00:00This is a $200 billion revenue company, and at the current rate of their expectations,
00:05they'll be $250 maybe by the end of next year, which is a stunning number.
00:09Still not as big as Google, by the way, but still a really stunning number.
00:12The point is, though, that they will claim that the AI investments are allowing them
00:17to be better at driving perceived performance, perceived is a key word.
00:21They're better at segmenting marketers differently, better at segmenting users,
00:25better at finding ways to add to the ad load without maybe people noticing.
00:28So there's all sorts of advantages that they get from it, and that's really driving it.
00:33Well, forgive my ignorance. What is perceived performance?
00:36Well, they can attribute a sale based on the idea that you were exposed to an ad.
00:43Whether or not you were actually incremental, maybe they're really good at targeting the person
00:47who was already going to buy a product.
00:49Yes.
00:50And they get credit for the sale. That would be the perceived performance.
00:54They're really good at that. They might drive real performance, too.
00:56No, it makes a lot of sense. Like, I am a big fan of flannel shirts, right?
01:01And I love this little brand, Outer Known, and I buy stuff there.
01:05So as a result, Outer Known ads pop up in my Instagram feed all the time.
01:10But I bought the shirt first before the ad popped up, not the other way around.
01:15Meta knows a lot about you because they're really intelligent in terms of their systems,
01:19and they know that you're already buying it offline, let's say.
01:21Whether or not you were exposed to that may or may not have a factor in driving that.
01:25It may have been coincidental.
01:27But the attribution tools that they produce, which are really good,
01:30might just say that they cause the attribution.
01:33We are getting a lot of, finally, interest.
01:35I mean, people have been trying to make wearables for so long,
01:38and it feels like it's finally gotten to a point where people are into it.
01:40There's been rave reviews of the Ray-Ban meta ones,
01:45the information reporting that Apple is starting to develop like an AI pin.
01:49How much does that change the advertising game?
01:51When they all of a sudden have access to data, that's like literally what you do every day.
01:56It probably doesn't change it much in the near term.
01:59It's a little fantastical to think about,
02:02certainly marketers thinking about allocating advertising budgets in that manner.
02:06That doesn't mean there's not a real consumer product.
02:09And, you know, unfortunately, thinking about the events of this past week,
02:13when you think about how consumers maybe might think,
02:16I think I need to have wearable glasses rather than holding onto a phone.
02:19Think about that as a consequence.
02:21That could be a catalyst, unfortunately.
02:23But I think that the idea of wearables, I think, do have legs in the long term.
02:27I know I'm waiting to get some.
02:29But I don't know that it will drive the advertising business at all.
02:31But does it shift?
02:32I mean, if I could wear Meta Ray-Bans instead of carrying my phone,
02:38I would probably use fewer Apple products, right?
02:42Does that massive business shift to Facebook?
02:46There's always that risk.
02:47And that's also why you could argue OpenAI wants to invest in hardware too, right?
02:51They want to have devices.
02:53We're not sure in what direction it will actually take, but absolutely.
02:56Now, there's a form factor.
02:57That's exciting, by the way.
02:58The new device, whatever it is, and we still don't know, right, that's coming out with the help of Johnny Ive.
03:03Exactly.
03:03The form factor is something that the world hasn't gotten over yet.
03:06Snap's been at this for a decade, right?
03:08Spectacles was kind of what the company really wanted to do when they went public in the first place a decade ago.
03:13We're not there yet.
03:14How long ago was it that IBM had a commercial showing these wearable glasses, right?
03:19I still remember them going, oh, my God, I want that.
03:21Or the original Google Glass.
03:23Everyone was like, you are an absolute nerd and dweeb if you wear these things.
03:26I did buy one of the original Snap glasses, though.
03:28I remember, like, queuing up in line on a Snap pop-up in Madison Avenue.
03:33I wore them once in San Francisco, and a random tech bro complimented on me, and I threw them in the trash.
03:38I want the LinkedIn glasses, though.
03:40I want to go to an event and say, hello, Danny, how was your recent job appointment?
03:45I want to be able to look at...
03:47Spooky.
03:47That's not spooky, dude.
03:48But I want that.
03:48I know, but what is the line here?
03:50Because it does feel like we're getting into a very, like, big brother, terrifying kind of future.
03:55We're there.
03:55We've blown past that point.
03:57We really have.
03:57I mean, have we?
03:58Are we just deciding that personal, I don't know, like, any sort of privacy is just over for us?
04:02I think consumers generally protest, and they don't like it when they're presented with the alternative of not having this.
04:08But then they're given convenience and ease.
04:10And this is the same with advertisers, too.
04:12They can complain about transparency and all sorts of other problems, but they're given perceived performance, perceived ease, and they take it.
04:17This is why you have to look at the European Union, where the basic premise is privacy is like your organs.
04:23You're not allowed to sell your organs, and you're not allowed to sell away your privacy in Europe.
04:27At least that's the spirit.
04:28Let me ask about the contribution of AI, and not just to Meta, but all the companies that you cover at Madison and Wall.
04:34I mean, last year, there weren't too many mentions of AI actually contributing to the bottom line if you went across S&P 500 earnings calls.
04:42And that seems to be picking up in this quarter.
04:44Well, definitely for these companies and any of the digital advertising companies, it's driving so much of the growth.
04:49We estimate that about a quarter of Meta's ad revenue is coming from a product called Advantage Plus.
04:54Advantage Plus is like this kind of set it and forget it, make the creative on the fly, figure out where the ads go on the fly.
05:00Everything's on the fly.
05:02For Google, that equivalent Pmax, performance max is a bit smaller.
05:05But this is where a lot of the growth is coming from.
05:07It drives performance the way that markets want to see it.
05:10Again, whether or not it's really incremental is beside the point.
05:13But AI-based products are really critical for every digital platform, and increasingly for the non-digital ones, too, like the traditional linear guys, the television networks like Comcast.
05:23They're not talking up the AI products.
05:25I didn't hear it on the call today, but their universal ads product would theoretically have an AI component for making creative for a small advertiser.
05:32So it is growing in importance for the whole industry.
05:35I mean, just what we got from Meta last night just really amp up the bar for Google next week for Alphabet's earnings?
05:41Expectations might be amped up.
05:42I mean, on the other hand, you look at Microsoft's numbers, which were a more reasonable, call it whatever, 10% constant currency growth for the search and ads business plus for LinkedIn.
05:50And that's probably closer to where the ad market is.
05:53With that said, Google is so big.
05:55They're so much bigger than Meta that they grow at the industry's level.
06:00And so if the industry grew 10, you shouldn't be surprised to see them grow 10.
06:04For Meta to grow 20 when they're half the size of Google, well, I mean, it's a lot easier to grow faster from a smaller base.
06:10For Meta to grow 20 when they're half the size of Google, well, I mean, it's a lot easier to grow faster from a smaller base.
Comments