Meta Records 27% Growth in Ad Revenue, Increases AI investment

Meta’s ad revenue jumped 27% year-on-year in Q1 2024, reaching $35.6bn, according to the tech giant’s latest earnings release

Instead of daily active users (DAUs), the company now reports on the term “family daily active people” (DAP). By this metric, Meta audience totalled 3.24 billion on average for March 2024, an increase of 7% year-over-year. Average revenue per user is reported to be $11.20.

Meta continues to increase ad loads, with impressions delivered increasing by 20% year-on-year, and the average price per ad increasing by 6%. Impression growth was mainly driven by Asia Pacific and the “rest of world” markets.

Online commerce continues to be the key driver of Meta’s year-on-year growth, followed by gaming, entertainment, and media.

Meta’s AI investment

With the recent launch of Meta AI – an AI assistant for questions across apps and hardware such as glasses – and maturing creator AI, tools for ad automation and programme development, Meta continues to increase investments in this field. Zuckerberg believes that once the “new AI services reach scale”, Meta has an advantage and a history of monetising them effectively.

Ad spend related to Meta’s two end-to-end AI-powered tools (Advantage+ Shopping and Advantage+ App Campaigns) have “more than doubled revenue” since last year.

On Meta AI, Zuckerberg clarified that although there might be opportunities to “have ads and paid content in Meta AI interactions” in the long run. However, he insisted that the product differs from search and the company is not working on search ads, contrary to peers such as TikTok.

Meta and Chinese advertisers:

Growth and spend from Chinese advertisers on remains strong. Although Meta does not quantify the impact of China in its quarterly results, CFO Susan Li shared in an analyst call that Asia Pacific remains its fastest-growing region – particularly with gaming and commerce verticals – and grew 41% year-on-year in Q1.

Analysts have expressed concerns about Meta’s growth, and its dependency on spending from Chinese brands reaching overseas consumers. Looking forward, Li hinted that growth percentages may dip, given the spike in spending from Chinese advertisers over the last 18 months.

Industry analyst Brian Wieser has estimated that Meta earned more than $7bn in sales from China last year, driven by emerging e-commerce players like Shein and Temu. Brands use platforms like Facebook and Instagram to drive downloads; from there, they can upsell users. Temu and Shein reportedly spent “roughly $600m and $200m” respectively with Meta in Q3 2023, with downloads increasing 500% and 52% year-on-year, according to reports.

All this poses challenges for other e-commerce platforms such as Amazon and Etsy: while Amazon still leads with higher conversion and transaction performance, Etsy has said that Temu and Shein are “single-handedly” impacting the cost of ads on paid channels like Meta and Google.

WARC Media forecasts Meta’s global ad revenue will reach $155.6bn this year. Facebook still commands a leading position among Meta’s family of apps: despite its high growth rate, 2024 ad spend with Instagram is forecast to fall $40bn short of its larger stablemate.

 

 

 

 

Credit: WARC

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