Can Meta Turn Muse’s Popularity Into Profits?

diplomats try and stave off a flare-up in the iran war plus can humanoid robots distract tesla investors from flat car sales and meta's muse ai platform is getting lots of love as an online shopping tool even as execs say that making it profitable will have to wait for another day these agents require lots and lots of compute and that costs the company lots of money to do and so we're not yet at a point where i think you can say this is a total home run for meta it's thursday october 22nd i'm luke vargas for the wall street journal and here is the am edition of what's news the top headlines and business stories moving your world today one person has been killed and eight others injured in an attack on a civilian airport in saudi arabia which authorities say was carried out by iran-backed houthi militants the u.s state department is now pulling some diplomatic personnel from the country in response to continuing threats from the yemen-based group earlier this month missile strikes hit saudi arabia's international airport in riyadh killing at least 12 people and injuring hundreds the houthis have threatened red sea shipping around the bab al-mandeb strait off the coast of yemen and attacked saudi oil pipelines they didn't immediately claim responsibility for the latest incident meanwhile middle eastern mediators are scrambling to give new life to talks with iran fearful that steps by both the u.s and israel could signal a possible escalation while president trump has said he wouldn't attack iran before the midterms are been waffle cons that the president has sounded some hawkish notes in recent days it's a push and pull because trump has said that he won't attack before the midterms obviously we know that he would be destroyed but he's not going to attack iran before the midterms because trump has said that he would be destroyed but he's not going to attack iran before the midterms to all market push prices up and that's not what he wants for american motorists who are about to decide who to vote on the other hand trump is under pressure from israeli prime minister benjamin netanyahu to carry the strikes as soon as possible because netanyahu is himself in a political campaign to be reelected and basically needs momentum to get voters on his side but in term of the movements you have two things happening you have a u.s aircraft carrying the strikes as soon as possible because netanyahu is himself in a political campaign to be is moving to the middle east you also had u.s diplomats were being asked to leave saudi arabia some of them or at least their families and all the parts of the region so you can sense that you know there's movement that would suggest preparation for a new wave of strikes but most likely after november 3rd a white house spokeswoman said the u.s wouldn't be attacking iran at any point prior to the midterms while netanyahu's office didn't reply to a request for comment nevertheless regional officials say they're taking the risk of escalation seriously and mediators have floated offers including the release of some frozen iranian funds in exchange for nuclear concessions from tehran in the hope of breaking a deadlock and talks for its part iran's foreign minister has said the country is open to negotiating but only if the u.s gives up its military options and high geopolitical tensions are boosting french defense and aerospace company talus which this morning announced that it will be opening up its military options to the iranian forces so far this morning reported a surge in orders through the first nine months of the year the company has recently bagged european and middle eastern orders for radar systems and air defense equipment and is scaling up a support and maintenance contract with the australian navy shares of tesla are down about five percent in off hours trading after the company reported flat sales for the third quarter european car sales were a bright spot though surging more than 70 percent of the company's sales in the third quarter and the company's sales in the third quarter and the company's sales in the third quarter and the company's sales in the third quarter percent in september compared to the previous year as the ev company gained ground in a region where chinese rivals have been dominating on the company's earnings call ceo elon musk said tesla's fleet of autonomous taxis will soon become a significant driver of revenue and that it would be ready to start shipping its optimist humanoid robots to outside companies by the end of next year humanoid robots in general will be the biggest product on earth so so it's a very big deal um but we should i don't want to temper expectations that we still have a lot to get through and it's about about a year or so that'll take us to get through all that stuff one thing musk didn't want to elaborate on was potential merger of tesla and spacex saying that talking about the tie-up was like tap dancing through a minefield and everything he'd had to say was already mentioned on spacex's earnings call on tuesday shares of ibm are dropping off hours after ceo arvin krishna offered this blunt assessment of the company's earnings call on tuesday shares of ibm are dropping off hours after corporate clients are viewing their ai budgets larger enterprises are becoming a lot more cognizant and a lot more aware of what is the true roi of all of their ai spend they're also getting worried is some of the ai spending completely out of control with no real return ibm stock had initially rallied after the company reported improving third quarter profit and revenue guidance across its software and infrastructure segments big blue also doubled down on its full year guidance of four to five percent revenue growth and speaking of growth nestle is seeing some of it particularly in its u.s snacking and pet care businesses reporter ame look covers consumer goods companies for dow jones news wires and told us that the turnaround shows that nestle has managed to remain resilient in spite of the disruption caused by glp ones and inflation hurting consumer spending nestle which has brands like kit kat and nest cafe beat analyst expectations on both growth and its whole revenue figures and that comes after it has shed big parts of its business like its waters vitamins and ice cream units and has undertaken massive job cuts very interestingly nestle's american operations did very well in food and snacking so even despite the rise of weight loss drugs and trendier kind of whole foods diets in the u.s nestle's frozen foods business remained resilient and the company's glp1 specific products mainly in the u.s and in the frozen foods business and its nutrition business are growing faster than the market nestle really grew based on volumes and that's kind of been their main priority because of high inflation and tighter wallets in the u.s when it comes to a lot of people switching to white label brands and that whole trend that we've been seeing so they've been focusing a lot on their volumes and not increasing prices too much nestle's results come ahead of a raft of u.s earnings due later today including from procter and gamble american airlines intel and ford coming up mark zuckerberg agrees to stay in california for now as meta splits its stock to potentially help him pay a future tax bill that story and more after the break shares of meta are rising off hours after the social media company yesterday reported record q3 revenue and