Meta Platforms, Inc. (META) Morgan Stanley 2024 Technology, Media & Telecom Conference (Transcript)

Meta Platforms, Inc. (NASDAQ:META) Morgan Stanley 2024 Technology, Media & Telecom Conference March 6, 2024 11:00 AM ET

Company Participants

Tom Alison – Head of Facebook

Conference Call Participants

Brian Nowak – Morgan Stanley

Brian Nowak

Good afternoon, everyone. Welcome to our afternoon conversation with Tom Alison, who’s the Head of Facebook. He oversees the Development and Strategy across all of News Feed, Stories, Groups, Video, Marketplace, Gaming, News, Dating, a lot more. You’ve been with Meta since 2010?

Tom Alison

That’s right.

Brian Nowak

There is a lot that’s been going on at Meta over the course of the last 10 years. You and I were talking about the first 8 and the last 2. So thank you so much for joining us.

Tom Alison

Thank you. It’s great to be here.

Brian Nowak

Let me do the disclosures. First, all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures, appear on the Morgan Stanley public website at www.morganstanley.com/researchdisclosures. They are also available at the registration desk.

Some of the statements made today by Meta may be considered forward-looking. These statements involve a number of risks and uncertainties that could cause actual results to differ materially. Any forward-looking statements made today by the company are based on assumptions as of today, and Meta undertakes no obligation to update them.

Please refer to Meta’s Form 10-K filed with the SEC for a discussion of the factors that may impact actual results.

Question-and-Answer Session

Q – Brian Nowak

Okay. Well, maybe we should sort of start a little walk down memory lane across the last decade.

Tom Alison

Yes. Sure.

Brian Nowak

So I’d be curious just too sort of talk about your main priorities and focus in your role the first 8 years. And then what has changed most in the last 2 years in kind of how you’re managing the businesses and what’s your focus on those?

Tom Alison

Yes. Sure. So I started at Facebook, like you said, about 13 years ago. When I joined, I joined as an engineer. I had done a start-up before that. I joined our user growth team. It was a great starting point at the company because I learned a lot about user growth, and Facebook was kind of — and it continues to be excellent at that.

I moved into engineering leadership. And I helped us kind of transition over to mobile during those years, getting kind of News Feed running on iOS and particularly focused on Android at the time as we saw global growth of Android. And then over time, I learned how to pick up and manage a bunch of different product lines: Dating, Groups, Events, Search. And I think that helped me really understand how to bring these products together in Facebook.

And I’d say in the last 2 years, I took on the role of Head of Facebook. So I’m responsible for our overall product strategy. I’m responsible for growing user engagement for revenue, and I manage all of the kind of product and technical functions that deliver the Facebook experience that folks use today.

Brian Nowak

Great. Okay. Well, those last 2 years, we’re talking about this offstage, there’s a lot has changed in the last 2 years. I think some of the investments that the company started making in GPUs sort of to analyze more first-party data has really driven a lot of positive results.

So maybe can you just sort of unpack that a little bit for us? Help us understand or give us examples of what you’re able to do better now with your first-party data that you couldn’t before you did the whole platform reconstruction with the GPUs?

Tom Alison

Yes. Yes. I’ll take a step back. I mean really, the last 2 years for me have been setting the foundation for the next several years of Facebook. And what our strategy is responding to at the moment are 2 really disruptive trends in social media.

The first one is generational change. I mean Facebook is 20 years old. And the generation that we built Facebook for, the next generation that we’re looking at, Gen Z, U.S. young adults ages 18 to 29, they expect different things from social media today. They want to stay up-to-date with their friends and with the people that they care about.

But they also view social media as something that’s really going to open up their world and help them pursue their interest, and they want to see content from everywhere. And so that was one change that we’re navigating.

The second one really is AI and all of the innovation. And I know we’ll talk a bunch about generative AI, but there was a bunch of innovation in the recommendation space. And if you think about what Facebook traditionally did, we did kind of social graph content ranking.

So you’ve got your friends, you’ve got the groups that you’ve joined, you’ve got the pages that you follow. You might have a couple of hundred friends and things like that. And so maybe we need to look at all the updates from those entities and maybe look at ranking, thousands or maybe tens of thousands of pieces of content to assemble your feed for you.

