Meta Aims to Focus on AI, Ads and Reels in 2023 After Near $14B Loss in Reality Labs in 2022

Meta intends to make an aggressive push in the upcoming year for investing in short-form content, specifically Reels, across its family of apps — despite its recent hit to monetization efficiency, which has been affecting the company’s overall revenue.

In its Q4 2022 Earnings Call, the company said the instability of foreign exchange rates took its toll on Meta’s total revenue for Q4, which amounted to $32.2 billion in 2022. “Had foreign exchange rates remained constant with Q4 of last year, total revenue would have been approximately $2.0 billion higher,” said Chief Financial Officer Susan Li.

For Meta, liberal use of AI technologies will play a pivotal role in supporting the overall functionality of Reels and advertisements on their platforms while also helping meet its efficiency goals in 2023, especially in light of its most recent mass layoffs of over 11,000 employees.

“We're working on flattening our org structure and removing some layers of middle management to make decisions faster, as well as deploying AI tools to help our engineers be more productive,” said CEO Mark Zuckerberg.

One of Meta’s leading AI technologies is its discovery engine, a machine learning system released late last year designed to prioritize recommended user content from all sorts of accounts – not just the ones belonging to friends, family, or others users might follow.

While the technology itself is still relatively fresh, Reels has been garnering lots of engagement to the overall system of apps in the last year, signaling a shift in direction for the company as short-form content popularity continues to be on an upward trend across its Family of Apps:

“We're especially focused on short-form video since Reels is growing so quickly. I'm really proud of our progress here. Reels plays across Facebook and Instagram have more than doubled over the last year, while the social component of people resharing Reels has grown even faster and has more than doubled on both apps in just the last 6 months,” said Zuckerberg.

Reels, for the moment, still suffers from weaker monetization efficiency compared to other Meta products and services, causing unwanted revenue headwinds the company expects to recover from as engagement grows.

Ultimately, however, Reels is proving to be a long-term net positive for Meta, and is a likely contributor to Facebook’s 2.00 billion daily active user milestone that was reached last December. Monthly active users were on the rise as well, resulting in another 51 million users compared to the year prior.

Meta also looks to further leverage the use of generative AI and other AI tools within their advertisement ventures as well, with over 40% of its advertisers already using Reels ads throughout its many platforms, according to Meta COO Javier Olivan.

“AI is the foundation of our discovery engine and our ads business – and we also think it's going to enable many new products and additional transformations within our apps. Generative AI is an extremely exciting new area with so many different applications, and one of my goals for Meta is to build on our research to become a leader in generative AI in addition to our leading work in recommendation AI,” Zuckerberg said.

During the call, Li and the rest of Meta maintained their firm position beside the Metaverse, stating the company will “continue to invest meaningfully in this area given the significant long-term opportunities that we see.” However, “we still expect our full-year Reality Labs losses to increase in 2023.”

Reality Labs rounded out the year with an operating loss of $4.28 billion for the fourth quarter, following $5.0 billion in business-related expenses. The segment’s loss for the entirety of 2022 was $13.72 billion.