---
title: "The Love-Hate Relationship between Meta Platforms and Chinese Companies Going Global: ByteDance Challenges, Temu Delivers"
description: "The e-commerce dividend, enjoy it and cherish it."
type: "topic"
locale: "en"
url: "https://longbridge.com/en/topics/10557238.md"
published_at: "2023-12-12T06:16:50.000Z"
author: "[Dolphin Research](https://longbridge.com/en/news/dolphin.md)"
---

# The Love-Hate Relationship between Meta Platforms and Chinese Companies Going Global: ByteDance Challenges, Temu Delivers

According to our annual review forecast (《[US Stock Advertising: After TikTok, will ChatGPT start a new "revolution"?](https://longportapp.com/en/topics/4284858?invite-code=)》), the pace of recovery in digital advertising this year and the trend of individual stocks (such as the cyclical recovery of advertising, the videoization of social media, and the debate over the disruption of AI search) are basically in line with our expectations, except for the unexpected benefits of social platforms in the third quarter due to the fierce e-commerce battle.

However, there are some derivative issues:

How should we understand the consumption boom in the first half of the year? As the leading social platform, how much of the dividends can Meta still share in the midst of the e-commerce frenzy? And how long can Google hold onto its search dominance under the continuous AI technology iterations by Microsoft? Can the emerging Gemini put an end to the peak showdown with OpenAI? With the high valuations in the technology sector, how much upside potential is there for Meta and Google? These topics are worth discussing and researching repeatedly, as they are of great help in assessing the current competition trends of internet platforms.

In this article, Dolphin Research will focus on Meta's discussion of the e-commerce dividends of social platforms, based on the third quarter earnings report, and delve into the impact of Chinese-style e-commerce platforms such as Temu on Meta's performance and the sustainability of future investments. In summary:

**1) The new round of chaos caused by cross-border e-commerce in China has a greater impact on the increase in online retail penetration and the pre-consumption of shopping seasons in Q3, which is the reason for the better-than-expected rebound in retail and advertising in the third quarter.**

**2) The contribution of Temu's user acquisition to Meta's total revenue in the third quarter is not significant (accounting for 1%, driving growth by 1-2 percentage points), but with the upcoming fierce e-commerce battle next year, social platforms are expected to continue to gain industry-level traffic acquisition.**

**However, Temu's customer acquisition in North America seems to have reached its peak, and its strategy after 2024 may shift from advertising bombardment to billions of dollars in subsidies, gradually diluting the dividends of social platforms.**

**3) Short-term consumer spending has shown a cooling trend, and management outlook is cautious, but Meta still has a clear Alpha for next year.**

**4) Compared to the valuation update after the second quarter earnings report, this upward adjustment of performance expectations provides a safety cushion for the stock price and still leaves room for growth. The outperformance will mainly depend on the progress of cooperation with Amazon and the monetization of Reels.**

For a detailed analysis, please refer to the following text. Due to space constraints, the discussion on Google search and AI will be published in the next article.

**I. Where does the "consumption frenzy" supporting advertising come from?**

As an indicator of the economy, discussing advertising naturally involves predicting the subsequent trends of the economy. From a medium to long-term perspective, advertising tends to move in line with GDP, but with the further penetration of online retail, there is still room for growth in the share of digital advertising.

![Automatically generated chart description](https://pub.pbkrs.com/cms/2023/0/jDcLo4HzNtgBEKPEe2pBXV1T1anPc5Bh.jpg?x-oss-process=style/lg)

However, by comparing the short-term cycles of the past three quarters, Dolphin Research found that the advertising revenue of giants and the annualized growth rate of the US GDP have opposite trends:

Contrary trends: From the fourth quarter of 2022 to the second quarter of 2023, although the growth rate of the US GDP remained stable, it showed a slow slowdown overall. However, during the same period, the growth rate of digital advertising truly bottomed out and experienced a solid recovery.

Similar trends: In the third quarter, with the rapid rebound of the GDP growth rate, digital advertising further recovered and entered a double-digit growth trajectory of 13.7%.

