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Meta’s Improved Ad Sales Buy Time for Zuckerberg’s Metaverse

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Meta Platforms Inc., formerly known as Facebook, is anticipating a significant recovery in advertising revenue, driving growth at the fastest rate since 2021. The company expects its revenue to grow by as much as 20% in the current quarter, a pace not seen since the post-pandemic economy slowdown and Apple Inc.’s privacy rule change negatively impacted Meta’s digital ad sales. Last year, Meta experienced its first-ever revenue decline, leading to investor skepticism about CEO Mark Zuckerberg’s ambitious spending on ventures outside the core business.

To address these concerns, Zuckerberg has made strategic moves, including cutting thousands of employees and enhancing advertising efficiency through artificial intelligence. These efforts have put the company in a stronger position with shareholders. Even with the prospect of continued rising expenses over the next two years, investors showed confidence, and Meta’s stock rose over 7% in after-market trading following the earnings report.

Analysts are becoming more optimistic about Meta’s prospects, with one upgrading the stock to a “buy” rating, citing clearer returns on investment. The improved advertising momentum and a leaner business model may offer Zuckerberg the support he needs to continue investing in artificial intelligence and his vision for the metaverse—a virtual-reality world that he envisions as a widespread future reality.

During an earnings call, Meta executives emphasized the company’s discipline and efficiency, promising to prioritize careful spending while investing in AI and the metaverse, where they see significant opportunities. The company reported second-quarter revenue of $32 billion, surpassing analyst estimates of $31.1 billion. Meta’s investment in Reels, short-form videos on Instagram and Facebook that mimic TikTok’s format, has contributed to the advertising recovery. The popularity of Reels, coupled with improved targeting, has boosted revenue.

Despite profitability challenges due to the slower monetization of Reels ads, Zuckerberg remains committed to the metaverse. Meta’s Reality Labs division, responsible for metaverse technology, posted an operating loss of $3.7 billion. However, Zuckerberg is confident in the potential of the metaverse and its transformational impact across various aspects of daily life.

While the future of the metaverse remains uncertain, Meta’s optimism in its advertising rebound and AI monetization opportunities is providing Zuckerberg with the necessary room to continue investing in his long-term ambitions. The company’s focus on AI chatbots and other AI-powered features, as well as the growing popularity of Reels, indicates Meta’s determination to capitalize on emerging trends and innovations in the digital space.

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