Baird's Colin Sebastian on Meta: Margins, investments are concerns but look further ahead

Kelly Evans (The Exchange Host) 00:00.310

colin sebastian is baird senior internet analyst colin welcome to you do you how do you expect them to flip the narrative here

Colin Sebastian (Senior Internet Analyst) 00:07.240

yeah kelly thanks for having me so you know our point today is is not to say that they're not legitimate concerns over over margins and investments by meta in fact we've highlighted those for several months but what we're nudging investors to do is look a little bit further

Colin Sebastian (Senior Internet Analyst) 00:21.640

ahead especially given the importance of the AI theme meta will be launching a lot of AI product next year leveraging all the star talent that they hired in twenty twenty four and twenty twenty five and we think that will create or could create more of a halo around the company

Colin Sebastian (Senior Internet Analyst) 00:37.870

and and help sustain healthy growth

Kelly Evans (The Exchange Host) 00:39.910

what kind of product and it's it's so funny because i understand that everyone 's piling on them for not having the killer app or something but they have instagram which is this is a great algorithm tons of ad load now clearly being optimized daily by AI mean this is what i

Kelly Evans (The Exchange Host) 00:56.430

imagine is going on in the background that is probably tell me that's not as great an advertising model as what google used to have

Colin Sebastian (Senior Internet Analyst) 01:03.190

well it's a fantastic advertising model in fact google meta accounted for about eighty percent of the entire industry 's growth this year and i think it's layering on top of that and the AI the large language model the next llama model from the AI team at meta that's going to

Colin Sebastian (Senior Internet Analyst) 01:19.390

build the next foundation for these apps not just facebook and instagram but also threads also whatsapp and importantly meta AI the app as well as wearables which will be a key factor we think going forward in twenty twenty seven right

Kelly Evans (The Exchange Host) 01:33.910

so you know in other words do you think they need new products and you know models that we're all using or can it just be enough that time spent on instagram goes up well

Colin Sebastian (Senior Internet Analyst) 01:45.350

i think it's a combination i mean certainly those are the core apps and there's a there's a big gap between monetization on meta versus monetization on google so we we still see a lot of growth there but meta is a company that's very adaptable we've seen the company transform

Colin Sebastian (Senior Internet Analyst) 02:00.430

through the mobile app transition through a lot of the the first party data issues with with apple with the tik tok obviously ramping up significantly and we think these are just another stair steps for meta more technology transformation and it'll be both it'll be the core apps

Colin Sebastian (Senior Internet Analyst) 02:16.990

as well as these new products we'll start to see next year

Kelly Evans (The Exchange Host) 02:19.590

before you go colin i'm also curious about this winning stretch we've seen in shares of airbnb kind of a complete pivot but it's interesting to watch the market tell you something might be going on there and what do you think that's something might be

Colin Sebastian (Senior Internet Analyst) 02:31.470

yeah i think for airbnb i mean it you know it's really been the early stages of of monetization growth on the platform and i think investors are now looking ahead to adding a loyalty program adding hotel listings adding advertising as a revenue source those are all incremental

Colin Sebastian (Senior Internet Analyst) 02:47.870

to growth the second key topic is you know nobody 's surfing online anymore ask anybody under thirty years old so when you go to chat GBT or gemini companies have to have unique services unique products in order to to be seen or to be found and airbnb has that they're not

Colin Sebastian (Senior Internet Analyst) 03:04.910

selling reselling a marriott hotel room where you can rent anywhere they're selling unique to inventory and so in general sites like airbnb that have access to longtail unique inventory and and products are going to do well and that's an increasingly important theme because

Kelly Evans (The Exchange Host) 03:19.910

you think if i'm chatting with chatgpt and i'm saying hey give me an example right where they would point me to an airbnb listing instead of a traditional hotel or something like that

Colin Sebastian (Senior Internet Analyst) 03:29.670

yeah and and the the inventory of those rentals on airbnb is unique so you know as opposed to being one of many different sites that has a certain product a commodity product or a commodity hotel room