![Chart, line chart description automatically generated](https://pub.pbkrs.com/cms/2023/0/iTEh4zn9SnaHoEGCdgpZyRUEbVZmkTqg.jpg?x-oss-process=style/lg)

**So, what is the reason for the opposite trends of digital advertising and GDP from 22Q4 to 23Q2?**

Dolphin Research thinks that among different advertising industries, "retail consumption" has the greatest impact on digital advertising in recent years, and "Retail" is also one of the most mentioned terms by the management of advertising giants during conference calls. Could it be that the strong demand for retail consumption has led to the recovery trend of digital advertising?

From the perspective of resident consumption and retail data, in fact, since the beginning of 2022, when the United States truly began to lift restrictions, local residents' consumption enthusiasm has not stopped. The counter-trend rebound in retail in the third quarter undoubtedly had a significant impact on the rebound of GDP growth rate.

![Image contains automatically generated description](https://pub.pbkrs.com/cms/2023/0/kt9dSfP69Y7ZMPXKi1ymMfPrpqNi7k3Z.jpg?x-oss-process=style/lg)

Therefore, at present, the key factor in predicting the future short-term (six months to one year) trend of internet advertising in the United States has become the judgment of how long this round of post-pandemic consumption enthusiasm can last.

However, before judging the future consumption trend, Dolphin Research believes that it is necessary to first clarify the first question - **why did resident consumption accelerate again after more than a year of economic rebound after the pandemic? Only by understanding the core reasons behind the phenomenon can we answer the sustainability of this wave of "consumption enthusiasm".**

From the perspective of the consumption of "excess savings", although the savings of residents increased due to the continuous growth of wages from the second half of 2022 to the beginning of 2023, the savings rate is not very high and is still lower than the pre-pandemic level. However, starting from the third quarter, residents have unexpectedly accelerated the consumption of savings, and the savings rate has rapidly decreased from 5.3% in May to 3.4% in September. By examining the income and expenditure of American residents, we can see some clues. The growth pace of residents' income in the second and third quarters has not changed much, but the expenditure on consumption has been increasing month by month since April.

![Automatically generated graphical user interface description](https://pub.pbkrs.com/cms/2023/0/BPFT9YBiBBMbZ1boLCCjgC7verrx7Cdu.jpg?x-oss-process=style/lg)

By tracking the performance conference calls of digital advertising giants such as Google, Meta, and Snapchat in the second and third quarters, Dolphin Research believes that the counter-trend increase in consumer spending, driven by Temu, the "Eastern catfish," has played an absolutely significant role in this wave of consumer frenzy this year. Since its launch in September 2022, Temu App has ranked among the top three e-commerce apps in North America in terms of downloads in just over a year. On the other hand, precisely because of the fierce competition from Temu, most platforms couldn't wait for the traditional shopping season in Q4 (Black Friday, Cyber Monday, etc.), so most platforms started their promotional period a month earlier. Therefore, the real period of promotion and hype started as early as the third quarter.

![Automatically generated table description](https://pub.pbkrs.com/cms/2023/0/KQfEsyEqmGW3wqXUXr1h9jGNho5KDqNw.jpg?x-oss-process=style/lg)

**2\. How much benefit can social platforms enjoy from Chinese-style internal competition?**

With the early promotion activities, it naturally drives the pre-consumption of overall residents. Therefore, whether online or offline, brand merchants need to adjust their marketing plans accordingly and advance their promotion budgets to Q3.

At the same time, in the fierce competition, the demand for advertising investment from e-commerce platforms will also increase significantly as they seek traffic sources. Therefore, from the perspective of both brand merchants and e-commerce platforms, their marketing needs will significantly increase in Q2 and Q3, resulting in a stronger rebound in digital advertising than previously expected. Among them, social platforms with natural traffic inflows are the biggest beneficiaries.

