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Behind the Numbers: an EMARKETER Podcast
Meta’s Big Bets: Superintelligence, Gen Z on Instagram, and WhatsApp’s Ad Goldmine | Behind the Numbers
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- [00:00]
Marcus
Got an E Commerce challenge. AWIN has you covered. With AWIN's affiliate platform, brands of all sizes can unlock endless marketing opportunities, reach consumers everywhere, and choose partners that fit their goals, control costs, customize programs, and drive real results. Learn more@AWIN.come marketer hey, gang. It's Monday, August 11th. Mind Jasmine and listeners, welcome to behind the Numbers and E Marketer video podcast made possible by awin. I'm Marcus, and joining me today, we have folks who both cover social media for us. We have our senior analyst based in New York, it's Minda Smiley.
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Minda Smiley
Hey, Marcus.
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Marcus
Hello there. And we have VP and principal analyst living in la. It's Jasmine Imberg.
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Jasmine Imberg
Hey, Marcus. Hey, everyone.
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Marcus
Hello there. Today's fact, Pittsburgh. Hello.
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Minda Smiley
Yes. I was hoping you didn't forget about this.
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Marcus
I was hoping that I got it right and you're actually from there. I thought you were.
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Minda Smiley
Yes.
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Marcus
Okay, so I normally have a fact about Finland because Jasmine makes me. She's from there.
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Jasmine Imberg
You haven't had one in a long time.
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Marcus
I ran out. Yes, I have. Yes, probably. But I ran because I ran out difficult. But Minda was like, what the hell, Johnson? Can I get some love for Pittsburgh? So here we go. Pittsburgh has how many bridges?
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Minda Smiley
I had a bad feeling it was going to be a bridge question. And I'm like, not great at bridge bridge trivia.
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Jasmine Imberg
How did you know it was going to be a bridge question?
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Minda Smiley
Well, we're kind of like the city of bridges. I mean, I don't know if we're actually known as that, but, like, that's what we call ourselves.
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Jasmine Imberg
I had no idea.
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Minda Smiley
Yeah, we have a lot of bridges, especially yellow ones. I don't know. I'm going to guess, like, I'm going to guess 70.
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Marcus
That's a reasonable guess. Okay.
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Minda Smiley
Okay.
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Marcus
Because. Because for your city to have this many bridges boggles my mind. Okay. 446 bridges.
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Minda Smiley
Okay, so they're counting, like, every single bridge.
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Jasmine Imberg
Okay.
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Marcus
All the bridges. Yeah.
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Minda Smiley
So there's some, like, pretty iconic ones that are like, you know, you see them in pictures. And there's these really small ones that I guess they're also counting in this tally.
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Marcus
So they have to.
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Jasmine Imberg
Are there a lot of rivers or lakes or. Why do you need so many bridges?
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Minda Smiley
Yeah, we actually have three rivers that kind of like converge, I believe, in the middle of the city. So, yeah, there actually is a lot of water for it being like a very landlocked city.
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Marcus
But this is too many, though. This is. You have more bridges than any other US City.
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Minda Smiley
Yeah, that's more than I would have even thought.
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Marcus
Yeah, well, you have even more than Venice. Land of the canal.
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Minda Smiley
Wow.
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Marcus
Too many bridges. But at this point, you should just combine them into one big super bridge. Just a platform that covers all rivers.
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Minda Smiley
Yeah, I mean, a lot of them are really old and kind of scary, to be honest, but, oh, they're there.
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Marcus
So I was this close to coming to Pittsburgh. Not anymore.
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Jasmine Imberg
Now he's just redesigning the city.
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Minda Smiley
Yeah, exactly.
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Marcus
You're welcome, Pittsburgh. Anyway, today's real topic is Meta, poised to overtake the pack in the AI race. Back in June, Mark Zuckerberg announced a new Super Intelligence Labs unit at Meta, to be led by former Scale AI CEO Alexander Wang as chief AI officer, and former GitHub CEO Nat Friedman, who will lead the AI product side of things. As Megan Bobrovsky of the Journal explains, the new unit brings together Meta's fundamental AI research team, the Llama Models Group, the AI products family, and the new lab focused on developing next gen models. Minda, what do you make of Meta's Super Intelligence Labs unit?
