By Isabella Fleischmann and Filipe Serrano
In its “year of efficiency,” as defined by Meta co-founder and CEO Mark Zuckerberg after massive layoffs, the parent company of Facebook, Instagram, and WhatsApp has chosen the payments frontier through WhatsApp in Latin America as one of its priority projects, according to Maren Lau, vice president for the region.
The company has also been using artificial intelligence (AI) to improve efficiency in ads, its main source of revenue, and is looking to expand commerce through the messaging app.
This focus also comes amid increasingly intense competition with TikTok.
In March, the company announced that it planned to lay off around 10,000 employees and close 5,000 open positions in its second round of cuts in four months.
In the first round, in November, 11,000 positions were cut, approximately 13% of the team, which also impacted Latin America.
These cuts, combined with the prospect of a pause in the US monetary tightening cycle, helped Meta’s shares recover after a 64% drop in 2022.
This year, the company’s shares accumulated gains of 84% as of last Friday (14).
In an interview with Bloomberg Línea, Lau highlighted the growth of Reels, Instagram’s short video tool that competes with TikTok, as a way to reach its audience.
Lau said Brazil and Mexico are big Reels users and that 40% of companies are showing ads in this format through the platform today.
Growth opportunities in Latin America center on demand for paid solutions and the prospect of a more developed digital advertising market in the region, regardless of changes to privacy rules implemented by Apple.
In March, Meta received authorization from the Central Bank of Brazil to operate with consumer payments to small and medium-sized companies.
The service was launched last week.
“Payments and financial services are very relevant topics in Latin America.”
“There is a great need for payment solutions in the region, in Brazil, in Mexico, and there is a great opportunity for several players in the financial ecosystem,” said the executive.
According to her, Meta tested the service with a select group of partner companies, acquirers such as Cielo, which performs payment processing for person-to-person transactions, and credit card companies such as Mastercard and Visa.
“We’ve been working closely with the Central Bank over the last few months, with their guidance,” she said.
“We’ve been working a lot with brands and acquirers, and payments through WhatsApp will add a way for people to connect with small and medium-sized businesses in Brazil.”
The executive did not disclose data on the penetration of person-to-person payments via WhatsApp, a service announced by Meta in 2020, which only received approval from Brazilian authorities after the launch of Pix, the Central Bank’s free instant payment system.
CONNECTING WITH BUSINESSES
If, in its early years, Facebook defined itself as a platform for social connections between people, for some years now, Meta has been focusing on its business with companies, with increasing use of artificial intelligence to improve conversions and ad performance.
The growing use of Meta’s platforms as business and payment tools, in turn, fuels the platforms’ relevance and user base in a sort of virtuous circle.
“As we work with businesses to improve their connections with consumers, we see our platforms growing at the same time.”
“So, at our latest earnings conference call, we announced that we now have 3.7 billion people using our platforms.”
“Facebook is up to 2 billion daily active users. And so we continue to invest in that.”
Therefore, the plan is to monetize these connections with businesses made through Meta’s platforms.
Another bet of the company in Latin America is on WhatsApp and Messenger’s messaging platforms and how they can be used in business.
In Brazil, Meta has a partnership for chatbots with Take Blip, a startup of communication solutions between brands and consumers on WhatsApp and Instagram.
Take Blip announced on Monday (10) the start of its operation in Mexico.
According to a study conducted by the startup, by 2028, WhatsApp is expected to be used by more than 80% of Mexico’s smartphone-owning population, a growth of 11% compared to 2022.
For Instagram, Take Blip forecasts a 60% user growth between 2022 and 2028.
2023, “THE YEAR OF EFFICIENCY”
Meta’s push into the region comes at a time when advertisers are rethinking digital spending due to economic pressures from rising interest rates and a decline in the effectiveness of online advertising after Apple implemented new privacy rules on iPhones.
Late last year, Apple tightened privacy policies to restrict how users can be tracked and targeted for advertising. Zuckerberg said the tech giant’s rules represented a “conflict of interest.”
