Meta Platforms' National TV Ad Shows a Major Shift in the Business Model

Meta Platforms (NASDAQ: META) released the Muse app earlier this month. It's the company's answer to ChatGPT, and it came alongside a nationwide TV ad.

That ad features Muse automatically performing various tasks, such as scheduling events, operating smart home features, and registering a user's child for fall sports. The ad also featured Muse automatically researching and ordering school supplies.

Not everyone liked the commercial, with some saying it made the product appear too similar to Amazon's Alexa and didn't fully capture what makes Muse different. However, the success of the Muse app and the rapid shift to national TV ads featuring it indicate a major shift is taking place at Meta Platforms.

Image source: Getty Images.

The company may finally be diversifying beyond selling ad space

Meta Platforms' biggest strength and weakness is its online advertising business. Revenues from the advertising segment reached $59.3 billion in the second quarter, a 27.5% year-over-year improvement. Online advertising is a high-margin business, so it may be hard to perceive that as a problem.

The issue is that Meta Platforms has absolutely no fallback option if online advertising slows down. Ads provide more than 97% of its total revenue. Meanwhile, rivals like Amazon and Alphabet diversified their revenue streams beyond their core offerings more than a decade ago.

Muse might be the big hit that lets Meta Platforms diversify and accelerate its revenue growth without relying exclusively on ads. Muse got more downloads in its first 12 days than ChatGPT did during the same stretch. Meta Platforms already has 3.6 billion daily active users across its social media platforms, offering a great foundation for Muse to become mainstream.

How Muse will make money

While Muse won't break even right away, its monetization model is already in place. The company makes money when users upgrade their subscriptions for access to expanded token capacity and additional features. However, Meta Platforms CEO Mark Zuckerberg hinted that there were additional ways for Muse to become a moneymaker.

In an interview on Tiff in Tech's YouTube channel, Zuckerberg laid out how Muse could make money as an intermediary for e-commerce transactions. He believes that Muse will help people spend and save money, and Muse will receive a small cut in those cases.

It won't show up meaningfully in financial results for multiple years, but Meta Platforms has a healthy enough balance sheet to wait that long. It's similar to how Amazon and Alphabet waited multiple years for their cloud infrastructure platforms to become profitable. Now, those assets are driving meaningful growth for both companies.

Meta Platforms is trying to achieve the same thing with Muse. Significant app downloads and a quick push toward national TV ads show the level of commitment Meta Platforms is giving Muse.

Meta Platforms is leading the shift from "tell me" to "just do it"

Other AI models can answer questions and provide product recommendations, but Muse is at the forefront of the "just do it" wave. Instead of asking for product recommendations, you can have Muse research products and complete orders for you.

Consumers can provide their email addresses, credit card numbers, and other details that let the AI agent initiate these orders. However, Muse will always ask for a user's permission before finalizing an order. In other words, Muse is set up so you won't end up with a surprise bill.

This shift can turn Muse into a household name despite how crowded the industry has become. ChatGPT, Gemini, Claude, and Grok are some of the many AI models competing for people's attention. If Meta Platforms maintains its technological lead on other AI models and forces its way to the mainstream, it can completely shift Meta Platforms' long-term prospects.

Investors have noticed. The stock has surged by more than 30% over the past month. That rally also came as a major lawsuit against Meta Platforms ended with a judgment far less severe than expected, to the point that it should have no serious impact on the company's revenue.

Meta Platforms' stock has been stuck in the mud for most of the year, but the Muse news sparked a rally that put the stock firmly ahead of the S&P 500 (SNPINDEX: ^GSPC) year to date. That trend is likely to continue in the long run as Muse gains more market share.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Meta Platforms. The Motley Fool has a disclosure policy.