But in a world where we’re going to try to show you the best of anything going on, on Facebook, now we have to look at billions of pieces of content to figure out what is the right one for you at the time. And so that really forced us to rethink our entire technology strategy.

And so kind of what we did was we said, “Look, we’re going to lean into this social discovery use case, not only helping you stay connected with the people that you care about now but leaning into Recommendations and our products to help you discover new things.”

And then we’re going to set a new technology strategy. And so we actually created an advanced technology group. They are kind of homed within the Facebook organization, but their charter is to build the best content recommendation system in the world that can power all of our Recommendations products, whether it’s in Facebook, whether it’s Instagram, whether it’s Threads. And we’ve set off on that course.

In terms of the results that we’re seeing, I mean, look, I’ve been pretty pleased with where we are. There’s obviously a lot more work to do. We invested a lot in short-form video, Facebook Reels. Facebook Reels is now about kind of one-third of Facebook’s video time. Facebook video time is over 50% of our overall time spent. And Facebook Reels has grown something on the order of 70% year-on-year, so good growth there.

But it’s not just Reels where we’re kind of applying this technology. We’ve really leaned into providing more Recommendations content in Feed itself. So this could be recommended text posts or photo posts or group posts or video. And right now, when you see kind of posts in feed, content posts, about 30% of those posts on average are delivered by our recommendation system. And that’s actually up 2x over the past 2 years, and that’s unlocked a lot of kind of new content inventory for us in Feed.

But it goes beyond that, too. I mean we have this product called Marketplace that’s very popular. We’ve been kind of upgrading the technology stack there. We’re seeing really good kind of strong year-on-year growth for U.S. young adults using Marketplace. They love that product, and it’s really been helping us kind of fuel engagement across the ecosystem.

Similar things for products that have been around for a while, Groups, groups you should join. We’ve been putting kind of those recommendation models on the advanced technology, growing engagement gains there. And I was admiring this the other day, a team that builds our People You May Know service.

This was Facebook’s original recommendation service that recommends friends for you. They put this service on GPUs very recently and are unlocking new games. So even some of our older use cases are kind of benefiting from the technology investments that we made. So those are the types of things that we’re seeing in the business right now.

Brian Nowak

Yes. That’s very helpful. Let me ask a couple of follow-ups there. That 70% time spent in Reels, that’s across the entire platform? That’s Facebook plus Instagram? Or that’s…

Tom Alison

No, that’s just Facebook time.

Brian Nowak

That’s just Facebook. Okay. Great.

Tom Alison

The 70% growth, yes.

Brian Nowak

And then the Marketplace is an interesting call-out because we do surveys on what people do on Facebook. And it always comes up as something I think that the market underappreciates. So what is it with the algorithms of the matching that’s now sort of driving that incremental Marketplace adoption from here?

Tom Alison

I mean just in general, what we’ve done is we’ve really improved relevance across the board. So one of the things that I saw when we were really looking at kind of the attitude, particularly of kind of the younger cohort, that Gen Z, 18 to 29, was they said, “Hey, look, this content just isn’t relevant enough to me.”

So what we’re able to deliver, whether it’s in Reels, whether it’s in Feed, whether it’s in Marketplace is really personalized kind of relevant content that drives both downstream engagement, that drives repeat usage. And just really improving the relevance of the products has been kind of one of the key things that’s really frankly driving progress across the board.

Brian Nowak

Got it. Okay. There have been investments that are enabling you to better analyze more of your data, improve relevance. Maybe walk us through how you think about sort of the compounding benefits of that. What inning are we in, in sort of that benefit you could see? And what are sort of the difficult hurdles you still have to clearly kind of keep this going?

Tom Alison

Yes. So when I think about where we are on the journey with — I’ll talk about our kind of recommendation systems and personalization technology in particular. Historically, we have kind of a Recommendations model, an AI model per product. So Reels has its own recommendation model that powers those recommendations, Groups has its own Recommendations model, Feed has its own Recommendations model.