Temu has been able to attract a large number of users in less than a year (September 2022 to September 2023) through "spending money to buy traffic," which has proven to be effective. In February of this year, Temu spent a whopping $14 million on two 30-second Super Bowl ads. "Shop like a billionaire" quickly influenced 15% of American residents, and just over the weekend when the ads were aired, over 400,000 American users downloaded the app. As of November, Temu has 64 million monthly active users in North America, and its penetration rate has reached 30% among the 220 million online shopping users in the United States.

![Automatically generated chart, bar chart description](https://pub.pbkrs.com/cms/2023/0/duY71SbnUWa5zS1TkHw3fDegXegZLiRK.jpg?x-oss-process=style/lg)

In 2023, Temu's global marketing budget is expected to exceed $2 billion, with approximately $1.4 billion planned for the US market. This means that for every average order value of $39, $5 will be spent on customer acquisition and promotion. In addition to the $14 million Super Bowl advertisement, which helped Temu gain 430,000 downloads over a weekend, the platforms with the highest user acquisition are those under Meta, followed by Google (including search and YouTube).

According to The Wall Street Journal, 46% of Temu's digital advertising spending this year went to Facebook, 22% to Instagram, 15% to YouTube, and the remaining 17% mainly to TikTok. Meta also mentioned in its Q2 and Q3 earnings calls that Chinese e-commerce platforms have played a significant role in driving advertising revenue in the North American market.

Based on the budget structure mentioned above, if Temu's digital advertising accounts for 90%, Meta is expected to gain an additional $860 million in advertising revenue in the US this year (5.8 + 2.8 billion). Dolphin Research estimates that this additional advertising demand of less than $900 million will help Meta increase its annual revenue growth rate by 1.5-2 percentage points in the US market.

However, the greater dividend lies in the fact that after Temu stirred up the overseas e-commerce market, various e-commerce platforms have started a "grabbing traffic" mode, pouring high marketing budgets into internet platforms with natural traffic. For example, Shein, another Chinese company, saw a surge in Temu's user base in the second quarter and started a new round of user acquisition after being left far behind in terms of downloads. However, according to Similarweb, Shein's customer acquisition investment is not on the same level as Temu's. For example, in the third quarter, Shein spent $69 million on search advertising, while Temu spent $240 million, showing an S:T ratio of 1:3.

But the bigger dividend is that after Temu stirred up the overseas e-commerce market, various e-commerce platforms have started a "grabbing traffic" mode, pouring high marketing budgets into internet platforms with natural traffic. For example, Shein, another Chinese company, saw a surge in Temu's user base in the second quarter and started a new round of user acquisition after being left far behind in terms of downloads. However, according to Similarweb, Shein's customer acquisition investment is not on the same level as Temu's. For example, in the third quarter, Shein spent $69 million on search advertising, while Temu spent $240 million, showing an S:T ratio of 1:3. While Amazon has a strong competitive barrier, Temu is currently positioned as a cost-effective e-commerce platform. Therefore, compared to Shein and more direct competitors in the US discount e-commerce market (such as Five Below, Dollar General, Dollar Tree, etc.), Temu's threat to Amazon is still not significant. This year, Temu's estimated GMV in the US is expected to account for only 2% of Amazon's, and the overlap of users between Temu and Amazon is only 8%.

However, Temu's momentum is worth paying attention to, and TikTok Shop is also eyeing the market. If we consider Temu's global GMV target of 30-40 billion next year, with 60% in the US, which is 20-25 billion in e-commerce GMV, it will already rank among the top three in the US retail industry, second only to Amazon and Walmart.

Therefore, Amazon has already taken action to defend against Temu and other potential competitors:

On one hand, it is reducing commissions for low-priced products, preparing to strike at Temu's core advantages.

On the other hand, it is partnering with social media giants to gain additional traffic. With direct competition, they naturally don't care about the hidden intentions of these social platforms, as they are also eyeing the lucrative e-commerce market.

In the second quarter, Amazon partnered with Pinterest to expand exposure for Amazon sellers. In the fourth quarter, it started deep cooperation with Meta and Snapchat to provide a shopping experience within social media platforms.

