AI Ruins Profits
As Tik Tok continues to take the lion's share of the time spent on social media, platforms like Youtube and META are trying to copy its secret ingredient… artificial intelligence.
Artificial intelligence is responsible for the incredibly addictive nature of Tik Tok. Leveraging the power of complicated algorithms, Tik Tok has found a way to draw users in for longer than any other platform.
In an effort to compete, META has pivoted away from their old model of letting your friends' interests dictate what you see, to now solely relying on AI to make the right content predictions.
As displayed in META’s most recent filings and future projections, their capital expenditure has and will continue to rapidly increase. One reason for this large increase in spending may be that developing and maintaining advanced AI is just a more expensive endeavor than the old way of doing things.
I think that it is possible that the more dominant AI becomes on social media platforms, the more these platforms will have to spend on advancing their algorithms to compete with one another. This competition would ultimately result in lower profit margins for everyone.
However, an alternate scenario could be that rather than stealing share from one another, these social media platforms could end up stealing some screen time away from television, (which is still responsible for almost 50% of consumers screen time spent.) In that case, AI would be an overall positive for the profits of social media giants. *
*The increasing user engagement on Facebook despite an even greater user engagement increase on Tik Tok, may be a hint that the AI increasing the total screen-time spent on social media as a whole may be true.