Meta earnings call: Reels ramps to $10B/year, Threads models ‘lean’ success (NASDAQ:META)

Meta Platforms (NASDAQ:META) rose more than 6% postmarket after its strong Q2 earnings echoed an online advertising recovery signaled the day before by tech-giant rival Alphabet — and like Alphabet’s chief Sundar Pichai, Meta CEO Mark Zuckerberg used a highly scrutinized conference call to set the company’s tone as tech pushes forward out of its slowdown.

After briefly praising the quarter and nodding to Meta’s “Family of Apps” reach of 3.8B people, Zuckerberg turned his attention to the product roadmap: first, its recently introduced “Twitter killer” app, the short-text social app Threads.

“I’m quite optimistic about our trajectory here,” Zuckerberg said of the Threads launch, which the company said drew nearly 100M users in its first three days.

“We saw unprecedented growth out the gate and more importantly, we’re seeing more people coming back daily than I had expected,” Zuckerberg said. “And now we’re focused on retention and improving the basics. And then after that, we’ll focus on growing the community to the scale that we think is going to be possible. Only after that we’re going to focus on monetization.”

“We’ve run this playbook many times before with Facebook, Instagram, WhatsApp Stories, Reels and more. And this is as good of a start as it as we can hope for,” he added.

Meanwhile, building Threads with a “relatively small” team on a tight timeline shows the company can build higher-quality products faster — and feeds into talk about how the “year of efficiency” is proceeding.

“The year of efficiency was always about two different goals, becoming an even stronger technology company and improving our financial results,” Zuckerberg said. “We can invest aggressively in our ambitious long-term roadmap. Now that we’ve gotten through the major layoffs, the rest of 2023 will be about creating stability for employees, removing barriers that slow us down, introducing new AI power tools to speed us up … and so over the next few months, we’re going to start planning for 2024. And I’m going to be focused on continuing to run the company as lean as possible.”

That brings up artificial intelligence, a heavy-investment area that is rapidly become the center of tech company roadmaps.

“AI-recommended content from accounts you you don’t follow is now the fastest growing category of content on Facebook’s Feed,” Zuckerberg said. “Since introducing these recommendations, they’ve driven a 7% increase in overall time spent on the platform. This improves the experience because you can now discover things that you might not have otherwise followed or come across.”

That particularly includes the company’s TikTok-rivaling short-video product Reels, he noted: “Reels is a key part of this discovery engine, and Reels plays exceed 200B per day across Facebook and Instagram. We’re seeing good progress on Reels monetization as well, with the annual revenue run rate across our apps now exceeding $10B up from $3B last fall.”

“Beyond Reels, AI is driving results across our monetization tools, through our automated ads products, which we call Meta Advantage,” he said. “Almost all our advertisers are using at least one of our AI-driven products. We’ve also deployed Meta Lattice, a new model architecture that learns to predict ad performance across a variety of data sets and optimization goals.”