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Minda Smiley
Yeah, I do have a lot of. A lot of thoughts on it, I would say. I would say generally I'm. I'm somewhat skeptical of where they're going with this. I mean, I think. And I. And I have some skepticism for a few reasons. I think on the one hand, there doesn't even seem to be a broad consensus in terms of what super intelligence is, you know, even among AI experts. I think as it stands now, at least, I think it's still a pretty abstract concept. And so to see Zuckerberg kind of hang his hat on this is a little bit odd to me, especially considering that I would say Meta is a little bit behind in the AI race. You know, they're not really considered a leader right now, and then for them to come out with such a broad kind of ambition around super Intelligence did strike me as a bit odd. I won't say I'm surprised by it. He did something similar with the Metaverse. I feel like he likes to come out with a big vision, but at this one, I do have some skepticism around how it's going to play out. There's still a lot of questions.
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Marcus
Yeah, the name maybe doesn't fit the goals, the objectives of Meta, at least at this stage. The five areas of AI that Meta said they're focusing on is advertising, social media content, online commerce, Meta AI assistant, and devices, smart glasses. And Ms. Bobrovsky of the piece was saying that Mr. Zuckerberg had recently painted A vision of the future where people have AI friends, create ad concepts from scratch with AI and talk to AI business agents when they need to speak to a merchant. You don't need sentient AI to get to that, but maybe this is a name for the future. Jasmine.
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Jasmine Imberg
Yeah, And I think recently the big takeaway for me in terms of Meta's super intelligence ambitions is it's very expensive, right? But I do think the good news is, based on Meta's earnings, is that you can spend a lot of money on AI without a completely clear vision of what it's going to look like as long as your core business is doing well. And of course Met as is. And that doesn't mean that Metta isn't going to get tough questions, particularly from investors, especially because the costs for superintelligence are going to continue to rise in 2026. I do think, you know, to mind his point about they're not necessarily being a why they're doing this and spending all this time and money and resources on it. Zuckerberg has started to try and lay out his vision a little bit. So just before earnings he released a blog post and a video talking about what he's calling personal super intelligence. And the distinction there is that he's setting it apart from some of what the other AI companies are doing, saying it's less focused on improving productivity and output and more focused on all of the things that, that more free time can provide, like connect, sorry, connections and creativity. And I think that kind of positioning makes a lot of sense given that Metta is at its core a social media platform and its original purpose, of course, was to connect people. And we are seeing that more people are turning to AI for personal reasons like therapy or companionship rather than work related purposes. And speaking of the Metaverse, I mean, I think this is a really good example of how Meta, outside of advertising, really hasn't been able to position its other products to enterprises. Obviously a lot of companies are spending a ton of money, the race is on to AI, but you know, the end goal is still undefined. And I am a little bit concerned about what, or I would say a lot concerned actually about what this means for people in society more broadly, especially as it comes, as you pointed out, Markus, not too long after Zuckerberg was talking about AI friends and how we can start to fill the void that people feel for not having enough friends with AI chatbots that not coincidentally, he is developing. Right. But I think from a purely business perspective, this was a smart move and a good Way to start to position superintelligence as something that's more about personal empowerment than productivity, because, you know, connections and creativity is what Meta is good at.
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Marcus
Yeah, yeah. This did feel like bit of a rebrand because Meta does feel like it's behind in the AI race. The company released the latest version of its LAM model earlier this year. Not a ton of excitement around that. They delayed the launch of a bigger version of the model as well. We touched on the Metaverse piece of this. How much of this announcement is trying to distract from the fact that they renamed themselves the Metaverse? It seems like a long time ago. It was about three, four years. Four years ago, 2021, they lost four and a half billion dollars in Q2 alone, Reality Labs division. And they're on pace to lose over 16 billion for the year. Should we kind of be ignoring that piece now, even though the company renamed themselves after the Metaverse?
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Minda Smiley
I don't necessarily think we should be ignoring it, but I do think. I think from at least, like a marketing and branding perspective, Meta as a company is really trying to position itself as a leader within AI. Yes, it has its wearable division that, you know, Zuckerberg is still. He still talks about quite a bit and whatnot. But I do think they're clearly trying to come out and, you know, make sure they're seen as a leader in AI. But the Metaverse is still kind of happening in the background, from what I can tell, but just not to the extent it was maybe two, three years ago. Although, yes, they have changed their name to Meta, so I don't think that'll be changing. But.
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Jasmine Imberg
Yeah, yeah. And from the investor perspective, I think they're willing to look the other way with all the losses at Reality Labs because the core business is doing so well. Right. And I think that's the key point here. If the core business starts to show signs of weakness, then they're likely going to be a lot less patient.