I would say like phase 1 of this journey was putting these models on GPUs, right? So putting them on GPUs actually allowed them to kind of learn more efficiently to perform better. A bunch of the gains that we saw in 2022 were frankly just like upgrading the kind of technology stack and the infra that powers the models.

But last year, we kind of took a step back and we said, “Well, is there an innovation story here?” We looked a lot at kind of the innovation that was happening with large language models and generative AI. Those models are just very large models that can handle lots of data and solve kind of very general-purpose types of activities like chatting.

We said, “Well, what would this look like in a recommendation space? What if we actually had, instead of these per product recommendation models, what if we had one Recommendations architecture that could power all of our Recommendations products and that could leverage lots of data?”

So we actually kind of re-architected our Recommendations stack to be able to kind of do this with the North Star. We basically have a technology road map that goes through 2026. So this is kind of part of it. And late last year, what we did was we said — so we created this kind of new model architecture, and we decided to test it with Reels to just validate was this going to help us.

And so we put Facebook Reels on this new model architecture. It used the same data as the older — the previous model that was on GPUs, but we got roughly an 8% to 10% gain in Reels watch time. So what that told us was this new model architecture is learning from the data much more efficiently than the previous generation. So that was like a good sign that says, okay, we’re on the right track.

And so now really in phase 3 where we’re going is how do we actually continue to validate and scale this. We think we have an opportunity to have a lot more data — to give these models a lot more data to learn from. And we think we have the opportunity to have these models power more products. So for example, instead of just powering Reels, we’re working on a project to power our entire video ecosystem with this single model.

And then can we add our Feed Recommendations product to also be served by this model. And if we get this right, not only will the Recommendations be kind of more engaging and more relevant, but we think the responsiveness of them can improve as well. So if you see something that you’re into in Reels and then you go back to Feed, we can kind of show you more similar content in Feed as well very seamlessly and responsibly.

Now look, all of this also requires a bunch of kind of hardware investments and planning, right? So in addition to this, we’re kind of like, frankly, like reconfiguring data centers, figuring out how to wire more GPUs together. This is a big part of what’s going to push model development in our generative AI work, but it’s also similar to Recommendations. Recommendations data is actually, in a lot of ways, a lot larger of a dataset than even some of the large language models used because you’re looking at all the interactions of billions of people every day.

And so we’ve really focused on kind of investing more and making sure that we can scale these models up with the right kind of hardware and data support. But I’m excited about the technology road map. I think we have kind of more ahead of us. But look, this is a — these are challenging projects. But overall, I feel good about the future of the technology investments and where we’re going with it.

Brian Nowak

The 1, 2, 3 into ’26 basically? It’s not anything that…

Tom Alison

Yes. Look, I mean, we’re going to be kind of continuing to validate the new model architecture this year. We’ve got a project that we’re working on to kind of unify Facebook’s video ecosystem. So I mentioned that Reels is 1/3 of Facebook’s video time. It means 2/3 of our time is still the video product that we developed years ago. Well, that product is actually — that kind of older video product is not on yet the kind of state-of-the-art ranking stack.

So we actually think by bringing these product lines together, unifying the experience, putting all of our video inventory on kind of one state-of-the-art kind of ranking stack, delivering it through this kind of more modern, Reels-centric viewer, we think there’s an opportunity to unlock kind of more upside in video down the road.

Now it’s a complicated project. There’s a lot of ad formats that we need to kind of manage through. There’s a lot of user kind of expectations and behavior. But it’s the type of thing that we can really do now and contemplate given where the kind of underlying technology is taking us.

Brian Nowak

Great. So let me ask you a question about total time spent on the platform or total engagement in the platform, because one of the consistent debates that we have externally is the incrementality of all of this video time. So maybe — we’ve talked a lot about Reels growing quickly, video growing quickly, et cetera, Marketplace doing well. What can you tell us about overall time spent, trends in the U.S. and globally?

Tom Alison

Yes. I’ll talk about that, but I’ll take a step back and tell you what we look at even more closely than time spent. I mean a lot of our focus has been really growing daily user visitation and engagement, right? A lot of the motivation for the strategy over the past 2 years was to reaccelerate daily usage. And we’re feeling better about where we are.

