Is AI fuelling Meta's revenue wheel? What does it indicate to marketers?

Meta Platforms has seen a strong digital ad boost, with its first-quarter revenue exceeding analyst expectations.

The company’s first-quarter sales increased to $28.6 billion, marking a resurgence in growth after three consecutive quarters of declines. Analysts predicted an average of $27.7 billion of first-quarter sales.

Meta’s CEO, Mark Zuckerberg, stated that artificial intelligence was assisting the company in increasing traffic to its platforms and earning more money from ad sales.

It is well known that Meta faced bruising 2022 as pandemic-era e-commerce growth fizzled, rivals like TikTok snatched up young users, and Apple Inc.'s privacy updates restricted access to the user data on which it built its ad business.

The drop in advertising demand in 2022 compelled the social media giant to cut headcount and reduce spending, sparking scrutiny of the billions invested in virtual reality technology.

Meta has also begun an aggressive cost-cutting campaign with plans to reduce its middle-management structure in order to meet Zuckerberg's goal of making 2023 the "year of efficiency."

And now, despite its slow adoption of AI-friendly hardware and software systems in its core business, Meta continues to make investments in strategic areas such as artificial intelligence and the metaverse.

That said, Meta also said it expects operating losses in its metaverse-focused Reality Labs unit to rise in 2023 after losing $13.7 billion last year.

It is well known that AI's usage has grown immensely in the social media sphere in recent years. From automatic content moderation and personalized recommendations to the ads, AI has been immensely impactful in enhancing the user experience on social media platforms.

With Meta attributing its digital boost to the usage of AI technology, it even more emphasizes the importance of AI to transform the way businesses connect with customers.

Considering the company's remarkable revenue growth and Meta’s effort towards introducing generative AI into its products, we foresee that the company’s digital ad boost will possibly increase in the coming days. In other words, more brands marketers will be encouraged to raise their marketing investment in Meta platforms.

Why? What can be the reasons behind Meta considering AI for digital ad boost?

When AI is put in place, it makes the work simple, effective, and beneficial for marketers and intuitive for audiences.

For organic posts:

For social media platforms like Meta, AI is contributing massively to managing and streamlining an unimaginable amount of data.

For instance, Instagram uses AI to analyse the data around the post, the data around the person who posted, the number of hours the user spent on particular types of posts and pages, and the history of interaction with the person who posted, and then it ranks and shows the post to users.

As a result, it leads to an increase in user engagement on the platform.

In fact, according to Mark Zuckerberg, AI-powered reel recommendations have resulted in a 24% increase in audience time spent on Instagram.

For ads:

With AI's ability to predict, ad management and optimization are made easy for marketers. Be it finding which type of creative will drive better results and segment audiences, making ad creative, testing ads, or improving speed and performance, AI is hugely helpful for marketers.

On the other hand, AI prioritises the ad topic preferences that users have already opted for on Meta platforms. It in turn enhances the user experience and helps marketers get a high click-through rate on the meta-platforms.

Going forward, in our opinion, with the integration of generative AI and many other AI features, the user experience will only increase, as will marketers’ investment in meta-platforms.

Overall, usage of AI will possibly intensify on Meta platforms, and it will considerably help brands get more value from their social media activities and maximize the ROI.