Can Facebook’s AI Dream Resolve Its Revenue Nightmare?

Facebook owner Meta is setting up a new “generative AI” product group as it strives to claw back revenues amid tough market conditions. It comes after investment in the so-called Metaverse—which is yet to pay off—and Apple’s privacy changes that impact Facebook’s ability to track users for advertising purposes.

As ChatGPT continues to dominate headlines, tech companies are accelerating their focus on AI. Microsoft has announced its aim to integrate chatbot capabilities into Bing, while Google is in the midst of launching a chatbot called Bard.

It’s therefore no surprise that Facebook is publicly pushing its own AI strategy—which has been in the making for some time.

Generative AI can be used to create new text, images, video, audio, code or synthetic data. Describing the new move in a Facebook post, Meta CEO Mark Zuckerberg said: “We’re starting by pulling together a lot of the teams working on generative AI across the company into one group focused on building delightful experiences around this technology into all of our different products. In the short term, we’ll focus on building creative and expressive tools.”

Why Facebook needs AI to solve its problems

While Facebook owner Meta has been focused on AI for some time, the technology is crucial to resolving multiple issues with its business model. It knows the old algorithm doesn’t work for it or its advertisers anymore, and Facebook and Instagram feeds have gradually been changing to look more like TikTok.

“Facebook and Instagram are shifting from being organised solely around people and accounts you follow to increasingly showing more relevant content recommended by our AI systems. This covers every content format, which is something that makes our services unique,” Zuckerberg’s said in a recent earnings call, adding that the firm is “especially focused on short-form video since Reels is growing so quickly.”

Zuckerberg outlined how Reels placed across Facebook and Instagram have “nearly doubled over the last year,” while people resharing Reels has more than doubled across both apps in last six months.

However, monetisation efficiency of Reels is less than Feed, so Facebook needs to make progress here, Zuckerberg said.

“Revenue headwinds” the firm is suffering—namely Apple’s privacy changes—will be neutral by end of this year, according to Zuckerberg, and then Meta wants to grow Reels.

Of course, Facebook’s business model is driven by data and advertising, and it wants to be able to do more with less of its users’ information. Amid a privacy-conscious landscape driven by Apple’s iOS privacy push, Facebook has been forced to adjust. It says AI can actually help protect privacy and is investing in research around privacy-preserving machine learning technologies. Meta is also releasing its Large Language Model Meta AI (LLaMAI) model to researchers.

Facebook says investments in AI and ML have so far paid off, with advertisers boasting performance improvements and efficiencies across the platform. In the last quarter, it claims advertisers saw over 20% more conversions than the year before and combined with the declining cost of acquisition, this has resulted in declining costs in ad spend.

The end of the Metaverse?

As all these announcements happen, it wouldn’t be strange to question what’s happening with The Metaverse. A year ago, it was all the firm could talk about—Mark Zuckerberg’s rather scary avatar was everywhere.

According to financial news site The Street, Meta’s AI focus is a diversion from the real news: In announcing the AI team, Mark Zuckerberg “just buried the metaverse,” The Street writes.

In 2021 and 2022, Reality Labs, the division housing metaverse projects, recorded a cumulative loss of nearly $24 billion, including $13.7 billion just last year, The Street points out.

“The legacy of the metaverse remains because Meta will continue to develop remnants of this virtual world, such as headsets, but it will be more for a target audience, such as videogamers and the crypto world,” it predicts.

However, Meta argues that it remains “committed to the vision we set out for the metaverse.”

“We were clear this is a long-term investment, and we continue to advance the metaverse through a variety of areas, including Quest, mixed reality and the next generation of social experiences,” a Meta spokesperson told me.

It echoes comments made by Mark Zuckerberg on the earnings call last month: “Our priorities haven’t changed since last year. The two major technological waves driving our roadmap are AI today and over the longer term, the metaverse.’’

Can Facebook’s AI dream resolve its revenue nightmare?

There’s no doubt that AI talk is everywhere at the moment, and the fast-moving success of ChatGPT has been a catalyst for the technology in 2023 so far.

While there is a lot of buzz around AI, it’s worth also considering the risks. The more people rely on AI-driven algorithms, the more it can be abused or exploited, says Jake Moore, global cybersecurity advisor at ESET. “Our data that drives AI will continue to feed into the system and people need to be careful about what they input, which could be sensitive or even confidential,” he warns. “People need to be mindful of what companies can do with their data—especially when apps are free.”

AI is a useful technology, with efficiency boosts and even possible privacy enhancements when used in the right way. But can AI save Facebook? Probably not, because AI alone can’t save anyone. Even so, Facebook needs to radically change the way it does business and investing in the technology is a smart move.