- [09:51]
Minda Smiley
And there is a through line. I mean, a lot. And I'm sure we'll talk about this, but a lot of why their ad business is doing so well right now is because of AI. So there's kind of that clear through line that makes it easier for them to tell a story right now around Super Intelligence, what they're working toward. But also AI is very clearly having a major positive impact on their bottom line at the moment.
- [10:10]
Marcus
Yeah. Really quickly, before we get to the earnings piece, just in defense of their Metaverse aspirations, Jonathan Vanion and Ashley Kapoo of CNBC did Point out that although the Quest VR headsets haven't become a breakthrough hit the Ray Ban Meta smart glasses are showing signs of success with sales more than tripling year over year in Q1 of this year. Again not from the biggest base, but still positive signs there. They are spending a lot more money on this AI race. $70 billion in CAPEX expected for this year. But to what they are, they're spending that much. The money going up is one thing, but the share of revenue, how much of the share of revenue are you spending on that? And that seems to be going up as well. It's not just the total dollars but the amount that they are spending of the revenue which to Jasmine, what you're saying like the shareholders are going to be keeping an eye on that number, but the ad business does look very, very healthy at the moment. I think we expect about 160-billion for the year. Meta's top line growth for Q2 21% ad revenue grew in Q2, basically the same as last Q2 as well. So that is really good. Jasmine, what to you is the most noteworthy part of Meta's Q2 earnings?
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Jasmine Imberg
I mean the business is just on a tear, right? I mean you already mentioned the 21% revenue growth. I mean that is just enormous for the company. The size of Meta and I think it's a testament to its continued execution power and its ability to give advertisers what they want and need, especially in a very difficult business environment. I think one of the things that really stood out to me and that I've been paying attention to is a lot of the generative AI tools for creative. And so they talked a little bit about this on the earnings call, basically saying that despite all of the concerns around handing over more control to Meta, especially in the creative process, Meta said that nearly 2 million advertisers are now using Genai video generation tools. That's about 20% of Meta's entire advertiser base based on the latest available estimates. I do think it was really telling that Zuckerberg was careful to say that these tools are the most valuable for small and medium sized businesses and that agencies will continue to play an important role with big brands. This is something that Minda and I have been following really closely given that, you know, the ad industry really went up in arms. You know, alarm bells were ringing after Zuckerberg came out in May saying that he was basically going to automate the entire ad process, which would be a redefinition of advertising. And Minda said this before but, you know, underlying all of this growth that it's seeing in its business is AI, Right? And so Metta can clearly point to the technology and say, hey, look, it's already boosting engagement, it's boosting our revenues. And I think that also helps to make investors a lot more likely to think that Meta's bigger AI bets, whether that's super intelligence or something else, who knows at this point, will eventually pay off.
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Marcus
Yeah. Minda, what about for you, what jumped out to you the most from their earnings?
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Minda Smiley
One thing that I find interesting as well, and Jasmine and I have talked about this, is we are seeing some, some, some saturation happen, the social landscape, but on Meta as well, I mean, we do expect time spent to start going down in the coming years. User growth is a little bit sluggish. Of course, it's a little bit better on Instagram compared to Facebook. But when you compare it to ad spend, you know, ad spend is just really pacing way ahead. And I do think this AI boom is kind of happening at a really an opportune time for Meta because, you know, they are kind of hitting a lot of saturation points by many metrics. And these AI investments in their advertising business are really just helping it grow at a time when they really need it, in my opinion.
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Marcus
Yeah, I mean, you mentioned that they're a company, a company as big as Meta, and that's the thing that jumped out to me from their earnings this time around, that the number of people worldwide who use at least one meta platform, they call it their daily family active people number. Basically people who use either Facebook, Facebook Messenger, Instagram or WhatsApp every day has continued to grow and grow by just an astonishing amount. It's grown by half a billion people in the last two years. So put another way, 5 billion people around the world use the Internet. Of the 8 billion on the planet, that means of the people who use the Internet on the planet, 70% now use a meta platform. The scale is just outrageous. One of those platforms we mentioned is Instagram. Amanda, you'd flag the recent New York Times article from Callie Holterman that grabs your attention titled Instagram wants Gen Z, what does Gen Z want from Instagram? Noting that young people are using Instagram for everything except the app's original function, the piece notes that in Multiple interviews with 15 to 26 year olds Gen Z people, they said that they used Instagram to keep in touch with friends, scope out crushes, build businesses, and pour over cooking videos. But out of all of of its features, they seemed least interested in the polished public photo feed that had once been Instagram's marquee offering. But, Minda, what was the most interesting part of the article for you?
