Meta is banking on AI to power the future of its ads business

The future of Meta's (META) advertising business is inextricably connected to AI – that's the case that the Facebook and Instagram parent made on Thursday at its Business Update event.

"AI is definitely having its moment," said Meta's Head of Global Business Group Nicola Mendelsohn at the event. "It's very much the belle of the ball, but it's actually had a place at our table right back to the early days of Feed back in 2006 ... Mark Zuckerberg just said it himself recently, that he sees that we're very much focused on two waves of tech, AI and the metaverse, and that they can actually build on each other as we use AI to power our ad system."

It was Meta's second-ever Business Update event, and the focus was Meta's advertising business, attempting to draw the through-line between ads, AI, and the metaverse. In the first quarter of this year alone, Meta's ad unit raked in $28.1 billion, beating Wall Street's expectations. At the crux of the argument is the company's suite of products that automate parts of the advertising process, said Mendelsohn.

"These products ... help businesses really simply be able to connect the right creative, with the right audience, at the right time," she told the audience.

"I'll give you an example," Mendelsohn continued. "For Advantage+ Shopping, for an advertiser, instead of just sitting there and manually setting up loads of different campaigns, they can just set up that interval and then we can automatically then test hundreds of different combinations that saves them time. That also optimizes for the highest-performing ones and then, ultimately, what it does is to drive better outcomes."

The central product announcement of the day was called AI Sandbox, which Meta plans to start rolling out slowly in July. AI Sandbox, which specifically focuses on generative AI and how it can be applied to advertising, will include a number of features, such as the ability to create multiple versions of the same text and background, as well as "image outcropping," which could help advertisers repurpose images for different formats.

John Hegeman, Meta's Head of Monetization, said: "We recognize that there are a number of tools that businesses are already using out there and will continue to use over time, as well, but what we see our unique opportunity is to tightly integrate these features over time into our products, which will allow advertisers to do a number of powerful things such as test kinds of different types of backgrounds or text variations, which could allow them to further personalize their messages or different parts of their audience."

Additionally, Meta featured a conversation with Jones Road Beauty CMO Cody Plofker, who spoke about how the Bobbi Brown-founded beauty company is using Meta's products geared towards advertisers, like Advantage+. Plofker, who's also Brown's son, said that Meta-owned platforms like Facebook and Instagram are where the bulk of the company's ad spend goes.

The metaverse connection between AI and ads, while still fuzzy, is becoming clearer.

"There's been a thing out there that we're not interested in the metaverse anymore," said Mendelsohn. "We are really interested in the metaverse, but we're really clear that this is going to be five, 10 years before it realizes the vision of what we're talking about... In the future, say you're a company, and you want to build a world in there. At the moment, it's quite clunky to be able to do that, but in the future, utilizing things like generative AI and machine learning, you'll be able to say 'I want to build a room' and there will be lots of things that happen as a result of that tool. That's just one tiny example. I think it will have so many different applications once we're in there."

"AI will help us develop the metaverse more effectively," Hegeman added. "Then the metaverse will be another great opportunity to create value for folks."

"What I'm hearing every day when I'm talking to CEOs, when I'm talking to CMOs, is that the thing that's most important to them is growth, and I hope that today shows how committed we are to helping them grow," Mendelsohn said at the event.

Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.

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