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Meta is pouring a lot of money into AI right now, and it could be a long while before those bets start to bear fruit.
That was the message CEO Mark Zuckerberg delivered at the top of Meta’s earnings report this week, sending investors scurrying to sell off the company’s stock. Shares of the social media giant dipped as much as 17% in after-hours trading on Wednesday, though the price rebounded slightly the next day.
Never mind that the company delivered revenue and earnings that actually narrowly outperformed analyst expectations. Investors were likely spooked by a forecast that included more spending on AI projects and slowing revenue next quarter.
Zuckerberg claimed any stock turbulence is to be expected, noting Wall Street’s reactions to the company’s early spending on other big projects like Reels, Stories, and the transition of the News Feed to mobile.
“It’s worth calling out that we’ve historically seen a lot of volatility in our stock during this phase of our product playbook, where we’re investing in scaling new products but aren’t yet monetizing,” Zuckerberg said on the call.
AI anxiety: Investors have become increasingly antsy about how Big Tech companies plan to make good on all the money they’ve been funneling into generative AI projects.
Zuckerberg sought to allay some of these fears by laying out a list of ways that AI could eventually earn revenue for the company. But he also warned that these payoffs will be “several years” in the making.
“Once our new AI services reach scale, we have a strong track record of monetizing them effectively,” Zuckerberg said. “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.”
He said that AI has helped the company “improve app engagement, which naturally leads to seeing more ads, and improving ads directly to deliver more value.” He claimed that “50% of the content that people see on Instagram is now AI-recommended.” (Although for the Facebook users who scrolled to find shrimp Jesus, that may not be a welcome stat.)
Its own lane: The earnings report comes on the heels of Meta’s rollout of its latest Llama 3 large language model. The company has diverged from its Big Tech rivals in the AI race in some notable ways. For one, its AI is much closer to open-source. It’s also using the model as a backbone to power a cast of business spokespeople, fictional characters, and assistants within its platforms, which, the Associated Press reported, are beginning to confuse some users.
But Zuckerberg said he is thinking long-term: “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.