Meta's Revenue Popped 22% YOY In Q2 – And It's Spending That ...
You know that DJ Khaled song with the chorus, “All I do is win, win, win, no matter what. Got money on my mind, I can never get enough”? Rather than the usual classical music or corporate Muzak, that’s what Meta should play before kicking off its quarterly earnings calls. Because Meta keeps on minting money every quarter and dodging the headwinds. Meta’s stock jumped by nearly 7% in after-hours trading on Wednesday based on strong results.
In addition to beating expectations with $39.1 billion in total Q2 revenue – up 22% year-over-year (of which all but around $389 million came from advertising) – Meta pulled off the magic trick of increasing both the number of ad impressions on its platform and CPMs by 10% apiece. Income for Meta’s family of apps – the trio of Facebook, Instagram and WhatsApp – was $19.3 billion, with a 50% operating margin.
Capex, whatev – it’s AI all day
With margins like that and ad revenue on the rise, investors can overlook the fact that Meta plans to significantly increase its spending to support its AI product development and research in the year to come. But it’s well worth spending big now, CEO Mark Zuckerberg told investors.
“At this point, I’d rather risk building capacity before it’s needed rather than too late, given the long lead times for spinning up new infra projects,” he said. Eventually, AI will touch nearly every product Meta offers, including to improve existing ones and also make new ones possible, he said. “It’s why there are all these jokes about how all the tech CEOs get on these earnings calls and just talk about AI the whole time,” Zuckerberg said. “It’s because it’s actually super exciting and it’s going to change all of these different things over multiple time horizons.”
AI is already fundamentally changing the way that advertisers use Meta’s tools. In the past, advertisers would come to Facebook or Instagram with a specific target audience in mind, like a certain age group, geography or people with a particular interest. Now, Meta’s ad systems have improved to the point where they can often do a better job of predicting which audiences to target than the advertisers can themselves, Zuckerberg said.
But advertisers still need to develop their own ad creative. Not for long, though, Zuckerberg said. “In the coming years, AI will be able to generate creative for advertisers as well, and we’ll also be able to personalize it as people see it,” he said. “Over the long term, advertisers will basically just be able to tell us a business objective and a budget and we’re gonna do the rest for them.”
We’ll generate it from here
According to Meta’s CFO, Susan Li, more than 1 million advertisers have used at least one of the company’s generative AI ad features – image expansion, background generation, text generation, etc. – in the past month. Li also highlighted additions from last quarter to Advantage+, Meta’s AI-powered ad platform for automated shopping campaigns. New bits include the ability to automatically upload multiple images and videos within a single ad and an expanded list of conversion types, such as add to cart. Now Meta just has to make sure the system doesn’t bug out.
Q2 was relatively ho-hum for Criteo. Its revenue ticked up by just 1%, although the company did move from a net loss of $2 million in the year-ago quarter to a $28 million profit. In the past couple of weeks, many of the world’s biggest CPG and grocery store brands have reported their latest earnings. One thing is clear: CPG brands are under pressure by retailers to squeeze their margins, lower prices and spend more on ads.
Alphabet is so big that, even when it’s growing slowly – YouTube, for example, disappointed with a lower-than-expected growth rate – it’s still outpacing competitors. The rumors are true: Outbrain will acquire Teads, the SSP and video monetization company owned by European telco Altice. The acquisition ends advanced talks, first reported in July, between the two companies. TV measurement platform Innovid has a new frequency management product that manages frequency caps across connected TV, mobile and desktop, including display and audio.
Investor, industry veteran and former SpotX CEO Mike Shehan returns from the ad tech sidelines to join the C-suite at Telly, a startup that gives away free TVs in exchange for viewer data.
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