As the glimmer of the AI gold rush fades for some industries, ad-funded tech giants claim they’re already seeing signs that major investments are paying off for advertisers.
Despite warnings of an AI downturn and mixed signals in financial markets, Big Tech hasn’t shied away from talking about AI this earnings season. This month, companies with big bets on AI have all shared quarterly results detailing how they’re using AI-powered platforms for advertising, content creation and enterprise applications.
Recent financial filings with the Securities and Exchange Commission reveal at least two dozen companies highlighted generative AI this month in quarterly results. Notable mentions include Google, Meta, Amazon, Microsoft, Pinterest, Coursera, IBM, Coinbase, Udemy and Confluent.
AI was cited as a growth driver by martech companies like Zeta Global and Perion Network, measurement firms DoubleVerify and Integral Ad Science and ad-funded streaming companies like Spotify and SiriusXM. Even agency holding company IPG said AI is enhancing data and analytics services while generative AI will be “equally fundamental” for its broader offerings and through partnerships with companies like Blackbird.AI, Getty Images, and Adobe.
Despite the optimism, Wall Street still isn’t convinced that Big tech’s big AI bets are paying off. Instead, massive AI players like Alphabet, Amazon and Microsoft have all seen share prices fall in the past two weeks. Meanwhile, Meta moved its expected 2024 capital expenditures even higher, increasing it from $35 billion to between $37 billion and $40 billion, largely due to spending further on AI.
According to Gartner analyst Nicole Greene, a recent analysis of product announcements in 2023 from 11 leading tech companies — including Microsoft, Google and Amazon Web Services — found that 99% mentioned AI or generative AI. She also noted board conversations about generative AI are outpacing talks about cloud computing and happening 2.5 times more than talks about digital transformation.
“Large tech companies have built businesses on taking risks,” said Greene. “They have both the capital and culture to continue to invest in the potential. They are building out the infrastructure, data governance and workflows to support the future transformation that AI can bring to their business partners. Their partnerships and monetization of these future AI features and applications will ultimately determine when these early investments become profitable.”
Here’s a look at some of the individual earnings highlights that focused on AI efforts:
On Meta’s earnings call, CEO Mark Zuckerberg said more than 1 million advertisers in the past month have used at least one of Meta’s generative AI ads tools for image expansion, background generation and text generation. He also noted recent AI-powered additions to automated ad platforms like Advantage Plus, which recently debuted a new AI images creation tool and additional conversation types. Other new AI features include AI agents for business and this week’s debut of a new AI Studio for creators.
Zuckerberg also noted the progress Meta has made with its Llama family of AI large language models and improvements for content recommendation systems across its family of apps. Ray-Ban Meta glasses have also been “a bigger hit sooner than we expected” thanks to features like Meta AI.
Meta execs are showing a renewed confidence as the company starts seeing some returns for advertisers. Meta’s AI-enabled tools helped generate strong returns for advertisers, according to a research note by William Blair, which cited Advantage Plus driving average of 22% higher return on ad spend for U.S. advertisers. The report also noted Meta AI usage garnering billions of interactions while Meta’s recommendation engines drove engagement across its Family of Apps including Reels engagement.
“In general, their tone is definitely increasingly bullish,” said Ralph Schackart, an analyst with William Blair. “I feel like they’ve sort of got the mojo back with their product momentum. You can hear it sort of in their voice inflection. At least to me, it feels like they’re operating off the balls of their feet versus sort of leaning backwards.”
Google added more than 30 new AI-powered ad features and products in the second quarter across its platforms for Google Search, Performance Max and Demand Gen. Alphabet’s quarterly results, released last week, also said 1.5 million developers are now using developer tools powered by Google Gemini while AI helped Google Cloud hit $1 billion in profit for the first time.
CEO Sundar Pichai said Google is seeing progress for AI search features like AI Overviews, which he said is getting higher engagement from users ages 18-24. AI features increased average profit uplift for shopping campaigns by 15% and helped beta tests of virtual try-ons attract 60% more views for shopping ads. Google also said it used generative AI features to create nearly 4,500 variations for a campaign promoting the Pixel 8 smartphone across YouTube, Discover and Gmail. But despite the growing confidence, AI isn’t changing all platform at the same pace.
“In terms of getting real generative audio, video experience is working well,” Pichai told an analyst who asked about AI reaccelerating YouTube growth. “I think there is still — it’s going to take some time. But over time, obviously, it will be deeply relevant to YouTube. And so, it’s an area I’m excited about in the future.”
