Yahoo Finance Why Meta's digital ad numbers are trouncing competitors right now: Nicola Mendelsohn
In its last earnings report, Meta's (META) ad numbers were a highlight, especially as other tech companies such as Alphabet (GOOG, GOOGL) and Roku (ROKU) said they remained somewhat concerned about the digital advertising market's much-talked-about slowdown.
Meta's ad revenue numbers were a notable beat, coming in at $28.1 billion versus the $26.7 billion that Wall Street was expecting. That suggests that, at least for Meta, digital advertisers are finding their way forward.
"What I'm hearing is that there's a stability out there when it comes to how [digital advertisers] are seeing things now," Meta's Global Business Group head Nicola Mendelsohn told Yahoo Finance at the 2023 Milken Global Conference. "So we've gone through a real period of real fluctuation, lots of changes that people couldn't have envisaged, but I think people are now more comfortable and confident in terms of what those uncertainties are, and they're factoring them in."
Though Alphabet clocked a small beat on its YouTube ad revenue and expressed some optimism about a stabilizing ad market, that optimism didn't exist across the board. For example, in the company's earnings call, the Google parent's chief business officer Philipp Schindler noted that "in network, there was an incremental pullback in advertiser spend."
At Roku, it was a similar story of choppy waters in digital advertising; ad spending in some areas improved, but other areas remained pressured.
Why was Meta's story more positive? In part, it was tied to the increasing success of new products such as Reels and investments in AI, Mendelsohn said.
"[Reels is] one of our fastest growing products, and what we saw just in the last handful of months was a doubling of the amount of Reels being shared every day to 2 billion Reels being shared," she said. "That's people commenting and sharing and discussing and debating and really enjoying the content that they're seeing. A lot of that has been powered by the investments that we've been making in artificial intelligence and machine learning."
Mendelsohn also identified messaging as a key ad opportunity, especially for WhatsApp, Instagram Direct, and Messenger.
"We're seeing that one of the products that have that we call [Click to Message] actually enables advertisers to start a conversation in one of the individual threads," she said. "That now has a runway of $10 billion."
Meta's goal is, in large part, to make it easy for advertisers to use its platforms, according to Mendelsohn.
To that end, Mendelsohn also delineated how AI, a key theme that CEO Mark Zuckerberg spoke about in the company's latest earnings call, fits into Meta's advertising strategy.
Meta's automated Advantage+ ad products are AI-powered, and they're "helping advertisers that want a reduction in the cost to actually reach the people that matter to them," Mendelsohn said. She explained that Meta, which has been using AI in one form or another since 2006, uses the technology in three ways.
"We use it to surface and bubble up the best content for you, that you, the individual among those 3.8 billion people, see the things that matter most to you," Mendelsohn said.
"We also use it to take content off the platform, any type of harmful content, misinformation. We're doing that through machine learning and AI," she added. "Then, finally, from the advertising side and monetization of our products, then it's really about making sure we put the right products in front of the right people at the right time."
Between Meta's AI-infused ad products and its focus on efficiency this year, some on Wall Street have taken notice.
"I don't think advertisers are doing backflips and spending money like crazy," Jefferies analyst Brent Thill told Yahoo Finance Live. "I think what's happening is Meta has improved their ROI. ... They've been excited about the refocus of the company away from the metaverse back to the core advertising opportunity. So I think, you know, advertisers all quarter in Q1 said, 'Hey, things aren't perfect, but Meta is actually improving their competitiveness.'"
Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.
Click here for the latest technology business news, reviews, and useful articles on tech and gadgets
Read the latest financial and business news from Yahoo Finance