We’ve had kind of quarter-on-quarter growth for the past several quarters in the U.S. So again, even reestablishing kind of growth in the U.S. was a big priority. And then underneath that, we’re pleased to see that daily usage amongst young adults is growing, which is kind of fueling that top line growth in the U.S. And so that was a big focus area for us as kind of an engagement objective.

The other thing that we look at is kind of organic content impressions and are those growing. And we also look at revenue-weighted content impressions to make sure we’re growing impressions in areas that are going to really maximize kind of our revenue. And so again, with the additional Recommendations and Feed, with the inventory that’s being brought on by Reels, we feel good about that.

Now I’ll talk about time for a minute because overall time spent growth is healthy, but I think we have to be careful at how we look at that because a thought exercise that you can go through is, would you rather have somebody watch two 5-minute videos or five 2-minute videos? From an overall time spend perspective, those are absolutely equal scenarios. From our business perspective, we would much prefer the latter scenario because that’s giving us more content impressions, that’s giving us more ability to serve ads. So the monetization efficiency of the time in the latter scenario is better.

So now what happens? Well, actually, we’re seeing this kind of mix between long-form and short-form videos to some degree. Reels growth is incremental to kind of top-line time spent. But yes, there are some mix shifts that are happening in between. The reason that I’m optimistic though is because you can have scenarios where you might even lose time, but you grow monetizable video impressions because of the shift to short-form video.

So again, with this video unification project that we’re working on, by unifying all of our video on the same kind of recommendations technology, by delivering it through the same experience, we’re setting ourselves up in a way where we can continue to grow video time long term. But we have a lot of dials and a lot of options to get the right blend of short-form and long-form video that we think users are going to want, but that’s also going to increase the monetization efficiency of that video product.

So again, lots of kind of complex things to work through. It’s a big focus for us this year. I think we’ll continue into 2025 on that. But we really look at not just the top-line time spent growth but how efficient are we from a monetization perspective within it. And there are scenarios where I would happily take kind of lower time spent growth if it meant that I could have kind of more ad impressions within that unit of time.

Brian Nowak

That’s good color. Well, let’s have a little discussion about generative AI.

Tom Alison

Yes. Let’s do it.

Brian Nowak

[Indiscernible] because we…

Tom Alison

I heard that it’s on a lot of people’s minds right now.

Brian Nowak

Yes. Mentioned in 18 minutes. It’s kind of impressive.

Tom Alison

Right on.

Brian Nowak

But it was a new set of products that you launched last year, last fall around Meta AI and a series of the chatbots, the Tom Brady bot, the Kardashian bot, et cetera. There seems to be a focus to drive new types of behavior. What have you seen so far? And as you sort of think about gating factors to drive more engagement with these assistants, what do you have to execute on?

Tom Alison

Yes. There’s a few things. I mean I think, actually, if I just think about Facebook, we’re working with kind of generative AI kind of features all over the company right now, as you can imagine. If I think about just Facebook, there’s a couple of things I’m excited about.

Look, I think people are going to continue to deepen these relationships with the chat-based assistant. And we’re putting a lot of effort into Meta assistant. And I think we’re really well positioned because essentially, what we’re seeing right now is that the interface to kind of some of these advanced AIs mirrors the interface that you use to communicate with other humans. And Meta is very good at creating kind of products that help you communicate in this way. So I think the chat is going to continue to grow.

Right now, Facebook, we really talk about this idea of social discovery. We’re showing you a lot of recommendations in your feed. You can go off and you can kind of talk to people about them. You can learn more that way. We’re looking at, hey, look, what would it be like if you also had kind of Meta assistant available with you in your feed? So you get a recommended post about Taylor Swift and you say to yourself, “You know what, when is the next Taylor Swift concert?”

Well, look, you could go ask in the comments and maybe wait for somebody to respond or you could easily just click a button and say, “Meta AI, tell me more about what I’m seeing with Taylor Swift right now is a nice content.” So I think we’ll be able to have these bridges to the AI in a way that’s really going to kind of deepen the experience of kind of discovering content.