Although Amazon spends a few hundred million on user acquisition, for Meta, it only results in a single-digit percentage increase in growth. However, for companies like Snapchat and Pinterest, whose revenue scale is still relatively small, especially those affected by Apple's IDFA last year, the water poured by e-commerce platforms like Amazon can make them take off immediately.

Taking Pinterest, the social platform that Amazon first partnered with, as an example, its growth rate in the third quarter increased to double digits, even with a high base from the previous year. The company also stated that next year, the revenue impact from working with Amazon will be more significant.

The downfall of traditional e-commerce platforms in the US is just the beginning of this upgraded battle. In mainland China, where there is pressure from the macro economy and limited opportunities, more platforms and merchants will target cross-border opportunities. Therefore, Dolphin Research believes that at least next year, this invisible e-commerce battle will continue. According to the latest report, Temu's target for next year is a GMV of 30 billion, with a medium to long-term goal of over 100 billion. It is already known that Temu is highly likely to continue its high investment mode next year, promoting its brand and cultivating user awareness, just like how Pinduoduo gained popularity in mainland China through 2-3 years of advertising bombardment, laying the foundation for future breakthroughs.

Therefore, it is not difficult to understand why Temu expects its marketing and promotion budget for next year to be significantly higher than this year. Regardless of any attempts by Amazon or other local e-commerce platforms to suppress Temu, at least in the short term, as long as Pinduoduo's core business in China remains stable and generates cash flow, Temu will definitely not give up and will have confidence in its short-term investments.

For platforms with new user traffic, they can continue to enjoy the dividends of e-commerce competition in 2024 and the incremental scale will be even greater than this year. In addition to the space brought by Temu itself and its existing competitors' defensive buying, the situation in mainland China this year (where physical consumption has reached a temporary peak and domestic social platforms can only benefit from 1-2 quarters of e-commerce competition dividends) is different from the overseas market. The overseas market is not only vast, but also has room for improvement in online retail penetration, whether it is developed regions like Europe and the United States or growing regions like Southeast Asia and Latin America. Therefore, for e-commerce platforms, it is worth tolerating high losses and low ROI in the early stages in order to eventually carve out a piece of the market.

**However, Dolphin Research remains cautious about whether the e-commerce dividends can continue to bring substantial incremental growth after 2024:**

First and foremost is the geopolitical risk, which must be considered as the top priority in the current period. European and American governments may adopt tough measures against Temu, just like they did with TikTok, through non-natural means of competition. Without Temu, the European and American e-commerce market may return to a situation where Amazon dominates and innovative platforms struggle to gain traction.

On the other hand, the shortage of budgets for small and medium-sized platforms is another factor. After this wave of "grabbing traffic," social platforms have seen a rapid increase in advertising prices. Referring to the CPM/CPC growth rate calculated based on Meta's financial report, although the monetization power of Reels is still being optimized, which passively lowers the overall unit price and leads to a YoY decline in the third quarter, the trend shows a significant improvement in the third quarter.

Therefore, in the actual industry, we also believe that industry prices are quickly rebounding. However, not all e-commerce platforms and merchants can withstand the gradually increasing costs. After all, in e-commerce business, the investment in user acquisition is just the tip of the iceberg, and more costs lie in infrastructure construction and logistics operations. Therefore, when the promotion price is too high, it may also trigger a supply-side clearance, thereby alleviating e-commerce competition, which may not necessarily be beneficial for advertising platforms.

1.  Referring to Pinduoduo's growth trajectory in China, when Temu approaches its customer acquisition ceiling, the company's marketing strategy may shift from "advertising bombardment" to "billions in subsidies," focusing on user stickiness, repurchases, brand upgrades, and increasing average order value to expand overall GMV. At this time, not only is the advertising platform not enjoying any dividends, but its own e-commerce business will also have to face competition from Temu.

