In the third quarter, Meta’s advertising revenue increased by 26% from a year earlier, while Google’s Search and other businesses reported 12% growth. Meta’s advertising business is now growing more than twice as fast as Google’s Search business.
This shows that Meta is gaining strength in online advertising even as AI changes the way people use the internet, according to CNBC.
The two businesses are now almost equal in size, although Google remains slightly ahead in advertising revenue from Search and other services. AI could create a serious challenge for Google’s advertising business if people stop using traditional search engines. He warned that such a change could be extremely damaging to Google’s advertising business.
Meta reported $63.1 billion in advertising revenue in the third quarter. Google’s Search and other division brought in $63.4 billion during the same period.
Nate Elliott, an analyst covering AI at Emarketer, told CNBC that people may start using ChatGPT, Claude or Muse instead of Google if these tools help them find information more easily.
In 2022, Meta’s revenue declined for the first and only time in the company’s history. The launch of ChatGPT in late 2022 also marked a major change in the technology industry. Meta CFO Susan Li said advertisers who followed the AI assistant’s recommendations saw almost 5% more conversions. They also increased their advertising spending by 9% compared with similar advertisers who did not use the recommendations. She said syrup producer Simply Organic Maple used Meta’s AI assistant and recorded a 57% increase in purchases. The company also saw a 36% fall in the cost of each purchase, showing how AI tools can help businesses get more sales while spending less on individual customers. Nearly 10 million advertisers used at least one of Meta’s AI tools during the third quarter, Li said during the company’s earnings call last week. Google expects to spend up to $205 billion on capital expenditure this year. Meta, meanwhile, expects its capital expenditure to reach as much as $145 billion. Its shares fell more than 12%, wiping out around $500 billion in market value. Its stock fell 14% in October, marking its worst monthly performance since October 2022. This came after a 27% rise in September, which was its strongest monthly performance since November 2022, CNBC reported. Google Cloud reported quarterly revenue of $31 billion, with growth of more than 100%.
The company has introduced AI Overviews and AI Mode , which give users AI-generated summaries instead of simply showing links to other websites. its Search revenue growth is slowing, CNBC reported Although Google said search queries reached a record high in the third quarter. However, it found ways to use AI to improve its advertising products, CNBC reported. Meta introduced an AI business assistant for advertisers about a year ago. These investments are putting pressure on both companies’ finances, with their spending pushing them into negative free cash flow territory, CNBC reported.
Because of AI, google’s search engine is also changing. The impact of Apple’s privacy changes was visible in Meta’s financial performance. The company then began investing more heavily in AI to improve its advertising tools and help businesses reach potential customers. OpenAI’s chatbot brought generative AI into the mainstream and increased competition among technology companies. Meta initially struggled to develop its own advanced AI models and fell behind companies such as OpenAI and Anthropic. The tool works with the company’s Ads Manager system and helps businesses create advertising campaigns and improve their performance. It gives advertisers recommendations on how to reach more customers and get better results from their spending. Li also shared an example of how AI helped a business improve its sales. The use of AI advertising tools is also increasing among businesses. Both companies are now investing heavily in AI infrastructure, but investors are worried about the cost. Meta and Google are spending hundreds of billions of dollars to build the data centres, computer systems and other infrastructure needed to develop and operate AI models. Investors want to know whether these investments will generate enough additional revenue in the future. The companies’ heavy AI spending has also affected their stock market performance. Meta’s shares have also faced pressure from investors. Investors are questioning whether the huge investments in AI will deliver enough financial returns. Both companies are spending heavily to build new AI products and services, but there is uncertainty about how quickly these investments will translate into higher revenue and profits. Meta is exploring paid AI subscription services as part of this plan. The company wants to turn some of its AI products into services that users pay for, instead of depending almost entirely on advertising revenue. Google is in a stronger position when it comes to earning money from businesses outside advertising. Advertising now accounts for less than two-thirds of Google’s total revenue . Its cloud computing business is also growing rapidly as companies increase their spending on AI infrastructure and computing services. Google’s ability to make money from its Search business remains important to investors. They added that Google needs to introduce new advertising products and show that it can continue making money from Search as AI changes how people use the internet.
Meta’s AI advertising tools are helping businesses get more customers, according to the company. Demand for its cloud infrastructure and custom AI chips, known as tensor processing units (TPUs), helped drive this growth, according to CNBC. Analysts at Wedbush said Google’s shares are unlikely to recover until investors become more confident about the future of its Search business.
Alphabet, Google’s parent company, suffered its worst-ever trading day after reporting disappointing third-quarter results on Wednesday.