Another one that I’m excited about is we’re integrating Meta AI into our Groups products. So if you are a kind of home hobbyist baker, you’re probably in a baking group on Facebook. And you can go in and ask a question and say, “Hey, how come my sourdough bread isn’t rising properly?” Now look, there are people in the group that will come in and answer your question.

But if for some reason they don’t, we’ve enabled Meta AI to come in and answer your question in the comments. And then the cool thing is, is that it can kind of tell you kind of what it knows from its general knowledge. And over time, it’s also going to be able to pull other group posts. It’s like, hey, this was discussed over in this post, why don’t you go check it out here?

Not only can you interact with the AI in that context, but other groups — other group members can interact with the AI in that context. I think we have the opportunity to put generative AI in kind of a multiplayer kind of consumer environment and see what comes out of that, which is going to be exciting.

But beyond that, there’s a lot of applications for advertisers, creators, developers. I mean I can talk about some of the things that we’re thinking about there. But overall, I think, look, if we’re in the kind of business of content discovery and enabling that for people, I think that just the generative AI products are going to be able to allow people to kind of deepen their engagement with the things that they care about, and also even share out the things that they’re kind of talking to the AI about in certain contexts back with the folks on their network that, I think, is going to kind of enhance the engagement impact that we see.

But it’s going to take us a while to kind of find out what are the right kind of integrations and formula for this. So you’ll see us testing a lot of different things and then kind of going with what sticks once we learn more.

Brian Nowak

And is the hard part just sort of ensuring it’s a high-utility experience? Is the hard part sort of making sure you’re analyzing the right signal? What is sort of the main regulator in how quickly it gets pushed out?

Tom Alison

There’s a number of things. I mean some of it is like the quality of the underlying model. So in addition to doing these product integrations, we’re continuing to invest a lot of effort in really training kind of our next kind of state-of-the-art generative AI models. We have Llama 2 out now. We’re working very closely on kind of Llama 3.

So you want to give these kind of AI agents more expressive power. You want to give them the ability not only to understand text but to understand images, to understand kind of what we call multimodal applications, which is going to really help in our kind of rich media ecosystem. So there’s things like that, that you need to do.

And look, any time you’re introducing a new consumer product, it takes some time for people to figure out, well, how do I use this and what is the right place to integrate this into existing products and workflows and how do you educate people on like what is this thing valuable for? So I think not everybody is going to think to themselves, hey, I want to kind of go and chat with a chatbot today.

But I think one of the things that we can do is in various parts of our kind of product experience, we can actually kind of show people interesting questions that you might want to ask the chatbot to help them realize, “Oh, I can go ask an AI about this. Now actually, I do want to go and do that.” And that helps people kind of progressively understand what the value is.

And then over time, we hope we can kind of build from like maybe serendipitous behavior, more intentional behavior where they’re going to the AI for more things. But I think at first, we’re going to have to create a lot of bridges and teaching people what are these AIs good for in kind of social context or other contexts where you’re using Meta products.

Brian Nowak

And the — on the point of content creation, you showed some examples of what Emu could do last year. We’ve seen other text-to-video models and applications come out in the last month or so across the ecosystem using GenAI. If you’re sort of keeping that same mindset of like the 2026 product pipeline, is it realistic that you could have text-to-video content creation rolled out across Meta? Or is that just too quick?

Tom Alison

I don’t think it’s necessarily too quick. I mean we’ve already seen kind of text-to-video applications both in research and even in some kind of limited production environments today. It’s very hard to tell the pace of how the quality is going to improve. I think that’s one of the big unknown questions in the industry where a lot of people are working on scaling up GPUs. And we’ll see how much kind of better quality comes out of that. So I know text to video will certainly be possible by ’26. The question is how good will it be?

But look, we’re already finding applications of some of the stuff within our own product. Even for kind of advertisers, we introduced some generative AI capabilities that allow them to do image outfilling, which is really good if you have an image that’s kind of meant for Feed. Can you outfill it and make it available for replacement in Stories very easily? Can you change the background kind of with generative AI for your product catalog to give our system more variations to go out and try and to optimize? Can you marry the text?

