It seems like a decade has passed since Facebook rebranded its corporate entity to Meta Platforms (META 3.04%) (it was only in late 2021). Remember that? Meta was heralding a 3D digital future with sweeping bets on the metaverse. Fast forward just a year and a half, though, and Meta is back pedaling and heralding 2023 as "the year of efficiency," replacing thousands of workers with new AI tools to make its backend processes more profitable again.
Nasty bear markets that expose inefficient uses of financial resources tend to hasten pivots like this. But that doesn't mean Meta has given up on the metaverse. On the contrary, Meta's new AI is a stepping-stone approach to that same 3D future. Investors and tech enthusiasts alike should be happy with this shift.
Meta joins the generative AI party
Long gone are the days of all the metaverse razzmatazz, the metaverse basically referring to a 3D rendering of internet sites and services. These days, it's generative AI that has taken over as investors' fetish of the moment.
Is generative AI merely hype ready to go up in smoke? Perhaps, at least as far as stock prices tied to said hype go. But from a pure business standpoint, generative AI services (like ChatGPT) are probably the real deal.
Don't take my word for it -- listen to Nvidia (NVDA 3.77%), which designs much of the hardware fueling this current generative AI boom. According to Nvidia CEO Jensen Huang, generative AI could be an inflection point in software development that levels the playing field, giving even the layperson the ability to will apps into existence with natural human language.
What's all this to do with Meta? Like the tech giant that it is, Meta isn't going to let itself be left behind in the generative AI mania cycle. But there's been a slight difference in Meta's plan of attack.
Sure, Meta has released some generative AI services for limited public use with text-to-image and text-to-video services. But as some executives explained at a recent investor conference, much of the AI work at Meta as of late has been for backend processes -- like increasing digital ad efficiency, speeding up advertiser pipelines, and other cost-saving initiatives. That's in keeping with Zuckerberg's not-so-sexy "year of efficiency" declaration.
Generative AI is really a stepping stone to the metaverse
As Meta trims expenses to support profit margins, it also created a new department to oversee overall AI. This is important if the metaverse is ever to become reality.
Coding software to create apps and experiences is already hard, let alone rendering all that stuff in 3D. If Meta wants a flourishing ecosystem of apps and experiences in real-time 3D (the metaverse), it's going to first need to make life easier for the millions of businesses utilizing its services around the globe.
Basically, Meta is heeding Nvidia's advice, and could be putting in the work now to make software development as simple as using natural human language.
I believe this is a smart move. After all, one of the biggest problems with Meta's metaverse push wasn't just that the general public wasn't ready for 3D digital worlds. It also lacked a robust ecosystem of developers for its virtual reality and metaverse segment -- now known as the money-bleeding division called Facebook Reality Labs, which racked up an operating loss of $13.7 billion last year on revenue of about $2.2 billion.
Yeah, the metaverse is expensive. But generative AI could make it cheaper to develop. So Meta is laying down those stepping stones for a 3D future.
Zuckerberg always said this was an initiative we'd be able to start measuring at the end of this decade. AI is helping Meta stay on course as a metaverse stock, even if the market has moved on and forgotten all about that for now.