detailed new plans about how it hopes to fund its massive ai investments tech reporter megan bobrowski covers meta for us megan i want to dive into the earnings in just a second but first let's talk about something else you've been reporting on which is this wealth tax that is looming in california we've talked about this before with our politics team but this actually came up yesterday with mark zuckerberg evidently sort of thinking about leaving the state before meta's board kind of got involved here to try to keep them there tell us what we're learning yeah so this is really interesting so as part of meta's efforts to fund their ai expansion they've decided to issue a new class of non-voting shares and so they've done this and as part of this mark zuckerberg can sell some of his shares to pay off any potential tax liability from a wealth tax without losing voters this is that one time five percent tax on the net worth of people who have assets of a billion or more who are living in california and there's kind of a snapshot it's of january 1st of this year so he kind of had to you know this there was an urgency to this yes exactly and so a public filing came out yesterday that showed that mark zuckerberg had been in discussions with the board about he said over the summer he told him he was concerned about this wealth tax and what it would do to him he said he was concerned about the health tax and what it would do to him he said he keeps mentioning that he might leave the state and in september says he's going so far as to put his house up for sale in four days the board quickly reaches a resolution and they sign a final agreement which resulted in these non-voting shares class c common stock all right so there's a component of this stock plan megan that that maybe was sort of geared towards mark zuckerberg but more broadly this is about helping meta to kind of pay for its massive ai build out primarily right it kind of says that mark zuckerberg is going to be the one who's going to be the one who's going to be it helps meta raise money without diluting anyone's shares and also give zuckerberg a way to stay in california and to pay any potential tax liability that he might have to okay so record q3 revenue i want to go into that because it seems like we're in a quite different place for meta than we were just a few months ago that's when its shares were being punished after its july earnings there wasn't enough clarity from the company about how it was monetizing ai well we got a bit of better news yesterday and i want to play a clip of mark zuckerberg sort of elaborating on what's gone right specifically with its sort of direct to consumer ai product called Muse. The most common use case for Muse is shopping. With more than a quarter of people who are using Muse engaging in this with an average purchase size of over $200, Plaid told us that they hadn't seen activity like they're seeing with their connector on any other service before. And in the first week, we had to work with Stripe to raise credit limits since the volumes were above what any of us expected. Megan, is that Meta's bet here, you know, grabbing a cut of e-commerce sales that are facilitated by its AI? Yeah, so Meta has talked about how they might benefit from Muse, and that's taking a cut of any sales that are made online. They've said at this point they don't want to put ads into Muse, and so they've looked at other ways to monetize the AI agent. You know, Meta already works with a lot of small businesses, and so they have said they see this as another integration for the agent, and that the business agents and the agents in their ideal world would be working together, and you could see them taking a cut from both sides even. You could be taking a cut from the consumer side and from the business side. Analysts estimate this could add billions of dollars of incremental revenue for the company. It really is going to depend on how many websites Muse will ultimately be able to access. We have already seen Amazon block Muse, and so I think this is actually one of the big hurdles they're going to have to overcome. And so I think this is actually one of the big hurdles they're going to have to overcome. Another big question mark about its future benefit to the company is all the technological efficiencies that are evidently going to be required to get Muse to be profitable. This is something CFO Susan Lee flagged yesterday would take time. Megan, could we find ourselves in a scenario before too long where investors are yet again clamoring for clarity from Meta on just how it hopes to make its investments profitable? Yeah, 100%. I think over the past few quarters, you've seen Meta really struggle to explain its story on how it plans to monetize all of its billions of dollars of investment. You have sort of seen an idea of where Meta thinks it can go in early success with the launch of Muse. Of course, we will have to see how Muse retention is. And like Susan Lee said on the call, it's not yet a profitable business. These agents require lots and lots of compute, and that costs the company lots of money to do. And so we're not yet at a point where I think you can say this is a total home run for Meta and they're out of the woods here. It will be interesting to see how they've truly made the agent more efficient enough to where it's actually profitable. Or is this another bet that's costing them more than it's ultimately bringing them in? Reporter Megan Bobrovsky covers Meta for us out of our San Francisco bureau. Megan, thanks so much for staying up late for us. Thanks for having me. And AI agents may be making online shopping as easy as ever, but as the journal's Esther Fung reports, sending back what was so seamlessly ordered is a whole nother story. So the current state of returns in the U.S. from a consumer's point of view, it's really frustrating. There are so many changes to return policies. There are tightened return windows, sometimes as little as five days. Consumers would have to pay attention to their returns, and they would have to pay attention to these details if they are purchasing something online. And if they were so used to a more permissive return policy, they might get a root shock when they realize they couldn't do what they used to do. There are also delayed refunds. And of course, there are also return fees. It could be $4.99, $5.99, $7.99, or even more than $10. Many retailers do allow free returns if items are dropped off in store, while others state that customers are responsible for return shipping costs, which have risen in recent years. And Esther says that's one reason why even if items come back in good condition, retailers often lose money on the whole process. People are paying more for returns because returns are expensive. They are expensive to ship. They're expensive to process. Somebody needs to be at the warehouse checking the item to see, hey, can this item be resold? All this takes time and resources. And retailers, they realize they can't keep subsidizing these returns, and they have to start implementing fees. And isn't that why podcasts are so great? Free to buy, free to recommend to a friend or family member in need of a fresh morning news routine. And if you insist, free to return if I'm not your cup of tea. And that's it for What's News for this Thursday morning. Today's show was produced by Daniel Bach and Hattie Moyer. Our supervising producer is Sandra Kilhoff, and I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.