Dive Brief:

• Meta Platforms saw revenue grow 23% year-over-year to $34.1 billion in Q3 2023, according to an earnings statement. Daily and monthly use of its family of apps both increased 7% year-over-year.
• Online commerce, CPG and gaming verticals were the largest contributors to year-over-year ad revenue growth. The total number of ad impressions served across Meta's services increased 31% while the average price per ad decreased 6% due to strong impression growth. 
• Reels is now neutral to overall ad revenue, and the company is continuing to improve monetization as the feature is estimated to have driven a more than 40% increase in time spent on Instagram since launch. Meta continues to expand AI capabilities for advertisers, with Advantage+ shopping campaigns reaching a $10 billion run rate.

Dive Insight:

Meta's year of efficiency, coupled with a rebounding ad market, have helped the company score its highest revenue growth rate since 2021. Executives attributed the revenue performance to its ability to deliver engaging experiences as Facebook and Instagram engagement remains strong and Reels and other video content drive incremental engagement.

To turn that engagement into revenue, the company is working to improve Reels monetization, create new on-platform ad experiences, help advertisers connect to marketing data and leverage AI across ads and products.

Reels has "graduated" to being a core app offering, according to CEO Mark Zuckerberg, and is now net neutral to overall company ad revenue — a milestone it hit earlier than expected. However, Meta is not planning to breakout its net revenue contribution in the future. Instead, the company plans to improve ad performance and interactivity, while looking to balance engagement and growth, in Reels and video more holistically across its portfolio. 

AI was a focus of the earnings call, as Meta looks to invest and expand a range of tools across advertising, feeds, messaging, hardware and beyond as the area becomes a major theme in 2024. The company is seeing "strong traction" with its Advantage+ Shopping solution, especially around online commerce and CPG advertisers, and more than half of its advertisers are using Advantage+ creative tools to optimize images and text in ad creative.

While Reels and AI are contributing to the company's growth, other areas have not taken off. Zuckerberg said that Threads, the company's competitor to X (formerly Twitter), is still focusing on growing the community as it seeks to become "a billion person public conversations app that is a bit more positive." And despite new launches around its Quest 3 headset and Ray-Ban Meta smart glasses and expanding testing of its Horizons software, the metaverse experiments that give the company formerly known as Facebook its name are still in the red: Reality Labs saw an operating loss of $3.7 billion.

Meta expects Q4 2023 total revenue to be in the range of $36.5 billion to $40 billion. The company has been seeing strong advertiser demand in key segments, but also more volatility. While it does not have material direct revenue exposure to Israel and the Middle East, the company has observed softer ad spend in the beginning of Q4 that correlates to the start of the conflict. 

Meta is also monitoring a regulatory landscape that could "significantly" impact its business in the future, and executives specifically called out the FTC's efforts to modify its consent order and impose additional restrictions on the company.

"We are contesting this matter, but if we are unsuccessful it would have an adverse impact on our business," said CFO Susan Li.