The AI revolution is an advertising revolution: Morning Brief

May 2, 2025

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Sure, going on popular podcasts to show a more human side is nice.

But what about claiming to grow the entire advertising market through AI and, in turn, changing the makeup of global GDP?

That’s Meta CEO Mark Zuckerberg’s vision anyway. And Wall Street appears to be buying into it.

If investors are still searching for answers to nagging questions about how massive AI investments will pay off, Zuckerberg provided the clearest reply yet: It will strengthen our core business. In fact, it is our business.

“Businesses used to have to generate their own ad creative and define what audiences they wanted to reach, but AI has already made us better at targeting and finding the audiences that will be interested in their products than many businesses are themselves, and that keeps improving,” Zuckerberg told investors on the company’s earnings call this week.

“If we deliver on this vision, then over the coming years, I think that the increased productivity from AI will make advertising a meaningfully larger share of global GDP than it is today.”

As hefty as that pronouncement might seem, it appears to have struck the right tone, avoiding the world-conquest AI rhetoric that other tech boosters have relied on and have yet to back up.

But this isn’t a modest aim either.

Zuckerberg used to win Wall Street’s approval by proving that his trillion-dollar ad machine was still humming and investors would tolerate Meta’s enormous AI spending. This time around is different — for all of Big Tech.

On what many believe to be the cusp of an economic downturn, Meta isn’t pitching its AI developments as an add-on to its operations, but as something central to its core proposition of targeted advertising.

The company’s ever-increasing AI spending isn’t a R&D lark, as more bearish investors scarred by the Metaverse see it, but an amplification of what the company does best.

“While Meta’s investments in GenAI have spooked certain investors who continue to question the return on these investments, we saw further signs of GenAI monetization in the firm’s ad business,” wrote Morningstar equity analyst Malik Ahmed Khan in a note on Thursday.

In a powerful showing, coming after Alphabet’s own impressive results, Meta noted that a new ads recommendation model it’s testing for Reels has already boosted conversion rates by 5%. And nearly one-third of advertisers were using AI creative tools in the past quarter.

For Zuckerberg, the enhancements AI offers to finding the right consumers and providing measurable results strengthen the case for boosting capacity and for a revamped model of advertising’s scope.

And with the company set to invest upwards of $70 billion toward its AI opportunity this year, the bet is not all about ads, of course.

Zuckerberg outlined four other areas of focus for its AI efforts: business messaging, Meta AI, AI devices, and more engaging experiences.

Meta’s efforts can also be viewed as an ambitious play to take on its rivals across tech’s legacy and emerging platforms.

As John Blackledge, senior analyst at TD Cowen, said in a note on Thursday, the AI opportunities Zuckerberg outlined are about “ultimately taking on Google search, iPhone and ChatGPT all at once.”