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    Earnings call: Meta’s Ad Revenue Hits $35.6B, emphasizes role of AI in advertising

    In the first quarter of 2024 (Q1FY24), Meta saw a 27% year-on-year rise in its advertising revenue reaching $35.6 billion across its family of apps which includes Facebook, Instagram, WhatsApp, and other services. Within ad revenue, the online commerce vertical was the largest contributor to year-over-year growth followed by gaming, entertainment, and media.

    The total number of ad impressions across Meta services increased by 20% this quarter, and the price per ad increased by 6%. The rise in the price of ads was driven by advertiser demand and was partially offset by impression growth from lower monetizing regions/surfaces (devices used to consume content). Meta’s chief financial officer (CFO) Susan Li explained that the company is increasing monetization efficiency in two ways— organic engagement (understanding user preferences to show the right ad at the right time), and increasing marketing efficiency and artificial intelligence (AI) is increasingly playing a role in both. “We actually grew conversions at a faster rate than we grew impressions over the course of this quarter,” Li explained, in reference to the company’s efforts to grow engagement via investments in AI-based content recommendations.

    Using artificial intelligence (AI) to deliver ads to the right audience:

    AI is helping Meta improve its app engagement, which leads to its users seeing more ads and improving ads to deliver more value. Through the company’s AI-enabled advertising tools (the Advantage+ portfolio), advertisers can automate steps of the campaign setup process, such as selecting which ad creative to show, and can even choose to automate their ad campaign completely. On the single-step automation, Advantage+ Audience has seen significant growth since Meta made it the default option for advertisers. This AI tool allows advertisers to increase campaign performance by just using audience inputs as a suggestion rather than a hard constraint. “Based on tests that we ran, campaigns using Advantage+ Audience targeting saw, on average, a 28% decrease in cost per click or per objective compared to using our regular targeting,” Li said.

    Meta’s end-to-end automation products like Advantage+ Shopping and Advantage+ App Campaigns also saw growth, with their revenues having doubled since last year. The company says that there is still a runway for increased adoption of these products, adding that it is trying to enable more types of conversion for Advantage+ Shopping. “In Q1, we began expanding the list of conversions that businesses could optimize for. So previously it only supported purchase events, and now we’ve added 10 additional conversion types,” Li mentioned.

    Meta has also deployed Meta Lattice for advertising, which consolidates smaller and more specialized models (which have historically been optimized for individual objectives and surfaces) into larger models that can better learn which characteristics improve ad performance across multiple surfaces like feed and reels and multiple types of ads and objectives at the same time. “This is not only leading to increased efficiency as we operate fewer models but also improving ad performance,” Li explained.  The company deployed this in 2023, across Facebook and Instagram, and in 2024 it intends to expand the scope of advertising objectives it supports.

    Getting advertisers to adopt generative AI:

    The company seeks to do this in 2 ways—

    • In the short term, it is focusing on generative AI use for ad creation. “Right now, we have features supporting text variations, image expansion and background generation and we’re continuing to work to make those more performant for advertisers to create more personalized ads at scale,” Li mentioned.
    • In the long run, the company is focused on business AIs. It is currently testing the ability for businesses to set up AIs for business messaging that represent them in chats with customers. The AI can respond to shopping queries like providing information about a product or its availability. This is currently being tested with a small group of businesses on Messenger and WhatsApp. “We’re hearing good feedback with businesses saying that the AIs have saved them significant time while customer — consumers noted more timely response times,” Li said.

    Incorporating ads into Reels:

    Li explained that while the ad load (number of ads displayed) on Reels has increased in the past year, it remains lower than the ad load of a user’s feed and stories. “We’re going to continue to look for opportunities to thoughtfully grow it in the future and invest in creative ways to address the structural supply constraints of the Reels format,” Li said, emphasizing that the company will seek to make the ads for Reels increasingly personalized, making people more likely to engage with them. Notably, on Instagram, reels make up 50% of the time that people spend on the app.

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    The post Earnings call: Meta’s Ad Revenue Hits $35.6B, emphasizes role of AI in advertising appeared first on MediaNama.

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