Meta Platforms (META) has a problem:
The narrative right now is built around AI…but AI isn’t actually generating any meaningful revenue for the company.
Case in point: Muse, Meta’s new AI agent, just became the #1 free app on the Apple and Google app stores, sending shares soaring 11% on Monday.
Of course, the agent has two paid plans in addition to a free plan – the Max plan, costing $100 a month; and the Power plan, at $20 a month. (Pro tip: If you get a referral code from someone, you each get a billion free tokens).
It’s hard to imagine those becoming material.
As Dylan Lewis pointed out on yesterday’s episode of the Brew Markets podcast:
“For Muse to begin even showing up as a percentage, a single percentage of revenue for Meta, it would likely need over 10 million paid users.”
Which, yikes. That would be quite the challenge, given that OpenAI only has about 50 million paying users.
Breaking down the math
As you can see, Meta has brought in at least $50 billion per quarter for the last year, as part of substantial topline growth:
So, given that $228 billion top line over the trailing-12 months…1% growth would represent an incremental $2.28 billion. Divide that by 10 million users, and you get to about $228 spent per, or roughly in line with the Power plan’s annual cost.
And that’s for a single percentage point.
So it’s hard to imagine Muse mattering to the business as a paid plan!
But the real opportunity is ads
Here’s the thing: Meta has never launched a big, successful subscription business.
Instead, for me the question is: How will Meta really monetize Muse?
I don’t see any reason why they couldn’t turn it into an ad platform, just like OpenAI is doing now with ChatGPT, or like Alphabet (GOOG) did with search, Gmail, Youtube, Waze, etc.
(Or like Meta did – very successfully! – with Facebook and Instagram.)
Of course, it may be that the agentic ad platform will take a while to set up. The user experience will be important, especially as competitors including Alphabet, OpenAI, Anthropic, and Microsoft (MSFT) will undoubtedly be playing catch-up and trying to seize share as quickly as possible.
You could see – and this is pure speculation – an intermediate step where Meta uses the data from Muse to enrich its ad offerings on Facebook and Instagram, which are the real cash cows for the business today.
In the marketing world, people talk about “high intent” actions – visiting a webpage, putting an item in your cart, etc.
Now imagine an agent that has all of that information across weeks, months, and years of your life. How you always order a chicken sandwich on Thursdays. How you’re constantly pushing back on your pest service because they keep failing to trap that pesky mouse. How your car keeps needing work done.
I can imagine a rival chicken restaurant, an upstart pest service, and a car dealership all wanting those targeting criteria, even if they can’t serve ads directly in Muse.
Can’t you?
So what’s that worth?
Seems to me it could be a lot. And that’s when I turn to TIKR’s proprietary valuation model to run some scenarios. I plugged in just three numbers:
- Revenue growth based on consensus estimates through 2029
- Average operating margins based on consensus estimates through 2029 (which assume a sharp decline in operating margin, so they could be very conservative!)
- A P/E multiple that matches the average over the past three years
…and when I flowed those through, it returned an implied valuation of over $1,000 per share.
You can create your own valuation model using institutional-quality data…for free.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