Schackart, the William Blair analyst, also noted that Google AI features are also gaining traction with advertisers. Ad buyers are seeing results with ads within AI Overview, Google’s generative search feature, but some also expect increased ad prices for keywords within AI-powered search. He also noted organic traffic is also starting to “wane a bit’ as generative AI ads perform better than traditional Google search.
“Probably the biggest trend quarter to quarter is these companies are giving specifics on how Gen AI is impacting their ad businesses,” Schackart said. “I think before it was just conceptual, sort of the hope that these benefits would materialize after the big [capital expenditure] build out.”
Microsoft
AI-enabled products like Bing and Edge helped Microsoft see a 19% year-over-year increase in search and news ad revenue, excluding traffic acquisition costs, which Microsoft CEO Satya Nadella attributed to improved execution and “healthy volume growth.” He also said people have used Copilot to create more than 12 billion images and have 13 billion chats so far in 2024, a 150% increase since the start of the year.
Nadella also mentioned advertisers are using AI-enabled features to improve ad optimization and create campaigns with Copilot and Microsoft Performance Max. Microsoft said it now has 60,000 Azure AI customers, a year-over-year 60% increase, while its AI-powered data platform Microsoft Fabric has 14,000 paid customers for a 20% quarter-over-quarter increase.
Snap Inc.
Snap reported a 16% year-over-year revenue increase to $1.2 billion for Q2 2024, driven by twice as many active advertisers, and growth for generative AI and augmented reality innovations. It also saw daily active users rise by 9% to 432 million while Snapchat+ subscriptions reached 11 million. Snap also noted generative AI augmented reality lenses had high engagement, including one made with with Beyoncé for her “Cowboy Carter” album that was engaged with 80 million times in three days.
Other ways AI came up in various earnings results and analyst calls:
- Pinterest: Pinterest reported $854 million in Q2 revenue and 12% growth in monthly active users, which CEO Bill Ready said was driven by AI-powered products. However, after beating analyst estimates, its stock fell nearly 15% due to a weaker forecast. The company plans to continue investing in generative AI features for advertising automation, creating new ad assets and improving content discovery.
- Apple: CEO Tim Cook used the company’s earnings to preview its upcoming Apple Intelligence platform. On Apple’s earnings call, he mentioned upgrades for Siri and new integrations with ChatGPT. He also promised to add in privacy protections and suggested the new AI features will be “another reason for a compelling upgrade” when people consider buying the next iPhone.
- Sirius XM: CEO Jennifer Witz said Sirius XM has continued using AI tools to generate synthetic voices and improve measurement targeting. (Beyond AI, she also mentioned working with The Trade Desk on UID 2.0.)
- Amazon: The e-commerce giant had slower ad revenue growth, reporting $12.77 billion but falling short of analyst estimates. On the AI front, Amazon also touted recently added features over the past three months including its Rufus shopping assistant for U.S. mobile customers, a Maestro AI playlist generator for Amazon Music and AI-powered search features for Fire TV devices.
- Ebay: It touted new generative AI-powered features like its “Shop the Look” tool and an AI background enhancement tool to improve the buying and selling experience, especially for fashion buyers in the U.S. and Europe.
AI stories from across Digiday:
- Microsoft report highlights AI efforts around election misinformation and harmful deepfakes
- Why YouTube and TikTok creators aren’t going all-in on AI-generated videos
- ‘Is it even worth it?’: Confessions of an agency exec on client challenges with generative AI peak
- ‘It’s a perception worry’: Marketers say AI safety guardrails need more nuance
- Why AR and VR are not going away, as AI advances personalization, measurement
- Perplexity’s new rev-share publisher program is live, but not all pubs are sold
Prompts and Products: Other AI news and announcements
- WPP and Nvidia announced a new partnership for creating AI-generated 3D virtual worlds.
- Canva announced it has acquired the AI image startup LeonardoAI.
- Runway debuted its Gen-3 Alpha image-to-video model. It’s also faced recent scrutiny for allegedly training its models using YouTube content.
- Apple previewed the first new features for its new Apple Intelligence platform.
- X CEO Elon Musk shared an AI deepfake of Kamala Harris, prompting more concerns around how AI-generated misinformation could impact the U.S. elections. X’s platform Grok has also faced criticism for creating and spreading misinformation about elections.
- The European Union’s AI Act went into effect, but enforcement won’t begin for another two years.
- Meta debuted a new AI Studio for creators and ways to create Instagram chatbots. (It also ditched plans to create AI-powered celebrity avatars.)
- Complex Magazine debuted a GenAI deepfake of Eminem’s alter ego Slim Shady to promote a July cover story about Marshall Mathers.
- OpenAI expanded access to its advanced voice AI tools months after putting them on pause.
- IPG Health announced a way to create more campaign assets using custo AI models and Adobe Firefly.
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