#SocialStocks: Meta Leverages Artificial Intelligence Throughout Subsidiaries

Snap utilizes ChatGPT as Musk seeks out alternative and other notable stories from this week

Welcome to “#SocialStocks,” The Fly’s weekly recap of Wall Street’s reactions to social media stock news.

LEANING INTO AI: 

Meta Platform’s (META) AI-driven advertising system, designed partly to overcome the restrictions introduced by Apple (AAPL) two years ago that force apps to get permission to track users and serve them personalized ads, is splitting marketers, with some seeing good results and others fearing they are being forced to relinquish too much control to the social media platform, The Financial Times’ Hannah Murphy and Cristina Criddle wrote. Multiple advertisers and company insiders told the publication that the Advantage+ tool is significantly boosting the performance of advertising campaigns in ways that allow it to recover lost ground since Apple’s privacy changes, but several companies expressed concern about the extent to which they now have to hand over management of their campaigns to Meta and its algorithms

In a Facebook post, Mark Zuckerberg announced a new team at Meta working on A.I. products for Instagram and  WhatsApp. The Meta CEO has created a new product group inside the company focused on generative AI. The post said: “We’re creating a new top-level product group at Meta focused on generative AI to turbocharge our work in this area. Were 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. Over the longer term, we’ll focus on developing AI personas that can help people in a variety of ways. We’re exploring experiences with text (like chat in WhatsApp and Messenger), with images (like creative Instagram filters and ad formats), and with video and multi-modal experiences. We have a lot of foundational work to do before getting to the really futuristic experiences, but I’m excited about all of the new things we’ll build along the way.”

CHATGPT: 

Elon Musk approached AI researchers in recent weeks about forming a new research lab to develop a ChatGPT alternative, The Information’s Jon Victor and Jessica E. Lessin reported. Musk, who co-founded OpenAI in 2015 but has since cut ties with the startup, is the CEO of Tesla (TSLA) and Twitter (TWTR). Musk suggested last year that OpenAI’s technology was an example of “training AI to be woke,” suggesting that a rival chatbot would have fewer restrictions on divisive subjects compared to ChatGPT and a related chatbot recently launched by Microsoft (MSFT).

Snapchat (SNAP) is introducing “My AI,” a chatbot powered by OpenAI’s ChatGPT, Heath reported. CEO Evan Spiegel says the chatbot will initially be available for $3.99 a month for Snapchat Plus subscribers, but the goal is to eventually make the bot available to all of Snapchat’s 750M monthly users. “The big idea is that in addition to talking to our friends and family every day, we’re going to talk to AI every day,” he says. “And this is something we’re well positioned to do as a messaging service.” Microsoft (MSFT) recently announced a version of its Bing search engine powered by ChatGPT maker OpenAI in an effort to compete with Google (GOOGL) by offering an AI-based service.

20-27 VISION: 

Meta has shared its latest augmented and virtual reality hardware roadmap with employees, and is planning to launch its first full-fledged AR glasses in 2027, The Verge’s Alex Heath reported. During an internal presentation, Meta executives also laid out plans for three new Quest headsets and a “neural interface” smartwatch, according to the report.

FEDERAL TIKTOK BAN: 

The White House gave government agencies 30 days to ensure they do not have Chinese-owned social media app TikTok on federal devices and systems, according to Reuters’ David Shepardson. Office of Management and Budget Director Shalanda Young said in a memorandum seen by Reuters that they “will be required to adjust information technology contracts to ensure vendors keep U.S. data safe by eliminating the use of TikTok on their devices and systems.” The action does not affect the more than 100M Americans who use TikTok on private or company-owned devices, the report added. 

ZOOM EARNINGS RECAP: 

Zoom Video (ZM) beat analyst expectations in its fourth quarter earnings report on Monday. The company’s chief executive highlighted a 27% growth in customers in 2023. “In fiscal year 2023, our growing base of Enterprise customers increasingly looked to Zoom to provide a seamless communication and collaboration platform, and drive productivity and efficiency during turbulent times,” said Zoom founder and CEO, Eric Yuan. “This was evident in the 27% growth in customers contributing more than $100,000 in trailing 12 months revenue, as well as the 115% trailing 12-month net dollar expansion rate for Enterprise customers. Zoom One adoption continued to accelerate and helped drive Zoom Phone to grow more than 100% year over year, surpassing 5.5 million seats in Q4. Our emerging technologies such as Zoom Contact Center picked up pace as customer experience teams recognized the value of a modern, integrated collaboration solution. While the macroeconomic situation continues to negatively impact our overall growth, we have maintained a healthy balance sheet and operating cash flow generation of approximately $1.29 billion.” The company also provided Q1 and FY23 guidance that beat you the consensus.