So again, we’re already seeing the near-term kind of benefits of the creative possibilities of this and integrating them into our product. And I think as we kind of work with people, with advertisers, with creators, we’re in a good position because we’re going to get a lot of kind of feedback and data on like how can we kind of really maximize the value of these creative possibilities for the kind of stakeholders in our ecosystem we’re most likely to benefit from it.

Brian Nowak

Yes. Okay. Great. Well, we look forward to seeing more of that. Let’s talk a little bit about the ad business. I thought at the — and you mentioned it a little bit earlier in our discussion. But recently, Meta also talked about how they’re managing ad load on a case-by-case basis and almost more dynamically, sort of the ad load, the number of ads you might see for a video versus Feed versus Stories, it could be different it sounds like by person or almost by — so maybe just talk to us about what changed there?

And so what have you learned about ad load than what you can more dynamically adjust that across the platform?

Tom Alison

Yes. It’s a great question. I mean I’ve talked a bit about Recommendations, but one thing I didn’t kind of mention with these big technology investments and upgrades we’re making, we’re also improving personalization. And what I mean by personalization is what is the right blend of content to give to you.

So for example, I’m really into recommendations. You might want to see more friend content. We need to learn that you want to see more friend content in your feed even if we have recommendations available. So actually, some of the engagement gains that we’ve seen over the last years has been not only bringing kind of new content inventory into the system via Recommendations but improving how well we personalize that slate or that mix of content for each individual user.

Now the same applies to ads. Ads are kind of content in our system. And so for example, I love ads. Like I can open Facebook and you can show me an ad at the top of my feed, and I’m like, “Awesome,” right? And like a lot of times, I’ll click on it. But even if I don’t click on it, I don’t mind it, I’ll keep kind of using Facebook, right? And you can actually increase my ad load with not very many consequences on my engagement.

Now you might be different. You might be like, okay with ads in Feed, but like ads in Reels, you’re not as into, and that changes your behavior. And again, so we personalize both kind of the frequency of ads, where and how are we placing them on a per user basis. So as our technology gets better and our personalization capabilities get better, it allows us to actually get better at serving the right or the optimal ad mix to kind of each individual user.

But I still kind of expect kind of beyond that, just a lot of the growth that I expect that we’ll see in the ads business is continuing to kind of monetize these newer high-growth surfaces like video, like Reels.

And I think the other opportunity we have outside of just getting better at kind of increasing content supply and increasing ad supply is if you think about video, I think we have an opportunity to like help more advertisers create video-friendly formats and do format optimization so that we’re not just kind of increasing like ad load or the supply of ads, we’re also increasing kind of the conversion factor and the efficacy.

And I think actually, it’s that formula, the fact that we’re kind of both increasing supply as well as increasing the efficacy of ads, that’s really kind of working to deliver a lot of value to advertisers right now.

Brian Nowak

I love ads. So you can keep pestering me. I’ll keep clicking notify.

Tom Alison

Okay. We’re going — all right. Note to the team, dial up Brian’s ads.

Brian Nowak

[Indiscernible] Yes. You’ve got Taylor Swift right. Like you analyze my feed, I don’t know.

Tom Alison

Like we know you.

Brian Nowak

Exactly. You probably do. So what about Advantage+? Advantage+ is something that there’s been a lot of ink written about this tool over the last couple of years. So a couple of things. So one, maybe talk to us about what are some of the applications of Advantage+ that have really resonated best with advertisers? And what do you see from an uplift spend per advertiser once they start to take on these tools?

Tom Alison

So kind of the core theme behind Advantage+ is rather than you — have to have you manage every single detail of your audience or your creative and put together kind of all of the combinations of the campaign on yourself, we’re offering kind of more and more ad products to allow Meta to optimize more variations of that for you.

So for example, our Advantage+ audience product, you can give us kind of some signals or some tips on the audience that you want. But then you can say, “Hey, I’m going to allow Meta to go out and find additional kind of audience candidates that are similar to mine.” And we’re seeing kind of good results with advertisers.

Some may just want to kind of take pieces of this. We have another Advantage product — Advantage+ product like our shopping product on folks that are doing kind of bigger shopping campaigns with lots of variations benefit from this a lot because we can take lots of your creative, we can take kind of audience in, we can even optimize like which surface to show the ads on.

