Meta Platforms Inc. leads the tech pack this week, reporting its third-quarter earnings a week ahead of most of its peers. Take that as a sign of confidence, perhaps. The positive reception to the company’s Muse assistant has Wall Street investors wondering whether the personal artificial-intelligence agent is proof of an AI business model they have been desperately seeking.
A strong showing from Meta, with enthusiastic projections for how Muse users could be monetized, would help its shares but also the fortunes of others in the AI space — particularly the neoclouds that have been hit lately as lenders worry that the expected revenue from data centers may never materialize. Muse can’t take the entire AI industry’s weight on its shoulders, but it can offer good signals on the moneymaking potential of consumer AI agents.
See more: AI Capex And Earnings: What Happens When Growth Slows
It’s too early for Muse’s impact to show up on Meta’s income statement because it launched with only three weeks left in the quarter. All the metrics so far have come from external observers. According to Sensor Tower, the Muse app has been downloaded 11 million times — faster growth than the earliest days of Claude and ChatGPT. Payments platform Stripe, which is establishing a potentially lucrative position as a payments middleman between AI bots and companies, said the top categories for bot spending in September were retail, travel and entertainment. That’s music to advertisers’ ears.
And yet there are signs that Muse’s momentum might be slowing, as I have written before, and much of Muse’s success has come from sheer brute force — almost 39% of Meta’s entire marketing expenditure so far this month has been pushing Muse, Sensor Tower noted.
When Chief Executive Officer Mark Zuckerberg speaks to investors on Wednesday, he will be expected to address at least some of these concerns. Have downloads of the app plateaued? Will use hold up once the advertising campaign tails off? What about some of the friction with companies like Amazon.com Inc., which has blocked the app? When will Muse be available in Europe?
Meta President Dina Powell McCormick told CNBC that part of the business model for Muse could be “taking a fee when we help you save money.” How close is the company to making those kind of deals? And what about the bank bosses that are moving swiftly to block Muse, too?
I guess these are all just variants of AI’s most pressing question: When is all of this going to pay off? The pressure to answer is why analysts such as Dan Ives are calling it Meta’s “biggest earnings call in a few years.” If Ives is anything to go by, there will be an impatience in the air when Zuckerberg fields analysts’ questions.
Zuckerberg used to say that a product wasn’t ripe to be aggressively monetized until it reached around a billion users. By that point, users are locked in, network effects are hard to challenge, and advertising and other trappings can be implemented without risk of a mass exodus. (This is what the critics mean when they talk about enshittification.) By his own standards, then, Zuckerberg is being forced to monetize Muse far earlier than his own sensibilities might wish.
But the company’s rampant AI spending and investments leave him with little option. Capital expenditures are expected to reach $41 billion in the third quarter, more than double the amount from the period last year. So far, Zuckerberg has mollified investors by making promises of future potential while pointing to strong ad growth now, aided by AI tools that have improved its recommendation algorithm. Ad growth in the second quarter was up 28% from the period last year. It’s expected to grow 23% in the third quarter, according to Bloomberg consensus data, surpassing $60 billion from ads in a single quarter for the first time. Wall Street would like that, but it wouldn’t be enough in its own right to justify continued massive spending. Evidence that Zuckerberg knows how to get Muse to more of his 3.6 billion users would be.
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