Currently, Temu's daily active users have been slowly declining since reaching its peak in September. Even during recent shopping festivals such as Thanksgiving and Black Friday, it did not reach new highs. This not only indicates that Temu has shifted some consumer demand to the third quarter after disrupting the market, but also suggests that Temu may have reached a bottleneck in acquiring new customers, which will likely accelerate the transformation of the company's marketing strategies.

![The chart description with low credibility has been automatically generated](https://pub.pbkrs.com/cms/2023/0/YzXtb4A4xYb2LuTt6R6ddZN5yDeUt1t8.jpg?x-oss-process=style/lg)

1.  In addition, next year is destined to be a critical year of fierce competition, and all companies will surely invest heavily. Therefore, it will be quite challenging for e-commerce advertising to maintain high growth in the following year, given the high base of the previous year.

**III. Tracing back to the source, the short and long-term prospects of digital advertising from the perspective of economic and industry trends**

The e-commerce dividend discussed above is a disruptive factor in the short-term fluctuations of digital advertising, but the inherent trend of digital advertising growth is still derived from changes in the economy itself.

Before Dolphin Research conducts its analysis, let's first take a look at how the management of internet advertising platforms views the short-term prospects.

![Graphical user interface, text, application, email description has been automatically generated](https://pub.pbkrs.com/cms/2023/0/ricDG9KiKDgfW3cBME8PAcBX2vBY8c3e.jpg?x-oss-process=style/lg)

**In short, the management teams are relatively cautious in their outlook for the growth performance in the short-term fourth quarter, as seen from the comparison of trends. In the long-term perspective, especially for small platforms cooperating with Amazon, there will be more explicit positive signals.**

**Now let's analyze in detail:**

**(1) Short-term perspective: Economic slowdown, "soft landing" or "hard recession"?**

In this week's strategy report "[Consumer Cooling Down, Is the US Only One Step Away from Interest Rate Cut?](https://longportapp.com/zh-CN/topics/10538261?invite-code=)", Dolphin Research expressed concerns about the possible cooling of consumption based on recent data. And the dot plot of market expectations for interest rate cuts indicates that it is not just us who have concerns about the economy next year, but also the majority of market participants.

Do you still remember the deviation in market expectations for the economy at the end of last year and the beginning of this year, which was only significantly corrected in the second quarter? With the excess savings rate in October falling back to a historical low, a significant decline in month-on-month net increase in consumer spending, an increase in credit card default rates, and the continued weakness in November's ADP non-farm employment data (of course, the main reference should be the overall non-farm data), it seems that we have returned to the question of "soft landing or hard recession" at the end of the year. **However, this time Dolphin Research believes that caution may be necessary. First of all, there are signs of cooling in consumer spending. Although e-commerce competition may benefit the general public and release more consumer demand than before, it is ultimately a budget shift within the stable market, not entirely industry growth. If the demand continues to slow down, businesses will adjust their expectations and reduce their original marketing budgets. In addition, although AI has the ability to optimize and improve digital advertising, in the short term, consumer willingness to spend still has a significant impact on the overall situation.**

Considering the lessons learned from the collective face-slapping in the market at the beginning of the year, what we can do now is closely track macro data and further confirm the turning point trend. Stay tuned for Dolphin Research's weekly strategy report, which will provide detailed analysis of the macro data for the week.

**(2) Medium to Long-term Perspective: "Catfish" Revitalizes the Market and Increases Online Retail**

Dolphin Research follows the characteristic that advertising is an indicator of GDP. It is expected that US inflation will fall back to a normal level of 2% and the economy will remain stable. However, due to the limited room for improvement in the 80% consumption penetration rate, the growth of digital advertising relies on the increase in online retail penetration, thereby driving digitalization of advertising.

From a medium to long-term perspective, Temu's entry actually invigorates existing market players through competition, helping to accelerate the online retailization of European and American brands (currently 80% of retail transactions still occur offline). At the same time, considering the intensifying competition among online retail platforms, advertising budgets from retailers will also increase. The difference between the two may lie in the fact that the former's advertising increment benefits e-commerce platforms more, while the latter mainly benefits social media and other internet media platforms.

