Mark Zuckerberg's decision to rename his company Meta Platforms will go down as one of the silliest ideas in American corporate history, right up there with New Coke and the Ford Edsel.
For investors, every utterance of the word " Meta" is an unpleasant reminder of Zuckerberg's commitment to the metaverse, a mammoth long shot that's years from ever paying off. Fortunately, the Facebook founder has some other promising things up his virtual sleeve. More on that later.
You could see the market's metaverse disdain playing out in real time this past week during Meta Connect, the company's annual developer conference.
Zuckerberg kicked things off with the widely telegraphed launch of the Quest 3 mixed reality headset, which goes on sale soon for $499. It's a nice upgrade, with better graphics and sound. I tested a few games. The "rhythm action game" called Samba de Amigo was fun -- turns out I am a master of virtual maracas. But a virtual Lego game was a poor substitute for actual Legos. Meanwhile, a mixed-reality Stranger Things game left me feeling vaguely nauseated.
The more Zuckerberg talked up Quest 3, and new experiences in the company's Horizon Worlds virtual reality platform, the lower Meta's (ticker: META) stock went. Then he followed up the Quest 3 by introducing a new version of the company's Ray-Ban smart glasses, which are basically a sleeker, better designed version of Google Glass. Those VR glasses, you might remember, launched in 2013 before getting mercilessly pulled off the market. The Ray-Bans are nicely designed, but I'm not sure I would wear them outside the house. They're a privacy disaster destined to get the wearer battered in a bar fight. By the time Zuckerberg was done with the Ray-Bans, the stock was off 4%.
But finally he got to the good stuff: a flurry of new initiatives in generative artificial intelligence software. Even for an old Meta skeptic like me, the announcements showed that the company is thinking creatively about AI as a way to make its platforms more engaging -- and eventually more lucrative.
Meta has used AI in its core business for some time now, to improve ad and content targeting across Facebook and Instagram. The company has also become one of the leading players in large language models, including the popular Llama 2 engine, which is available to anyone under an open-source software licensing model. But the new wave of announcements show Meta thinking cleverly about how consumers will experience AI in the years ahead, while opening up new business opportunities.
One new example is a text-to-image software tool called Emu, an acronym for "Expressive Media Universe." It will be familiar to anyone who has experimented with Adobe Firefly or OpenAI's DALL-e software. In Meta's case, the software will be embedded across the company's apps. It's already available in Instagram Messenger, where users can create Emu-powered stickers. I sent my daughter an image of a tap-dancing quokka.
My quokka didn't generate any revenue for Meta, but the concept has the potential to make the platform stickier -- and eventually it could be applied in commercial realms, like generating advertising images on the fly. Meta is also adding AI photo editing tools to images on Instagram.
Additionally, Zuckerberg unveiled Meta AI, a general-purpose chatbot like ChatGPT, Google Bard, and Microsoft Bing Chat. In Meta's case, the chatbot will be embedded (at least initially) inside Messenger and other apps.
Meta AI can be used in a group chat, where it acts as a useful information resource without leaving the app. One intriguing element of the Meta AI story is that it can access the open internet via a partnership with Bing (and not Google), offering current information on weather, news, and sports.
Finally, Meta launched a new family of chatbots -- 28 to start -- infused with celebrity personalities. I especially like the Dungeonmaster, a chatbot tied to Snoop Dogg, with a Dungeons and Dragons focus. I'm not much of a D&D fan, but if Snoop is the dungeonmaster, I'm there. Other bots are tied to Tom Brady, Kendall Jenner, and Paris Hilton.
Meta is opening the platform to businesses who can create their own chatbot personalities through a software tool it calls AI Studio.
After the keynote, Evercore ISI analyst Mark Mahaney wrote in a research note that he was incrementally more positive on Meta shares. He has a $435 target price, more than 40% above the stock's recent level.
Mahaney writes that Meta "may well be an underappreciated AI winner." He thinks the company "almost certainly" will drive improved user engagement on its platforms, while also allowing businesses to build their own AI chatbots "that can immediately scale across a large user base" of more than three billion souls. And he thinks that business-driven chatbots could be the long-awaited "monetization unlock" for the company's messaging services.
William Blair's Ralph Schackart also thinks the new AI capabilities will get people to spend more time across Meta's apps. He sees Meta AI as a shot across the bow for both ChatGPT and Bard in the emerging chatbot category.
I'd go one step further. Meta has the potential to turn its generative AI technology into a new player in the massive internet search category. When it comes to Meta, the important quest is the one for more ad dollars, not a nausea-inducing trip to the metaverse.
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