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Minda Smiley
Yeah, I mean, I thought that. I mean, the fact that Instagram is actively targeting Gen Z is interesting, but to me, the more interesting piece of this article is the fact that Gen Z is using Instagram quite a bit. Maybe not in the way that older people are, but there's clearly, you know, this generation clearly is interested in Instagram. I think there's sometimes this narrative that we always hear in the industry that Gen z is on TikTok, they hate Instagram. I think it's so much more nuanced than that. You know, there maybe is some truth to that in terms of they may use TikTok a little bit more, they might find it more culturally relevant and all of that sort of stuff. But I do think they are big Instagram users, but they just do use it in a different way. And looking at our own data, this is only for the US by 2029, we expect there to be 60.5 million Gen Zers on Instagram and 51.7 Gen. 51.7 million Gen Zers on TikTok. So that is a pretty big divide. And I just think it speaks to the fact that there is a big, big Gen Z audience on Instagram, although they are not using it in the way that, yeah, order, order. People are.
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Jasmine Imberg
There was something that stood out to me in the article too, and they had interviewed some Gen zers talking about how it feels more comfortable to post on TikTok than it does on Instagram. And I think, you know, a common narrative and sentiment that we hear all the time. But I think the reality is that most people, young people in particular, don't really feel comfortable posting anywhere at this point. And so there is this data from Pew Research center, which is a couple years old now, but I think it is probably still relatively accurate that about 25% of TikTok users in the US accounted for 98% of the content that was posted on the platform. So even there, what you're seeing is that most people are there to consume content, right? They're not necessarily posting maybe on Instagram. It's a little different. They may not be consuming content in the feed. They might be doing things like messaging, which we know is a huge activity on Instagram. But I think this is more of a common phenomenon across platforms, especially among young people who, you know, are very attuned and worried about perceptions online And.
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Minda Smiley
I do think obviously TikTok is very popular among young people, but I think I totally agree with everything Jasmine is saying. And I do think one area where Instagram actually does have a lead over TikTok is, is messaging and these maybe smaller places, these smaller communities. DMing has really blown up on Instagram. And so I think for a lot of young people especially like this is kind of an odd analogy, but like I almost think having an Instagram account for them is like having an email address. Like it's just like a. It's just like a way for them to communicate with other people, that it's kind of just become the standard thing.
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Jasmine Imberg
That you just have and a search engine. Right. I mean we talk a lot about this, but I know this from my own personal experience. I'm certainly not a Gen Z, but I will go on, if I'm going to a new restaurant, I'm going to go on Instagram first and check out their profile and I want to see pictures of food and the location and sometimes I'll go and look for like business hours or a phone number, how to make a reservation. That generally is my first point of contact online with a place like that. So you know, there's a lot of use cases for Instagram that's outside of posting on the feedback.
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Marcus
Yeah, really quick. Something that jumped out to me from the piece was basically asking how much of Instagram's recent success has been the product of others misfortune. Jennifer Greigel, an associate professor of communications at Syracuse University, thinks that Instagram has benefited from its relative stability in a chaotic social media landscape. What with TikTok's future in the US being uncertain and Elon Musk's takeover of Twitter plunging the platform into chaos. Ms. Greigel thinks that Instagram may not electrify Gen Z, but it's become a weird default. For better or worse, what do we think?
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Jasmine Imberg
I think that's certainly true. Right. And I think we can go all the way back to thinking about how Instagram took stories from Snapchat and incorporated it into its service. Right. And ultimately made it a bigger and more and better service than Snapchat had, at least in terms of its ability to generate revenue and engagement for the company. And I think, you know, when we saw this short shutdown of TikTok back in January, where a lot of people flocked to was Instagram. And so it maybe in some ways has become this safe space, at least in terms of knowing that it's not going anywhere anytime soon. The One thing that might throw a wrench in that though of course is met as antitrust trial. Because if you know the company ends up getting broken up, who knows what the future of Instagram looks like?
- [20:14]
Marcus
The last piece of the Meta puzzle we're going to be talking about Today is the WhatsApp piece. There's a June last call from the Associated press noting that WhatsApp said users will start seeing ads in parts of the app as owner Meta Platforms moves to cultivate a new revenue stream by tapping the billions of people that use the messaging service, as will be shown in the app's Updates tab, not where your personal messages live and will be targeted to users based on age, location, language, channels you're following in the app, etc, but won't use personal messages, calls or groups you're a member of. Channels will also be able to charge users a monthly fee for subscriptions so they can get exclusive updates, and business owners can pay to promote their channel's visibility to new users. So ads and updates, then there's channels and then there's business unions paying for things Jasmine, how much how big of a sleeping giant is WhatsApp and its ads potential?
