META Muse Strengthens AI Profit Path, Trust in Platform Raises Next Roadblock

Marlee Caden (0:00)

Welcome back to Trading 360, I'm Marlee Caden. Even with a 4% pullback today, Meta shares are surging so far in September. The stock is up more than 25%.

It hit a new 52 week high last Thursday on the heels of Mark Zuckerberg, unveiling the company's Muse AI charm at the Meta Connect Conference. For more on what's next for Meta, let's bring in our panel today. Joining us, Ali Mogharabi, the Equity Analyst at West End Capital Management, and Dave Nicholson, Chief Research Officer over at Futurum. Great to have you both on. Ali, let's start with you here. It's absolutely fascinating, this Muse launch and how much optimism there is around it. Now, we have a physical element to the Muse launch.

They have spent years already putting AI into the products that people are using, but Muse is very different because customers have to choose to actively download it except for a few where it's embedded already into WhatsApp. How significant is that distinction here for Meta and what are you watching to determine if this initial excitement translates into lasting adoption?

Ali Mogharabi (1:03)

Sure. Great questions. First off, it is more closely aligned with the entire ecosystem.

Within WhatsApp, as you mentioned, obviously, it can also be separate, but I think there's a more likelihood that the current users of WhatsApp, consumers obviously, could actually adopt this more rapidly, and we've seen it with certain download figures out there. A few things to track is whether the downloading figures are actually decelerating or not. We haven't seen any indications of that yet. So that's one. And then the other one would be just that trust factor. Is there a trust factor in this app we have seen or in this agentic AI? And we have seen some issues over the weekend with I think there was some downloading of Mac files, obviously Meta addressed that very, very quickly. But I think that trust issue is the main factor in terms of whether user adoption will continue to increase and users will allow the agentic AI access to more personal information, which these days are taking a lot more seriously than they were in the early days of Meta or Facebook.

Marlee Caden (2:16)

And Dave, we had a very lengthy conversation about Apple's AI outlook. And you have such a way of phrasing how you're looking at everything. You call this a battle for context, rather than simply a battle for the smartest AI model. So what does Meta know about its users that could give Muse the advantage here over something like a Google Gemini or Apple's AI?

Dave Nicholson (2:45)

Yeah, Marlee, that's exactly right.

It knows more of your social media context, if you will. You could argue that in some of the social media apps that are part of the metaverse, I should say meta universe instead, that they know more intimate things about you that translate into buying behavior. So when you think about who is going to be at the forefront of directing your spend, they have a leg up. Now, as Ali just said, the real question here is a question of trust. Who are you going to give that permission to?

Purely anecdotal, I downloaded Muse and I hit a roadblock fairly early on with some permissions that I was not willing to give it, that I've already given to Apple and even Claude. So, real question here could cut generationally, of course, but I think that it's really a three-way race between Google, Apple and Meta at this point. There's plenty of room for everyone to grow. We just need to keep an eye on, yeah, downloads, but how much are people going to truly engage? How much commerce is going to take place as this goes forward?

Marlee Caden (3:59)

And Ali, analysts, as I was looking across some of the optimism around this, you have a very wide range of potential revenue estimates around Muse. Where do you think the economic opportunity comes from? And how big of a potential driver do you view Muse right now with the information that you have?

Ali Mogharabi (4:20)

Well, let's answer the second question first. Right now, it's not necessarily that big of a driver in terms of revenue growth.

But in the future, I mean, certain things could take place. So obviously, as mentioned, the agentic AI has a lot of information about you in terms of behavior, in terms of what types of interactions you have, how long you're looking at a certain IG clip, right? How long you're actually interacting on what topic with your various friends and or others on that social media.

And that gives them an idea in terms of, okay, what products should the agentic AI be seeking for you? The best value, the most attractive. It just again depends on what types of characteristics in certain products you're looking for. So obviously that could improve the conversion rate or basically end up in actually a transaction so they could get nice revenue share from those. But one thing I think many should take into account is that this could also to a certain extent, I'm not saying significantly, to a certain extent cannibalize advertising revenue because then ad placement, the return on ad placement for brands may actually decline because again, this is just an agentic AI going in, just utilizing that data, not necessarily getting as much emotional feedback from you and just trying to close that transaction ASAP. So there could be some ad revenue cannibalization in terms of how significant that remains to be seen.