So is this ad going to perform better in a Reels context? Or is it going to perform better in a Feed context? And actually being able to optimize kind of across a lot more variables is allowing us to give advertisers better results.

And so I think you’re going to continue to see us like build on this theme of being able to test and allow advertisers to easily test and use our systems to get the most out of finding optimal combination of things. And honestly, like what we tend to see is when these products work well, the cost per click for advertisers goes down, they’re more efficient. Over time, that gives advertisers the confidence to unlock more budget with us or try kind of new products and get more out of us. So I just think you’re going to see us continue with that theme.

And again, we talked about generative AI, right? Like now part of this suite is if you look at kind of our kind of Advantage+ creative, making it super easy. If you’re selling a handbag online, you can generate 10 different backgrounds for that. You can kind of feed that into our Advantage+, and we’ll find the best variation. So giving advertisers the ability to give us more variance to go out and optimize very easily is just going to speed up that cycle of finding kind of the most effective campaign. So I’m excited about that.

Brian Nowak

You continue to improve. You have over 10 million advertisers of the — any help at all on what percentage of the advertisers are using Advantage+? And then for the ones that aren’t, what do you have to sort of show them or what’s the hurdle they have to get over to start to adopt those tools?

Tom Alison

Yes. I mean there’s no one size fits all for Advantage+. So we have some advertisers that are using more of the end to end. We have some advertisers that are using parts of it. I think for some of our Advantage+ audience work, I think we’re kind of defaulting folks into that now and I think that’s become kind of more popular.

A lot of what we really have to do is figure out — sometimes what we’ll do is we’ll be able to figure out how well — how does Advantage+ work with like a larger advertiser maybe with more sophisticated objectives or a big campaign, right? Because they can give us lots of assets to optimize. They can give us lots of hints on audience. They want to try out different surfaces. And so we often kind of learn a lot from being able to run those campaigns.

And then we figure out, well, how do we scale this maybe beyond the e-commerce vertical and to other verticals? Or how do we scale this from kind of a high-spend advertiser to a lower-spend advertiser? So it’s really kind of in that learning process of how do we make sure that this technology works for all segments.

But I would say, overall, like we’re pleased with the progress. We get good reception from this. And I think in the course of time, we’ll just continue to see a trend of more and more advertisers at least opting into some of the Advantage+ products, and then more folks are going to be able to use the end-to-end solutions.

Brian Nowak

Great. The other part of the revenue that the company started talking about a little more consistently over the last couple of years have been click to message. So I think maybe just too sort of help us out a little bit on where have you made the most progress in click to message? We think it’s sort of approaching 10-plus percent of total revenue now, growing rather quickly. What has driven that strength over the last couple of years in the click-to-message go-to-market?

Tom Alison

Yes. So what we’re seeing with click to message, it’s essentially a product that allows advertisers to specify an objective of acquiring a customer over a messaging channel. And we have kind of regions of the world like Southeast Asia, parts of LATAM, where messaging is just so ubiquitous in terms of how can people communicate, not just with their friends or their family but also with businesses, that there’s been a growing demand for this type of product.

So beyond kind of click to messaging, we also offer kind of paid business messaging tools. So not only can we help you establish a relationship over messaging with a prospective customer, we can help you kind of enhance that relationship through things like marketing or remarketing or customer support or even allowing kind of purchasing behavior inside of the message thread.

So again, we’re kind of seeing this market kind of validated and grow overseas. I think we’re starting to see some interesting traction in the U.S. The thing that I’m excited about, we’ve been talking about generative AI, right?

So in a world where we can actually have chatbots help businesses really scale these types of business, by taking maybe some of the more routine customer interactions and letting the chatbot handle them and then taking some of the higher-touch customer actions and having kind of humans handle those, that’s going to create a lot more value for businesses.

That’s going to allow new businesses to come on and try some of these things. And we think it might even kind of unlock kind of regions in the world where maybe people aren’t quite ready to invest in kind of these messaging-based products because they’re like, “I’m not sure there’s an ROI for my business,” but it’s like the cost of trying them with a good kind of generative AI solution goes down a lot.