Based on the analysis above, Dolphin Research has made some adjustments based on eMarketer's predictions for the economy, retail, and digital advertising:

Taking into account the short-term potential macro pressures, the retail growth rate for 2024 has been slightly lowered (from 3% to 2.5%), while the online retail (e-commerce) penetration rate has been increased.

Considering that the overall digital advertising market will have some additional growth due to the increase in online retail penetration and the fierce competition among e-commerce platforms, the proportion of digital advertising to online retail has been slightly increased.

Taking into account the short-term dividends from e-commerce competition and the accelerated monetization of short videos, the proportion of social media advertising to digital advertising in 2024 has been increased.

In the end, the market size of social media advertising on social platforms is expected to maintain a 5-year CAGR of 13% from 2023 to 2027. This is slightly more optimistic than eMarketer's forecast (CAGR 12%). The biggest difference lies in the judgment of the growth rate trend for next year. Although Dolphin Research will be more cautious about overall retail consumption, due to the three major dividends of "short videos + e-commerce competition + cutting off web cookies," we are more optimistic about social media platforms.

![Chart, bar chart description has been automatically generated](https://pub.pbkrs.com/cms/2023/0/ET9bHKpmfk4hEBFckHkWFBbLyzvL3BwV.jpg?x-oss-process=style/lg)

**IV. How much room does Meta have for recovery with Zuckerberg's stock sell-off?**

Let's go back to Meta itself. Despite Meta's strong performance in the third quarter, the management expressed caution about the outlook for the fourth quarter during the conference call (mentioning budget cuts by advertisers in the surrounding areas after the Israel-Palestine conflict) and continued to emphasize the uncertainty of the macroeconomy. In addition, as the optimization of operating leverage is nearing completion and investment in AI will put Meta's capital expenditure back into a growth cycle, there were concerns about short-term profitability, causing the stock to drop by nearly 10% after the earnings report was released.

However, with the announcement of cooperation with Amazon and the expectation of interest rate cuts, Meta also experienced a surge of over 20% in November. But as the voices of an economic downturn grow louder, if there is indeed a hard landing rather than a benign slowdown, and if the Federal Reserve's enthusiasm for interest rate cuts is lower than expected, then advertising stocks closely tied to the macroeconomy will naturally be hit hard.

![Automatically generated chart description](https://pub.pbkrs.com/cms/2023/0/tpCJU4YDF7LLqQqN9gmJPppW3z6qruFU.jpg?x-oss-process=style/lg)

Dolphin Research believes that the possibility of a severe economic downturn in the United States next year is still low, and Meta still has alpha benefits on the revenue side next year:

**1) E-commerce battle dividend**

This point has been discussed extensively in the previous text, so I won't go into detail here. Even if the promotion costs for Temu double next year, with a global budget of 4 billion, due to a wide user base and the addition of new traffic from Reels, we still expect 40%-50% of the budget to be allocated to Meta's platforms (Instagram, Facebook, etc.).

In addition to paying attention to how Chinese e-commerce platforms like Temu spend money, Dolphin Research is also interested in how Meta balances its cooperation with Amazon in the presence of competing platforms like Temu, and how much short-term and long-term benefits Meta can gain from its collaboration with Amazon. Dolphin Research will continue to monitor the details of their cooperation.

**2) Reels moving from revenue neutrality to positive ROI**

Meta did not disclose the revenue situation of Reels during the conference call in the third quarter. The market generally predicts that it will exceed 10 billion in 2023 and be in the range of 20-25 billion in 2024, doubling its growth rate.

The growth is supported by the persistent demand for short videos. According to third-party data, Instagram's user engagement growth rate has remained above 10% since the end of last year, surpassing TikTok and other social media platforms during the same period. In terms of daily average usage per user, although Instagram's growth is not significant (nearly 8 minutes), the gap with TikTok has also narrowed (from 40 minutes to 35 minutes).

