Meta's recent launch of a Superintelligence Labs unit signals an aggressive pivot toward AI, but analysts have questions about the company's ability to lead in a space where it's currently playing catch-up.
"I'm somewhat skeptical of where they're going with this," said our analyst Minda Smiley during a recent "Behind the Numbers" episode. "There doesn't even seem to be a broad consensus in terms of what superintelligence is even among AI experts. To see Zuckerberg hang his hat on this is a little bit odd, especially considering that Meta is a little bit behind in the AI race."
Metaverse miss
Meta's superintelligence push comes as the company continues to hemorrhage money, analysts say. It raises questions about whether the AI focus is partly meant to shift attention away from metaverse struggles.
"From a marketing and branding perspective, Meta as a company is really trying to position itself as a leader within AI," said Smiley. "The metaverse is still happening in the background, but just not to the extent it was maybe two, three years ago."
Our analyst Jasmine Enberg pointed out that investors are currently willing to overlook Reality Labs losses because Meta's core business remains exceptionally strong.
"If the core business starts to show signs of weakness, then they are likely going to be a lot less patient," she said.
AI driving Meta's advertising
Despite questions about Meta's long-term AI strategy, the technology is already delivering significant benefits to the company's advertising business.
"Nearly two million advertisers are now using GenAI video generation tools. That's about 20% of Meta's entire advertiser base," said Enberg. "Underlying all of this growth is AI. Meta can clearly point to the technology and say, 'Hey, look, it's already boosting engagement, it's boosting our revenues.'"
This strong performance helps justify Meta's massive AI investments, with the company expecting to spend $70 billion in capital expenditures this year, analysts say.
Instagram's Gen Z strategy
While Meta pursues its AI ambitions, Instagram continues to evolve as it works to maintain relevance with younger users. Contrary to popular belief that Gen Z has abandoned Instagram for TikTok, data suggests a more nuanced reality.
"There's sometimes this narrative that Gen Z is on TikTok, they hate Instagram—I think it's so much more nuanced than that," said Smiley. "By 2029, we expect there to be 60.5 million Gen Zers on Instagram and 51.7 million Gen Zers on TikTok in the U.S. That is a pretty big divide."
Young users are engaging with Instagram differently than older generations, analysts say, using it less for posting polished photos and more for messaging, searching for businesses, and consuming content.
"Having an Instagram account for them is like having an email address," said Smiley. " It's just a way for them to communicate with other people that it's just become the standard thing that you just have."
WhatsApp monetization begins
Meta is also finally making moves to monetize WhatsApp, which it acquired a decade ago. The company recently announced plans to introduce ads in the app's updates tab, while being careful to keep ads out of personal messages.
The cautious approach to WhatsApp monetization may serve as a test case for Meta's broader messaging strategy.
"I think WhatsApp is kind of a guinea pig right now for how to monetize messaging, and then whatever works, they will eventually try to port over to Instagram and maybe even Facebook," said Smiley.
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