Instagram and Facebook ads drive profit surge

This spring, the sales of advertisements on Instagram and Facebook saw a significant increase, leading to a remarkable rise in profits for the parent company, Meta. The company reported that its revenue exceeded $39 billion in the three months leading up to June, marking a 22% increase compared to the same period last year. This growth was attributed to higher advertising prices and a broader reach of their commercials. Despite investing heavily in artificial intelligence (AI) projects, Meta's profits surged to nearly $13. 5 billion. Additionally, the company recently agreed to pay a $1. 4 billion settlement to the state of Texas due to allegations of collecting user facial data and other personal information without proper consent. On Wednesday, Mark Zuckerberg, the founder and CEO of Meta, expressed that the company experienced a 'strong' quarter and hinted that their AI system is 'on track to be the most used AI assistant in the world by the end of the year. ' Meta has been allocating substantial resources towards AI, as well as augmented and virtual reality products, including headsets that allow users to immerse themselves in their favorite games or fitness classes. The reported profit came despite the Reality Labs unit, which focuses on developing such products, incurring a loss of $4. 5 billion, exceeding analysts' expectations. Zuckerberg and other tech leaders from companies like Google, Microsoft, and OpenAI are engaged in a competitive race to create advanced AI tools. On Wednesday, Meta cautioned that it anticipates spending as much as $40 billion this year on AI development, with plans for continued high spending into 2025. Max Willens, a principal analyst at eMarketer, suggested that any concerns investors may have had regarding Meta's expenditures on AI and the metaverse are likely to be alleviated by the results of this quarter. He noted that Meta's strategic introduction of ads on Reels, a short video-sharing service designed to compete with TikTok, has resulted in a perfect combination of increased impressions and rising ad prices. TikTok is facing a potential ban in the US due to a new law that is set to take effect. Meanwhile, analyst Mike Prolux stated that Meta is 'well positioned' to deliver on AI tools. However, he pointed out that while the parent company of Facebook and Instagram may boast about its AI assistant becoming the most used globally, users of Instagram, Messenger, and WhatsApp are essentially required to use it since it provides the search bar for those applications. Prolux remarked, 'In a way, it’s a smart move by the company to effectively introduce Meta AI to its users by compelling them to use it. ' While Meta has been investing heavily in AI and metaverse developments, driven by Zuckerberg himself, the company has also been looking to cut costs in other areas, resulting in the reduction of thousands of jobs. Meta's global workforce now stands at 70,799, down from a peak of over 87,000 employees in 2022. However, during a call following the earnings update on Wednesday, Chief Financial Officer Susan Li stated that by the end of 2024, the company's headcount would be 'meaningfully higher' compared to the previous year.