Meta is pushing the metaverse aside for AI

On Tuesday, the parent Facebook Meta (META) announced that it will lay off 10,000 more employees. The move is part of CEO Mark Zuckerberg’s so-called “Effective Year,” in which the company is cutting spending amid falling digital ad revenue and rising interest rates.

But buried in Zuckerberg’s announcement of the layoffs was a clear message for both Silicon Valley and Wall Street: Artificial intelligence is now just as important to the company as metadata.

Reason? If Meta can build on its AI capabilities, it could return to the good graces of Wall Street and earn itself the capital it needs to fuel its metaverse ambitions in the years to come.

Need proof of movement? A quick look at Zuckerberg’s Facebook post announcing the layoffs will tell you how important AI is to the company’s future. When talking about how Meta is investing in future technologies, Zuckerberg said: “Our single biggest investment is driving AI and integrating it into all of our products.”

And while he mentioned Meta’s work on the metaverse twice in his statement, that was only after talking about the company’s AI efforts.

“We do leading work on a wide variety of cutting-edge technologies and then distill them into inspiring products that improve people’s lives,” Zuckerberg wrote.

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“We [invest in] AI to help you express yourself creatively and discover new content, with metaverse for a real sense of presence, with new media formats to create richer experiences, with encoding to enable you to communicate privately in more ways and with business tools to help reach customers, create opportunities, and grow the economy.”

Part of the reason AI is so loved is due to the hype surrounding the topic initiated by OpenAI’s ChatGPT, Microsoft’s (MSFT) Bing and Google’s (GOOG, GOOGLE) Poet. However, the other half of the equation is that Meta needs to continue to compete with rival TikTok.

That company, which is facing its own existential problems, including a possible ban by the Biden administration, has created its backbone through its AI-powered For You page to serves you a never-ending stream of addictive short videos. And Meta is working hard to make sure it can match those capabilities.

“It’s been very clear that AI and metadata are at the forefront and central to Meta’s long-term strategy,” Forrester VP and research director Mike Proulx told Yahoo Finance. “But the problem is still the here and now; There are only so many runways left for the company to deliver.

Facebook President and CEO Mark Zuckerberg speaks during the annual Munich Security Conference in Germany, February 15, 2020. REUTERS/Andreas Gebert

Facebook President and CEO Mark Zuckerberg speaks during the annual Munich Security Conference in Germany, February 15, 2020. REUTERS/Andreas Gebert

Meta has been criticized for its massive investments in Zuckerberg’s plan to turn the company into a metaverse-first business. That includes the research and development of everything from the headsets needed to support that vision to the software that will run the applications.

In 2021, Meta reported a loss of 10.1 billion USD from the Actual Labs business, which houses the company’s metadata efforts. In 2022, has grown to $13.7 billion.

However, the greater emphasis on AI allows Meta to appease investors, while continuing to pour money into its metaverse ambitions. Especially since it is expected to take years until the metaverse becomes a payable reality, if at all.

“[Zuckerberg is] are looking to invest in projects that can drive growth,” Gene Munster, Managing Partner of Deepwater Asset Management, wrote in a recent note.

“Gone is the NFT test. He said he will invest more in AI to improve Story recommendations and ad measurement tools, add large language modeling (LLM) features to messaging, and automate ad campaigns. by creating creative content.

In other words. Meta is now a metaverse and AI company. At least for now.

Got a tip? Email Daniel Howley at [email protected]. Follow him on Twitter at @DanielHowley.

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