![Chart, Line chart description has been automatically generated](https://pub.pbkrs.com/cms/2023/0/kzFJhRjiFXhWQir9ACKNTDUdfJupKoZG.jpg?x-oss-process=style/lg)

![Chart, Bar chart description has been automatically generated](https://pub.pbkrs.com/cms/2023/0/zEsEyjubY9tNTJaLJHRMs8PVZ7THp2MV.jpg?x-oss-process=style/lg)

**3) Impact of Apple's privacy policy, AI can make up for the shortfall**

When it comes to Meta's AI, the first thing that comes to mind is its open-source large model. However, the AI tool Advantage+, which was launched in the first quarter, has already helped Meta make up for a loss of 10 billion yuan due to Apple's privacy policy in just three quarters.

In the third quarter, Meta's revenue was 33.64 billion yuan. Assuming that the advertising fees brought by Temu and Shein amount to 800 million yuan (estimated by Dolphin Research), there is still 32.8 billion yuan left. This is already higher than the revenue during the peak period in the fourth quarter of 2021, when the pandemic was at its peak. It can be considered that Meta has basically overcome the impact of Apple's privacy policy.

![Chart, Histogram description has been automatically generated](https://pub.pbkrs.com/cms/2023/0/gt7aPYpfVC4ifmgsX1C9gUuKrtWYsaHe.jpg?x-oss-process=style/lg)

The main selling point of Advantage+ is that it automatically generates and distributes advertisements using AI, based on user data within Meta. It generates graphic and text ad content based on different marketing objectives. This tool reduces the time for brand merchants to create basic advertisements, allowing them to focus more on content creation and product design. In other words, Advantage+ does not completely solve the problem of reduced advertising accuracy due to the impact of Apple's privacy policy for merchants. However, by using this tool, Meta has retained customers and improved the ROI of advertisements.

**4) Limited optimization of operating leverage, but still effective on a YoY basis**

In the third quarter, Meta's operating profit margin has recovered to 40%, just one step away from the peak level in history. However, Dolphin Research believes that due to the new investment cycle brought by AI, the space for further optimization is relatively limited.

However, the degree of optimization in the third quarter is significantly larger. Therefore, if we look at the YoY comparison from next year, we can still see the effect of optimizing operating leverage.

![Chart description has been automatically generated](https://pub.pbkrs.com/cms/2023/0/bvCbBVeqWA9vkR5EtVe4EovnjzWRmyzD.jpg?x-oss-process=style/lg)

In summary <1-4>, compared to concerns about the slowdown in EPS due to rising recession expectations in the market, Dolphin Research pays more attention to valuation multiples. Based on the current forward PE ratio, as of December 7th, with a market value of 839.2 billion US dollars, corresponding to the consensus earnings expectation for 2024, the PE ratio is 19 times. Meta: Valuation Adjustment and Earnings Report

In terms of valuation, Meta is currently positioned within the historical valuation range, but the safety cushion is relatively thin, to be conservative.

However, due to Dolphin Research's higher growth expectations for Meta and social advertising, we have adjusted our revenue forecast based on previous performance assumptions (referring to the retrospective analysis "TikTok's Fall, Meta's Feast"). We have increased the growth rate for 2023 from 10% to 14.6% and for 2024 from 10.6% to 14%. We have also slightly raised the total expenditure level for 2024, resulting in a noticeable improvement in operating profit margin.

![Automatically generated chart description](https://pub.pbkrs.com/cms/2023/0/iqvL2Z5ziN4moMnnNpdjYX4mGtSCMxvN.jpg?x-oss-process=style/lg)

Based on the assumption of WACC=10.45% and g=2.5%, Meta's valuation through DCF is estimated to be USD 940 billion, equivalent to USD 365 per share. This corresponds to a forward PE ratio of 20 times the net profit for 2024. Due to the expected 25% growth in operating profit in 2024, this valuation is relatively neutral. After adjusting the performance assumptions, the valuation has increased by 5.6% compared to the neutral expectation of USD 345 per share in the previous target price after the second quarter.