- [21:10]
Jasmine Imberg
It's kind of unclear really, Right. So Meta says 1.5 billion people use WhatsApp's updates tab daily, and that is an enormous scale and that is certain to peak advertiser interest. But we don't know how many of those 1.5 billion are actually using status, which is WhatsApp's version of stories where the ads are going to be displayed. And I'm an audience of one. But I am a very heavy WhatsApp user. I think I have posted a status maybe once and it was years ago, and every time I go onto my Updates tab, the only person who's ever posted a status update is my niece. And so I know for certain that it is popular in other parts of the world. But at least from my own experience, you know, it seems like a relatively underused part of the app when compared to the core functionality, which of course is messaging. And I think that also kind of leads into the bigger issue with monetizing WhatsApp, which you alluded to. And one of the reasons that Meta has backtracked on plans to introduce ads into status in the past, and that is that there's a ton of privacy concerns with putting ads in messaging services, and people just generally don't want advertisers to slide into their DMs because status is separate from the personal messages. I think it makes It a safer space to introduce ads, but that means that the reach is probably going to be lower. The ads are less likely to be as performant, at least in the short term. So I think there's still a lot up in the air. But, you know, I think given sort of the careful rollout that we're seeing, as well as like, the limited areas in which ads and other monetization tactics are available, really in WhatsApp, it's not going to be a big revenue driver for the company anytime soon.
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Marcus
Yeah, Minda, they bought this company meta Facebook 10 years ago, and it's. It seems like they want to do something with, with this service in terms of trying to make money from it. I mean, it's in the US alone, WhatsApp is 3/4 the size of TikTok when it comes to users. So what do you make of the potential here for WhatsApp app to make money from advertising?
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Minda Smiley
My personal thought on a lot of it is I do think as we were talking about earlier, messaging is just becoming a bigger part of the social experience. We're seeing it happen on Instagram quite a bit. So I think in some ways a lot of this is just kind of like, I think WhatsApp is kind of a guinea pig right now for like, how to monetize messaging, and then whatever works, they will eventually try to port over to Instagram and maybe even Facebook. So we'll see.
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Jasmine Imberg
Yeah, I think that's absolutely right. You know, the time is right right now to start to monetize messaging and Meta, to do so carefully. But we're also seeing, you know, it start to look for other surfaces to monetize in other ways too. I mean, Threads got ads this year as well, so it's certainly looking to expand its surfaces. And given the scale of WhatsApp, I mean, it's one of the, you know, it's an app that it's basically just been sitting on and not monetizing. It's also a huge philosophical shift, though, for the company. And I, you know, I keep keep going back to this because the Original founders of WhatsApp were very anti advertising, very anti monetization in general. So, you know, it just feels like a huge shift to now start introducing advertising, which I think, again, is another reason why they do need to tread carefully.
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Marcus
Yeah, and no rush here either. We mentioned that they grew ad revenue in the course of the by over 20%, and that's ad revenue that was $47 billion.
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Jasmine Imberg
And we should also mention actually that part of that is due to click to WhatsApp ads, which have proven very successful and popular too. I can't remember if they mentioned it in the most recent earnings, but they've certainly talked about it in the past. And those are ads that you see on Instagram and Facebook that then Drive people to WhatsApp to message directly with a business. So again, along the theme of the Time is Right we are seeing people get more comfortable talking with business. It just feels very different when you have an ad, for example, showing up in your inbox or between messages that are private, between you and your friends or your family. And you know, it can feel like an intrusion of privacy even if it isn't.
- [25:35]
Marcus
Well, that's where we leave the conversation today. Thank you so much to my guests. Thank you to Minda.
- [25:39]
Minda Smiley
Thank you.
- [25:40]
Marcus
And to Jasmine.
- [25:42]
Jasmine Imberg
Thanks for having me.
- [25:43]
Marcus
Of course. Of course. Thanks to the whole editing crew and to everyone. If you're listening to behind the Numbers, the marketer video podcast made possible by Awin, Rob Rubin will have the Banking Payment show for you tomorrow, where he'll be discussing why financial media networks can't play the same game as other commerce media folks.