AI is all the buzz—and the world of advertising does not appear to be an exception. Meta has high hopes for the role of artificial intelligence in advertising, with CEO Mark Zuckerberg saying on a recent earnings call that “AI is going to change advertising in a big way.”

Meta Head of Global Business Nicola Mendelsohn joins Yahoo Finance Live at the World Economic Forum in Davos, Switzerland to discuss the incorporation of AI in advertising and how the company is leveraging AI for advertisers.

Mendelsohn states that current AI tools in its Meta Advantage suite have assisted in “really significant growth for advertisers" who have seen “better targeting and better performance.”

Mendelsohn sees a “cautious optimism” from advertisers who utilized internet advertising less in 2023.

According to Mendelsohn, access to tools are not limited to size, noting: “It’s always been about the democratization of digital marketing,” with companies of all sizes utilizing features such as reels for advertising.

With the upcoming presidential election, Mendelsohn states the company is “constantly working out what our [Meta’s] playbook is,” in terms of political advertising regulations—not just in the US but globally.

It's all part of Yahoo Finance's exclusive coverage from the World Economic Forum in Davos, where our team is speaking to top decision-makers as well as preeminent leaders in business, finance, and politics about the world’s most pressing issues and priorities for the coming year.

Editor's note: This article was written by Eyek Ntekim.

Video Transcript

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- On Meta's last earnings conference call, CEO Mark Zuckerberg said that AI is going to change advertising in a big way. And we have the perfect person to talk about that, the head of the Global business group at Meta who's in charge of advertising among other things. Great to see you. Nicola Mendelsohn is here with us in Davos. So Nicola, it's already changing advertising in many ways. So talk to us about what you're already seeing and what we may yet see in terms of the two.

NICOLA MENDELSOHN: OK. So back in '22, we brought together all of the products that we have that are actually powered by AI into our Meta advantage suite. And what we're seeing now is that our advertisers on the whole are using at least one of those products. And the reason they're doing that is because it's giving them better targeting and better performance. On average, they're seeing about a 32% increase in return on their advertising spend. So this is really significant.

So this is where we are already today. We're going to continue to be investing to deliver stronger performance for our advertisers. But also when you start to think about generative AI, well, that's where we're really going to see some exciting changes, and we already are. So when it comes to-- we launched last year our whole generative AI sandbox, and we're seeing our advertisers now starting to do image creation in there. We're starting to do image enhancement. We're starting to see copy being done.

And so this allows advertisers to do so much more personalized marketing at scale, which I think is going to be very significant.

- Can you call the end to the ad recession that played out a lot last year?

NICOLA MENDELSOHN: Well, we're starting to see already that the mood here, this Davos is pretty similar to last year, which is there's a cautious optimism in the air. I think advertisers are getting more comfortable in uncertainty. And we're certainly living in very uncertain times. But ultimately, advertisers are going to advertise where they're getting strong performance. And with some of the numbers that I just shared with you, they're certainly seeing that from the Meta suite of products.

- And what does the balance look like between-- I mean, there's obviously a lot of small advertisers across the Meta platforms, but you also deal with a lot of the big advertisers. So what kind of differences are you seeing in demand between large and small companies?

NICOLA MENDELSOHN: Actually, I mean, one of the things that I think is wonderful about Meta is, in very much, it's always been about the democratization of digital marketing. So it doesn't matter if you're the world's biggest advertiser, the world's smallest advertiser, you still have access to the same tools. And so they're using all of them. I mean, they're really are enjoying the Meta Advantage suite of products. It's really important.

We're also seeing a big take up in reels. Three-quarters of our advertisers, large and small, are actually using reels now in their advertising. And that's not a surprise because we're seeing that people are really enjoying reels. We're seeing hundreds of billions, 200 billion real plays a day and very high engagement. We're seeing hundreds of millions of comments that are-- or shares that are actually happening. So we're seeing really deep engagement in that reels product.

And a lot of that, of course, is also powered by AI.

- What about the uptake in terms of ads for Threads?

NICOLA MENDELSOHN: Well, I knew you were going to ask me on that. So we're very excited about the launch of Threads. We shared that there's been hundreds million people utilizing it. We think they're really enjoying it. And it's actually far exceeded our expectations in terms of the take up. And we recently just launched it also in Europe as well. But to your question, well, it's a little too early for that.

The way that we build products, I think you know this now, is that we really make sure that we get the engagement there with people, and that they get there, that's what we did with reels, that's what we did with stories. And when we see that depth of engagement and the scale that we want to get it at, that's the point of which we'll bring in monetization. And I promise you, you'll be the first to know.

- I will ask again.

NICOLA MENDELSOHN: I know you will.

- Obviously Threads is the most direct competitor to the artist formerly known as Twitter. Are you seeing any of the advertisers who had temporary or even more permanent boycotts there deploying more ad dollars on the Meta platforms?

NICOLA MENDELSOHN: So I think ultimately it's about where advertisers are getting their performance. And what advertisers are telling us that they're getting really strong performance on our platforms. As I said, we don't have advertising on Threads yet. But people are looking to where they can get the most return and I'm really pleased with the fact that they're seeing that on our platforms.

- I think investors are digesting what happened in the Iowa caucus. Former President Donald Trump really had a strong showing there. As we approach the election, do you think advertisers will pause their spending because of what could be another Biden-Trump rematch?

NICOLA MENDELSOHN: So I think what we're hearing from advertisers is they really want to understand what we're doing when it comes to elections. And we're not sitting here waiting every four years for what's going on in American elections. Actually we're working on elections all over the world every year. And we're constantly working out what our playbook is, to think about it like that. So one of the things that we will do that we do with elections all around the world is actually to set up a special unit that works on the election.

We've got very clear guidelines about who can advertise. People have to be registered as a political party so that when the advertising runs actually you can-- people can see that it's being put out there by a political party. And then any of those ads actually go into our ads library. And there are now over 15 million ads in that ads library that you and I anybody can go out and have a look at. And of course, we don't just allow anything.

And what you'll see is a week before the actual election in America, we will stop any new advertising. And the reason for that is because we wouldn't have time to go and actually check the validity of the claims being made. So we think that's a really important thing when it comes to the election.