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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Wednesday this week should have been a red-letter day for investors in social media company Meta. After a rapid path through Congress, President Joe Biden signed a new law requiring Chinese internet company ByteDance to sell the US end of its TikTok service or see it banned from the country’s mobile app stores. The wildly popular viral video platform, which once seemed an existential threat to Meta’s Facebook and Instagram, looked to have been defanged.
By the end of the day, however, that was long forgotten. An unpleasant shock from Meta’s latest earnings report initially wiped $200bn from its stock market value. With its ambitions around artificial intelligence growing, the company warned of an unexpected leap in costs and capital investment, with no promise of exactly when the increased spending would pay off.
The midweek whiplash for Meta shareholders speaks volumes about how fast the focus of competition has shifted in the tech world. Four years ago, before Meta (then Facebook) launched its own short video service, Reels, TikTok was seen as the greatest threat to its dominance. But the opportunity — and perils — from generative AI have opened a new wave of direct competition between the tech giants that could far exceed the perceived threat TikTok once posed.
The fact that Meta’s share price hasn’t responded to the action against TikTok is partly due to the uncertainties that still hang around the move. An attempt to ban the service in 2020 failed in court, and a legal challenge is expected on free-speech grounds. This time around, congressional leaders believe that stressing the national security risks posed by the Chinese-owned service will carry the day.
Even if the new law were to result in TikTok being shut down completely in the US, the financial effects for Meta would be minimal. TikTok generated around $6bn from US advertising last year, according to digital advertising analyst Brian Wieser — a drop in the bucket compared to the $138bn in advertising Meta produced.
Meta CEO Mark Zuckerberg’s sights are no longer fixed on TikTok. He was clear this week about where he plans to spend most of his time for at least the next two years: on AI, a technology he claimed would carry Meta well beyond its social media roots. Zuckerberg has a new pitch: “Creator AIs”, personalised chatbots and agents that he hopes will provide a much more engaging way to reach customers.
The idea of chatbots is hardly new — Facebook has tried them before without success. But what was new this week was the depth of Zuckerberg’s enthusiasm for the idea, and the extent to which he is swinging his company’s resources behind the new wave of generative AI.
Meta had been a latecomer to the large language model party, dominated by OpenAI and Google. Its decision last year to release its own model in open-source form was seen as a clever way to make up for lost time. By offering a way for others in the tech world to use the technology themselves, Meta increased its influence and potentially reduced the costs of maintaining the technology. But the company’s CEO said this week that progress since then had given him a whole different view.
In Zuckerberg’s latest vision, the pursuit of AI is no longer just about finding new ways to boost engagement on the company’s social networks or improve the effectiveness of its advertising. Instead, it will have a far more dramatic impact, carrying Meta well beyond the social networking world that has defined the company in its first 20 years of existence. It is now bent on building AI-powered agents capable of carrying out complex tasks for its users, throwing it into direct competition with Google and the Microsoft/OpenAI partnership.
“We have shown we can build leading models and be the leading AI company in the world,” Zuckerberg declared.
No wonder Wall Street has caught fright. Eighteen months ago his insistence that Meta was all-in on its big bet on the Metaverse hammered the share price. The stock has since risen nearly fivefold, thanks largely to a reversal of course that saw Zuckerberg slash the Metaverse spending and promise a new focus on cost efficiency.
This week, everything has changed again. Meta’s new pursuit of AI agents as providing the key to the next era of online activity has brought head-on competition between the biggest tech companies a step closer. And for now, the Meta chief executive is making no promises about when the pay-off will come.
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