Now look, with generative AI in the context of a business or a business messaging, there’s still a lot that you need to get right. I mean I’m sure a lot of you have seen kind of the errors that chatbots still make, right, in a business context. If you have a chatbot that’s doing something that hurts the brand or has the customer lose trust in the business, that’s a very kind of big issue.

So we’re kind of in smaller-scale testing of this type of product right now. Again, with a small number of businesses infusion, again, seeing really encouraging results. I think it’s going to be a tricky road to get it all right, but I do see kind of an outcome where we’re able to offer this to more businesses and actually grow that entire business category.

Brian Nowak

Great. Last one I had is on Reality Labs. I think there is this perception or maybe it’s just — maybe it’s more of a debate externally about can Reality Labs — even if it is a success, how does it help the core, the core Facebook platform? Or is this going to cannibalize?

So I know it’s very early, but maybe just talk to us about sort of what you’ve seen so far of people who are using the Reality Labs tools with their engagement on Facebook. And how do you think about the vision of the two of them integrating long term?

Tom Alison

Yes. I mean there’s a couple of kind of cross-connections that we’re exploring across the product lines. One of them is just helping people kind of understand what’s possible in a virtual environment in Quest. I mean the most basic expression of that has been allowing people to choose their own avatar in Facebook or Instagram. And it’s a 2D avatar.

It’s obviously kind of an illustration of their kind of persona. But the cool thing is that once you set that in Facebook or Instagram, as soon as you get a quest, you’ve already kind of got your persona ready to go, and it just reduces friction into getting more of the experiences.

And we’re also seeing kind of possibilities of working with gaming developers. Facebook has a gaming ecosystem. We have a whole free-to-play kind of gaming ecosystem that drives engagement. Can we have more of the gaming developers develop experiences that you can kind of play in Facebook and also then go play in VR and have more cross-pollination kind of, of those users across the different kind of gaming titles to try different experiences? So we’re looking at things like that.

There’s kind of new possibilities opening up in VR with this idea of mixed reality, right? Because virtual reality, you’re in this very immersive experience. And it’s like, I guess, you could kind of look around and see your Facebook Feed, and that would be cool. But mixed reality offers interesting opportunities. You’ve seen probably these videos of people like washing their dishes with a Quest headset on while watching a video, right?

So we are going to be exploring, well, what do our apps look like in mixed reality? Because we know that people, while they might be using the headset for gaming or other things, actually, now mixed reality offers kind of the opportunity to use more of the traditional social products and kind of explore that in new ways.

I’ll tell you the thing I’m actually most excited about though is the Meta Ray-Bans and augmented reality. So the video capture on the new Meta Ray-Ban is really cool. One of the things where I think, to your point on how could this drive engagement for Facebook or Instagram, if you look at creators right now and they want to take first-person video, they’re going and sticking a phone in people’s face.

I’ve even seen some creators like strap it to their head. I mean that just feels like a very unnatural way of capturing the world. And what — especially what young adults want from social media now is kind of more authenticity.

So the fact that you can go out, capture first-person views of what you’re doing, kind of capture even a live stream of it, send that back into Facebook, into Instagram, create Reels from that, I think that’s like an interesting first-person content format that is captured in a very authentic low-pressure way. And to me, that’s interesting content.

And we’ve already seen creators start to really — start to say, “Oh, wow, I can use the glasses for that.” You’re starting to see more video created from it. And actually, the product itself, when somebody posts a video from Meta Ray-Ban glasses, we give a little bit of attribution, which helps other creators and people discover that this is possible.

So again, like when I look at like what are the creative opportunities that the kind of Reality Lapse devices allow for, that’s one in particular that I can — and I’ve been talking to the team and I said, “How can we get more creators creating content here?”

Because the content feels unique, it feels fresh, and it feels like something you can’t do. And it’s just very convenient for creators to be able to capture it with a pair of glasses versus holding a big camera or something like that.

Brian Nowak

All right. Well, Tom, it would be very exciting to everyone that you ship over the next year or so. Thank you so much.

Tom Alison

Yes. Thanks for having me. Appreciate it.