Meta Platforms (META 0.49%) wants in on the generative artificial intelligence (AI) boom.
While Microsoft (MSFT 0.44%) and Alphabet (GOOG 0.06%) (GOOGL -0.01%) are grabbing headlines about the potential use of their generative AI investments, Meta's efforts in artificial intelligence have, for the most part, flown under the radar. But AI has been and remains a core focus of Meta. CEO Mark Zuckerberg said the latest endeavor in AI, generative AI, will be the biggest theme for the company's products in 2023.
Meta is well-positioned to accelerate its efforts in artificial intelligence, and it can use generative AI throughout its business.
A massive shift
Meta had to step up its AI efforts following the implementation of Apple's App Tracking Transparency on iOS and an increased concern around privacy among consumers.
Meta substantially stepped up capital expenditures in 2022 in order to support building out data centers. Capex went from $19.24 billion in 2021 to $32.04 billion in 2022. That's more than Alphabet spent last year. Management expects to keep its spending in line with that level in 2023.
Those data centers support its AI efforts, which require tons of computing power. Those AI projects power the recommendation engine that underpins its Reels and Feed products, leading to greater engagement with its family of apps. They can also improve ad targeting, using the same ideas that work for the content recommendation engine. Additionally, Meta is working on AI to improve ad measurement now that it's less capable of tracking the conversion of ad impressions into product sales.
While Meta's always been working on AI, the massive shift felt across the industry in late 2021 forced it to step up its efforts and accelerate its data center build-out. With so many of its resources focused on AI, the company is positioning itself to become even more of a leader in the space. And if Zuckerberg wants to increase the focus on generative AI, he has the resources to do exactly that.
How generative AI fits into Meta's business
While Microsoft and Google are focusing their generative AI efforts on the goal of improving internet search results, Meta may have a few better use cases for its artificial intelligence.
"I think you'll see us launch a number of different things this year," Zuckerberg said during Meta's fourth-quarter earnings call. But he wouldn't go into details about what exactly the company might be working on. It's worth noting, though, that Meta already released a video generator last year based on its AI.
Meta's AI applications could help its advertising business. Unlike Google or Bing, which mostly generate ads from clicks on promoted links, there's much more creative work that goes into a Facebook or Instagram ad. Meta's AI could help with ad creatives or copy, helping marketers find the best-converting ads for their goals.
Meta's AI may also help businesses develop better chatbots for WhatsApp and Messenger. Improved bots for businesses could improve the interactions between businesses and their customers and potential customers on those platforms, make them more efficient for businesses, and incentivize businesses to spend money on click-to-message ads.
Finally, generative AI could help creators on Meta's various platforms produce more interesting content. Not only could it improve photos or videos, but it could also theoretically be used to create whole worlds in the metaverse on its Oculus platform. More content could lead to greater engagement.
Meta may be a sleeping giant in the growing area of generative AI. But the potential for it to show meaningful financial results from its investments gives it an even greater incentive to make this area a big focus in 2023. With the market seemingly underappreciating Meta's AI infrastructure and research team, it may be worth picking up some shares before the company starts launching its own generative AI products.
