As I Predicted, Q4 Was a Barn-Burner for Meta

Image via Meta’s AI Image Generator

February 1, 2024—Meta's Q4 2023 results are in, and they surprised Wall Street - but they didn't surprise me.

A few days ago I posted:

1️⃣ "I expect Meta to report Q4 revenue growth above the midpoint of its guidance of $36.5 billion to $40 billion. There is a strong chance it could surpass the upper end of that guidance."

💪🏻 Meta reported revenue above guidance, at $40.1 billion.

2️⃣ "On a full-year basis, I expect Meta to report total revenue of $133 billion to $135 billion, up from $116.6 billion in 2022. That would amount to a 14% to 16% year over year increase."

💪🏻 Meta reported full year revenue of $134.9 billion, up 16% year over year.

Meta can say all it wants about AI and the metaverse, but it's still an advertising business and gets 96% of its revenue from advertisers.

Here are a few of my top advertising-related takeaways from Meta's Q4 2023 earnings call (transcript here):

1️⃣ China-based advertisers are a big revenue driver

On the call, CFO Susan Li noted that Chinese advertisers made up 10% of Q4 total revenue – the first time I believe she has quantified the impact. While she didn’t name names, the two biggest factors are Temu and Shein. Both are battling to gain market share and users, and are devoting huge sums to Meta ads to entice first-time buyers to their low-cost goods.

2️⃣ AI is boosting ad growth

No surprise, Mark Zuckerberg led off the call with a long discussion of Meta’s broader AI philosophy and strategic approach. But he and Li also provided valuable color about Meta’s AI ad initiatives. In addition to Advantage+, the company's suite of automated ad products, there's also generative AI. Meta's early work in generative AI is helping advertisers to quickly and efficiently create multiple versions of ads, generate ad images on the fly, and test different ad copy. Meta expects to invest more to build out these features in 2024.

3️⃣ Messaging is a growing revenue stream

Meta’s click to message ads and its paid messaging product are becoming a more important source of revenue. The company didn’t share specific stats, but Zuckerberg at one point called messaging the "next revenue pillar" for the business.

Also notable: Zuckerberg called out WhatsApp’s user growth in the US (without sharing figures). After many years of being underutilized, WhatsApp may finally be getting more attention in the US.

😬 What didn't get a lot of attention on the call was Reels. In the past, execs have talked about how they're building out video products and more recently, they talked about Reels' contribution to revenue. This time, Reels got only 12 mentions, and the majority of those were about how Reels related to Meta's AI ambitions.

📊 Quick advisory if you're like me and rely on Meta's quarterly disclosures of its users:

This quarter was the last time Meta will report Facebook monthly and daily users. It's also no longer going to report Family of Apps monthly people. In honor of that, here's a slide from yesterday's earnings presentation. Grab those stats while you still can!