Meta could outdo Google in the AI transformation, professor says

Despite being one of the pioneers of artificial intelligence research, Google (GOOGL) isn’t poised to be a winner of the transformation, according to a business professor.

“While Google may have blazed the trail in artificial intelligence, it’s Meta (META) that’s poised to reap the rewards,” Howard Yu, LEGO Professor of Management and Innovation at IMD Business School, said in a written piece shared with Quartz.

The reason according to Yu, who also leads the Center for Future Readiness, is about business models.

“Google’s core business model — built on the elegance of simple search and link-clicking — is actually being undermined by AI,” Yu said, “while Meta’s advertising ecosystem is being supercharged by it.”

For example, Meta’s AI-powered advertising system has been able to adapt after Apple’s (AAPL) introduction of its App Tracking Transparency feature, Yu said, which requires iOS apps to request user permission to track activity. Before, advertisers could track how users bought a product after seeing an ad. The tech giant’s probabilistic models “are working better than the old tracking system ever did,” Yu said.

Meta is also “erasing the line between content and advertising,” Yu said, by using AI to make items in images and videos on social media feeds purchasable. The company “isn’t just creating ad inventory — it’s turning everything into potential inventory.

And Meta’s partnership with EssilorLuxottica (EL) on Ray-Ban Meta smart glasses gives it an AI-advantage that doesn’t threaten its business.

Meanwhile, Google is struggling to integrate AI into its products without threatening its search business, Yu said, which “thrives on simplicity, directing users to click on links that generate ad revenue.” With AI chatbots that can provide direct answers to queries, users don’t have to visit web pages where ads are placed.

And Google’s other AI features, such as NotebookLM, “don’t necessarily strengthen its primary revenue stream.”

Meta was the third-highest tech company on the Center for Future Readiness’s Future Readiness Indicator after Nvidia (NVDA) and Microsoft (MSFT), due to its “aggressive investments in AI” that show “strong momentum, impacting nearly all aspects of its operations,” the report said. Google parent Alphabet was the fourth-highest tech company on the list.

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