**Dolphin Research: Meta**

**Earnings Reports (Past Year)**

October 26, 2023: Conference Call - "Meta: Greater Contribution from Chinese Advertisers (3Q23 Earnings Conference Call Summary)"

October 26, 2023: Earnings Review - "Meta: Strong Return of Advertising, Why Isn't the Market Buying It?"

July 27, 2023: Conference Call - "Meta: Focusing on AI Empowerment, Not Just Commercialization (2Q23 Earnings Conference Call Summary)"

July 27, 2023: Earnings Review - "TikTok's Decline, Meta's Complete Rebirth"

April 27, 2023: Conference Call - "'Efficiency Year' Shows Good Execution, Reels Show Their Strength (Meta 1Q23 Conference Call Summary)" Earnings Report Commentary on April 27, 2023: [Meta: Rebirth after Tribulation](https://longportapp.com/zh-CN/topics/5520158?invite-code=032064)

Telephone Conference on February 2, 2023: [Efficiency is always on the tip of the tongue, Zuckerberg has learned to be "obedient" (Meta 4Q22 Earnings Conference Call Summary)](https://longportapp.com/en/topics/3917546?invite-code=)

Earnings Report Commentary on February 2, 2023: [Positive Buffs, Meta's Gorgeous Turnaround?](https://longportapp.com/en/topics/3916567?invite-code=)

Telephone Conference on October 27, 2022: [Despite being questioned under "siege", Zuckerberg still insists on betting on the Metaverse (Meta 3Q22 Conference Call Summary)](https://longportapp.com/topics/3580757?invite-code=032064)

Earnings Report Commentary on October 27, 2022: [Stubborn Meta, still gambling on the "Metaverse" despite severe losses](https://longportapp.com/topics/3579820?invite-code=032064)

Telephone Conference on July 28, 2022: [Macroeconomic, Apple ATT, and multiple headwinds in competition, management's short-term outlook is conservative (Meta Conference Call)](https://longbridgeapp.com/topics/3210898)

Earnings Report Commentary on July 28, 2022: [No "Google-style" reversal in expectations, Meta's decline is hard to hide](https://longbridgeapp.com/topics/3209031)

Telephone Conference on April 28, 2022: [No rush to commercialize Reels in response to competition (Meta Conference Call Summary)](https://longbridgeapp.com/topics/2445846)

Earnings Report Commentary on April 28, 2022: [Is the surge a change of faith? Meta's turning point has not yet arrived](https://longbridgeapp.com/topics/2442693)

Telephone Conference on February 3, 2022: [Can we expect Reels to activate Meta's user growth like Stories did three years ago? (Conference Call Summary)](https://longbridgeapp.com/topics/1891697) Earnings Report Review on February 3, 2022: "More Troubles for Facebook After Rebranding as Meta"

**In-depth Analysis**

June 27, 2023: "TikTok Falls, Meta Feasts"

February 21, 2023: "US Stock Market Advertising: After TikTok, Will ChatGPT Spark a New 'Revolution'?"

July 1, 2022: "TikTok Wants to Teach the 'Big Brothers' a Lesson, Google and Meta Are About to Change"

February 17, 2022: "Internet Advertising Overview - Meta: Low Combat Power is the Original Sin"

September 24, 2021: "Apple Draws Its Sword, Is Facebook the First 'Bloodshed' Giant?"

August 6, 2021: "Facebook: Digging Deep into the 'Business Value' of the World's Number One Internet User Harvester"

November 23, 2021: "Facebook: A Costly Transformation into 'Meta', Turning Point Not Far After Double Pressure"

**Risk Disclosure and Statement in this Article:** [**Dolphin Research Disclaimer and General Disclosure**](https://support.longbridge.global/topics/misc/dolphin-disclaimer)

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> **Disclaimer**: This article is for reference only and does not constitute any investment advice.
