Meta’s business was lambasted by lawmakers during a Senate hearing about online child safety on Wednesday.
But if you thought scenes like CEO Mark Zuckerberg apologizing to families who say their loved ones were harmed by Meta’s platforms would ding the company’s stock price – guess again.
Meta’s shares surged by nearly 15% after reporting Q4 earnings on Thursday. It was the company’s fourth consecutive quarter of revenue growth, following a dismal 2022.
In case you were wondering: No, Zuckerberg did not mention the Senate hearing during his call to investors. And not a single investor pressed him about it, instead focusing their questions on Meta’s energized ads business and its investments in AI.
Revenue up, costs down
Meta generated $38.7 billion in ad revenue last quarter, up 24% YOY. Its overall daily active user count hit 3.19 billion, up 8% YOY.
The total number of ad impressions served across Meta’s apps, including Facebook, Instagram and WhatsApp, increased 21% YOY, and average revenue per impression increased 2%.
Online commerce, consumer packaged goods and gaming were Meta’s strongest ad verticals, said CFO Susan Li.
Chinese advertisers seeking users in other geos – including gaming brands and ecommerce companies such as Temu and Shein – were a key growth driver, Li added. This quarter, Chinese advertisers represented 10% of total ad revenue and accounted for 5% of Meta’s total worldwide revenue growth.
Ad revenue grew by 19% YOY in North America, 23% in Asia Pacific, 33% in Europe and 32% in rest of the world markets.
Efforts to grow audience engagement were a main factor behind these increases, Li said, pointing to gains in video engagement in particular. Daily watch time across video, including Instagram Reels, was up 25% YOY.
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Meta’s investments in campaign optimization and retail media also drove revenue growth, Li said. The company is especially bullish about the ability of Advantage+ Shopping Campaigns to entice advertiser spend through optimization gains. Meanwhile, Meta’s Shops ads product reached a $2 billion annual run rate last quarter.
Recent partnerships also point to commerce as a top priority for Meta. In November, it announced an integration with Amazon that will allow Instagram and Facebook users to purchase products featured in Amazon ads without leaving the app.
Year of job cuts (sorry, efficiency)
But what was most pleasing to investors in Q3 is that the strong performance of Meta’s ads business was complemented by a drop in operating costs.
Meta’s expenses dipped 8% YOY and its operating margin doubled to 41%, reflecting gains from what Zuckerberg has dubbed the company’s “year of efficiency.”
From November 2022 to November 2023, Meta cut roughly 21,000 jobs, ending Q4 last year with about 67,000 employees, down 22% YOY.
“Being a leaner company is helping us execute better and faster,” Zuckerberg told investors. “We will continue to carry these values forward as a permanent part of how we operate.”
AI with the assist
Going forward, Meta will continue focusing most of its resources on developing its AI offerings, including launching version 3 of its Llama open-source large-language model this year, Li said.
Further development of its AI-powered ad products, namely Advantage+ Shopping Campaigns and generative AI for ad creative, are also top priorities.
Another major goal is to build on the AI assistant Meta launched at the end of last year and to make progress on AI Studio, a platform where developers can create their own AI chatbots. Meta will eventually monetize these products once they reach scale.
Today, Meta relies heavily on user-generated content to feed its AI models, Zuckerberg said – the billions of publicly available images, videos and text posts its user base shares on Facebook and Instagram. But as more people engage with its AI-powered assistants, Meta plans to start training its models using those user interactions.
Meta is also designing its own specialized data centers and investing in purpose-built silicon to better suit specific AI use cases, Zuckerberg added.
But what about the metaverse? You know, the supposedly civilization-altering technology for which Facebook changed its name in 2021.
Zuckerberg barely even mentioned the metaverse, other than to hint that it remains a long-term priority.
FTC what happens
But here’s something Meta can’t afford to put on the back burner: Monitoring the legislative landscape.
While the ill-fated recent Senate hearing didn’t come up, Li did mention the Federal Trade Commission’s stated goal of modifying its existing consent order with Meta to ban the company from monetizing any data it collects on users under the age of 18.
“We are contesting this matter, but if we are unsuccessful, it would have an adverse impact on our business,” Li deadpanned.
But overall, it seems Meta isn’t going to let regulators rain on its parade. It’s choosing to focus on the positive instead.
“Our communities are growing,” Zuckerberg said, “and our business is back on track.”
