No comfort for those who lost their jobs, but Mark Zuckerberg’s so-called ‘year of efficiency’ appears to be paying dividends as Meta just turned in its most profitable quarter ever .
The company reported Q3 revenues of $34.1 billion, up 23% year-on-year, with a net income of $11.6 billion, up a massive 164%. Ad views increased by 31% year-on-year with advertising revenue coming in at $33.6 billion, although the average price per ad declined six percent year-on-year.
Facebook daily active users stood at 2.09 billion on average for the period, an increase of 5% year-on-year, while monthly active users totalled 3.05 billion, a three percent rise.
On the other hand, Zuckerberg’s pet project of the Metaverse continues to tank financially, with Q3 seeing the division adding a further $3.7 billion of losses, coming the total loss to date to an eye-watering $35 billion in just over two years. But there’s still no sign of pulling back, even with the Reality Labs division expenses running at $4.0 billion in the quarter.
And inevitably Meta is all in on AI, with Zuckerberg saying the firm will put non-AI projects on the back burner and push non-AI hiring into next year:
AI will be our biggest investment area in 2024, both in engineering and compute resources. But I want to avoid allocating a lot of new headcount. So we're going to continue de-prioritizing a number of non-AI projects across the company to shift people towards working with AI instead.
On the recruiting front, one dynamic…is that we have a sizeable hiring backlog right now since part of our layoffs earlier this year included teams swapping out certain skill sets for being able to hire others. We're still going to be hiring those roles into 2024. So that means that even though we're planning to grow headcount at a much slower rate going forward, the actual rate next year may temporarily be faster as we work through this hiring backlog.
He ran through a checklist of AI work done in recent months:
AI advances are driving a lot of our product and business performance. Generative AI will increasingly be important going forward. I outlined our product roadmap earlier. And on top of that, we're also building foundation models like Llama 2, which we believe is now the leading open source model with more than 30 million Llama downloads last month. Beyond that, there was also a different set of sophisticated recommendation AI systems that powers our feeds, Reels, ads, and integrity systems. And this technology has less hype right now than generative AI, but it is also very important in improving very quickly.
AI-driven feed recommendations continue to grow their impact on incremental engagement. This year alone, we've seen a seven percent increase in time spent on Facebook and a six percent increase on Instagram as a result of recommendation improvements. Our AI tools for advertisers are also driving results with Advantage+ shopping campaigns, reaching a $10 billion run rate and more than half of our advertisers using our Advantage+ creative tools to optimize images and text in their ads creative.
But the road ahead isn’t mapped out as clearly as other innovations have been over the years, he added:
When we [were] working on things like Stories and Reels, there were some market precedents before that. Here, there's technology which is extremely exciting, but I think part of what leading in an area and developing a new thing means is, you don't quite know how big it's going to be.
But what I predict is that I do think that the fundamental technology around Generative AI is going to transform meaningfully how people use each of the different apps that we build. I think for the Feed apps, I think that over time, more of the content that people consume is going to be either generated or edited by AI. Some of it will be [that] creators will now have all these tools to make content more easily and more fun. And I think over time, maybe we'll even get to the point where we can just generate content directly for people based on what they might be interested in. I think that, that could be really compelling.
The turnaround is impressive in many ways, although it has come at a horribly high price. As of the end of September, the firm’s headcount was 66,185, down 24% year-on-year. Putting the obsession with pouring money down the Metaverse drain, it was a more somber Zuckerberg who fielded the post-results analyst call, with CFO Susan Li picking up a lot of the air time, at one point taking on the thankless task of justifying ongoing spend on Reality Labs current work. Sheryl Sandberg’s commentary, usually heavily use case centered, has been sorely missed and it will be interesting to see in coming quarters how much further Li steps up.