue during the final months of 2022 was around 4% lower compared to Q4 the previous year (approximately 32.1bn and 33.6bn, respectively), the company still performed better than many analysts had predicted.
Meta needed a win. For much of last year, the company was assailed by scathing headlines and at least one letter from a wary investor, all broadly accusing the company of obscene spending for a product that has yet to find a viable and lucrative use case. This, of course, is the metaverse, an ill-defined virtual realm where (if Meta founder and chief exec Mark Zuckerberg is to be believed) we will one day congregate as virtual avatars to work, play, shop and socialize.
Nicola Mendelsohn, vice-president of global business group at Meta, argues that the company's tribulations throughout 2022 have been vindicated by the latest earnings report. “Last year was very much a critical year because we were able to demonstrate that we didn't just have a plan, but that the plan was working, and we have the proof points to show it,” she says. “Even though we’ve been underestimated recently, I quite like that, because being an underdog in my eyes is actually a position of strength."
Throughout the hail of criticisms last year, Zuckerberg has tried to assuage media scorn and investor nerves with an insistence that the metaverse is a long-term investment, and with some patience, it will pay off.
“I agree with Mark Zuckerberg’s sentiment that those who are patient will reap the rewards of Meta's overall vision,” says Kenneth Landau, chief executive officer and co-founder of Mytaverse, a company that designs virtual environments. “Meta just isn’t at that stage yet because it has been ironing out some of its structural issues. Still, there will likely be a rebound especially when it comes to advertising spend which is set to pick up.”
The company’s latest earnings report is not proof-positive of Zuckerberg’s prediction for the metaverse. It is, on the other hand, evidence that the company’s strategy of placing its eggs across multiple baskets is beginning to bear fruit. Though the company’s name suggests a kind of tunnel vision focused on the metaverse, it also has substantial revenue streams flowing in from its "family of apps" - which includes household names like Instagram, WhatsApp, and, of course, Facebook - as well as its advertising business.
Facebook hit the two billion-user mark for the first time in its nearly 20-year history in December, a strong indicator that the platform remains competitive despite the rise of newer platforms like TikTok and BeReal. “Facebook engagement is incredibly strong,” Mendelsohn says.
The popularity of Reels – a video-based feature on Instagram launched by Meta in response to TikTok – has also been growing among advertisers, according to Mendelsohn. “I am thrilled with the advertiser adoption of Reels,” she says. “More than 40% of them are already running ads.”
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Zuckerberg, perhaps in response to investor pleas, has also vowed to trim the proverbial fat within Meta moving forward; “our management theme for 2023 is the ‘year of efficiency’ and we’re focused on becoming a stronger and more nimble organization," he wrote in yesterday’s earnings report. In November, Meta announced that it would be laying off around 13% of its workforce, equating to around 11,000 employees. It remains to be seen whether the company’s “efficiency” plans will yield another round of layoffs in 2023 or beyond.
The company is also beginning to lean more heavily into artificial intelligence (AI), a field that has recently begun to blossom within the ad industry as platforms like ChatGPT open up new vistas of creative possibility. Mendelsohn specifically highlights Advantage+, an AI-powered product released by Meta last year which enables advertisers to “reach valuable audiences with less set up time and greater efficiency,” according to a company blog post.
“This is definitely an area we’re going to be doubling down on because, for everybody, growth and efficiency is top of mind,” says Mendelsohn.
Meta will still face significant challenges ahead as it continues to battle economic headwinds, develop and sell its virtual reality technology and remain competitive in an increasingly crowded and ever-evolving tech industry. But Mendelsohn is hopeful. “I’ve been at the company almost a decade,” she says. “I’ve never been more excited about the future, and I truly believe that our best days are ahead.”
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