Piper Sandler raised the firm’s price target on Zoom Video and keeps a Neutral rating on the shares. The sales results in Q4 came in slightly above plan as Zoom continues to find some stability in the Online customer base, and key product areas of Zoom Phone and Zoom Contact Center continue to see strong adoption, the analyst tells investors in a research note. While bears will point to lead metrics continuing to decelerate and fiscal 2024 revenue growth of just 1%, Zoom’s 2024 margins came in above expectations, even adjusting for announced layoffs, says Piper. It believes Zoom needs to look beyond Meetings and invest faster in other markets.

LAYOFFS NOT OVER: 

Twitter laid off “well above 50” staff over the weekend, including Director of Product Management Esther Crawford and Revue founder Martijn de Kuijper, The Verge’s Emma Roth reported. CEO Elon Musk, who is also the CEO of Tesla (TSLA), has done at least three rounds of layoffs since his pledge in November that layoffs were over.

FINED: 

U.S. court, last September, ruled that Meta will have to pay walkie-talkie app-maker Voxer $175M for patent infringement, wrote Ashley Belanger for Ars Technica. Over the ensuing months the Facebook parent tried “to avoid paying up by requesting a judge either reject the jury’s verdict or give Meta a new trial,” added the story. Meta’s requests were denied by a federal judge this week making it likely Meta will have to pay running royalties “for illegally copying Voxer’s technology and using it to launch Facebook Live and Instagram Live,” said Ars.

THE SOUND OF SNAP: 

In a blog post, Snapchat said, “Today we’re excited to announce Sounds Recommendations for Lenses and Sounds Sync for Camera Roll, new Sounds creative tools that make it even easier to create and share. With over 250 million Snapchatters engaging with augmented reality everyday, Snap’s leading AR Lens technology combined with Sounds deliver both a hyper-expressive experience to engage with friends and a powerful distribution tool for artists to share their music with fans. Since launching Sounds, videos created with music from Sounds on Snapchat have collectively resulted in over 2.7 billion videos created and over 183 billion views! Sounds Recommendations for Lenses is a new way for Snapchatters to find relevant Sounds to complement a Lens. When applying a Lens to a photo or video, Snapchatters can tap the Sounds icon to access a list of relevant Sounds to add to a Snap. Available in the US and rolling out globally on iOS and Android. Sounds Sync for Camera Roll photos and video allows Snapchatters to create montage videos that are automatically in rhythm to the beat of audio tracks from the Sounds library. Snapchatters can select between 4-20 photos/videos from their camera roll. Available in the US and rolling out globally on iOS and coming to Android in March.”

ADDITIONAL ANALYST COMMENTARY: 

MoffettNathanson raised the firm’s price target on Zoom Video and keeps an Underperform rating on the shares following the Q4 report. The company’s operating margin guidance might be well ahead of Street estimates, but that should not come as a surprise given the 1,300 employee layoff announced on February 7, the analyst tells investors in a research note. The firm says Zoom’s fiscal 2024 revenue growth outlook is now 1.2% at the midpoint, below expectations of 4.5%.

Mizuho said Zoom reported “solid” Q4 results with a sales and free cash flow beat. More importantly, the fiscal 2024 operating profit and earnings guidance came in meaningfully ahead of consensus expectations with Zoom’s revenue guidance of 1% year-over-year growth “appearing highly achievable,” the analyst tells investors in a research note. The firm continues to believe fiscal 2024 “will be yet another transition year” for Zoom as the Online segment stabilization in fiscal Q2 should position the company well to reaccelerate growth in fiscal 2025.

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Originally Posted March 1, 2023 – #SocialStocks: Meta leverages artificial intelligence throughout subsidiaries