The change affected social networking companies like Twitter, Facebook, and Snap.
Asked by Bloomberg Line, Lau said she “doesn’t think this issue is relevant.”
But despite the new conditions for online advertising, Meta foresees a “continued, strong and thriving” digital ad market in Latin America, according to Lau.
She cited an Insider Intelligence study that projects 14% growth for digital advertising in the region, compared with the overall growth of 10%.
In the fourth quarter results, Latin America entered the “rest of the world” category, which grew 5%.
The company, therefore, anticipates an acceleration of growth in 2023.
And this occurs in a context in which, globally, Meta has entered the aforementioned “year of efficiency”, which includes staff cuts and the need to ensure solid financial bases to level the organization and increase productivity, as well as prioritize projects.
The vice president for Latin America declined to comment specifically on the cuts for the region.
According to Lau, the closure of the company’s office at Infinity Tower in the Itaim region of São Paulo and its move to B32, on Faria Lima Avenue, was a relocation for more space.
REELS, AI, AND MESSAGING
In Latin America, the social networking company has focused on B2B e-commerce – between businesses – and has sought to support companies in three areas:
- improvements in artificial intelligence;
- messaging and commercial payments;
- and Reels, Meta’s version of TikTok.
In this context, Meta’s investments in AI (artificial intelligence) aim to add value to businesses by improving conversions and the cost of ad performance.
According to Lau, the business messaging service is another area of expansion, as Latin America is one of the leading regions for Meta’s operations globally in user purchases and business relationships, especially on the Messenger and WhatsApp platforms.
The executive also said that the estimated annual revenue generated by the “click-to-message on WhatsApp” feature – when the online ad directs to open a WhatsApp conversation with the marketer – is US$10 billion (per annualized rate, run rate).
The big tech also said it is investing billions of dollars in keeping its platform safe, removing content that violates existing rules, and analyzing the necessary measures to allow customers to return to the platform.
Latin America was one of Reels’ first test sites.
“We already see the rise of Reels on our platform.”
“The shift towards short-form videos continues, and how we help businesses connect with consumers on our platform is critical.”
“So we see a significant opportunity ahead with businesses,” said the VP.
For Meta, Reels is part of a suite of ad products and formats across Facebook and Instagram platforms.
This tool allows businesses to reach consumers across multiple services and formats.
According to Lau, short-form videos are a new area of expansion as consumers are exhibiting new behavior on the platform.
Without guiding growth and penetration expectations, the executive said she foresees growth in monetization for Reels.
When asked about competition with TikTok, the executive said that short-form video responds to a consumer behavioral demand and that Reels is responding to the needs of this audience.
Meta said it invests heavily in AI technologies to enhance its advertising, content search, and discovery platform businesses.
According to the VP for Latin America, the company has achieved 20% incremental annual business conversion through these initiatives.
“With our investments in artificial intelligence, for example, with our lead shopping product, we see businesses have 20% additional conversions year over year.”
“That’s a significant amount of value going to businesses, reducing the cost of ads,” she said.
Generative AI, which has become a key project for other tech giants such as Microsoft, Google, and Amazon, is also in Meta’s focus, as the technology can create content.
This can change a company’s ability to implement its creative arts marketing budget more nimbly and efficiently, according to the VP.
She added that small businesses would benefit from AI-based automation, which can help them save money, allowing them to invest and expand their businesses.
Meta said it has teams of engineers worldwide working on AI projects for different purposes, such as strengthening recommendations, safety, and security on its platform and optimizing advertising campaigns.
According to Lau, Meta has invested 80% of its resources in its core platforms and businesses to empower client companies to be more efficient.
“Lead buying is a key area and allows advertisers to optimize a hundred variables in targeting and creative that a person doesn’t need to spend hours doing,” she said.
According to Lau, AI-powered engines will quickly use machine learning to identify the most efficient customers across Meta’s platforms.
With information from Bloomberg