For those following news surrounding Magnificent Seven stock, Meta Platforms' (NASDAQ:META) LLaMa is the subject of constant headlines. But what exactly is LLaMa, and is Meta making money off of it? Is the development of LLaMa positive or negative for Meta stock in the long term? Below, I’ll work to answer these questions to provide a better understanding of LLaMa and how it can add value to the tech stock.
LLaMa: Meta’s Open-Source Answer to ChatGPT
Starting from the root, LLaMa is a large language model (LLM), emphasized by the capitalization of L-L-M in the name. LLMs are a type of artificial intelligence that are trained using massive amounts of human-generated text or other means of communication. This training teaches the model how humans communicate, allowing it to generate human-like responses to questions. ChatGPT was the first LLM to come to real prominence, and now companies like Meta have developed their own version of the technology.
One way that Meta is differentiating its model is by making it more open source. Open source refers to the idea that anyone can see the code and training methods used to develop the model. This means that any party can alter and customize it to serve their specific use case. However, there is significant debate about how “open” Meta’s model is. Meta doesn’t fully reveal the information used to train the model, and there are some restrictions on who can use it.
However, the model is still much more open than ChatGPT or Alphabet's (NASDAQ:GOOGL) Gemini. Overall, small creators and businesses can build their own applications using LLaMa for free, increasing the adoption and accessibility of AI tools. However, significant costs are still associated with running LLaMa to create applications.
Is Meta Actually Making Money off LLaMa?
The short answer is no, Meta is not making money off LLaMa, at least not directly. The company likely generates revenue from licensing LLaMa to large enterprises. Additionally, its Meta AI assistant, powered by LLaMa, likely helps increase engagement on Facebook, WhatsApp, Messenger, and Instagram apps. Higher engagement increases the value of advertising on these apps, indirectly boosting revenues.
At this point, Meta isn’t really directly looking to monetize LLaMa. Instead, LLaMa feeds into all the other parts of its business, creating other opportunities.
How LLaMa is Creating Value for Meta Now and in the Future
Meta has talked about how LLaMa is powering AI advertising tools like Advantage+ Creative. This is driving value for users. Meta states that ObjectsHQ, a small business, saw a 60% increase in return on ad spend when using the tool. This shows LLaMa is driving benefits to Meta’s extremely successful advertising business. The advertising business has been the key to moving the stock’s 68% rise since the beginning of 2024 as of the Mar. 13 close.
Improving the company’s AI models can also lead to more benefits for the company’s advertising business over time. Meta has already made significant strides in increasing the personalization of the advertisements on its apps. Continued investments in LLaMa are likely to help make these advertisements even better, driving more advertising revenue.
It is possible that Meta could look to start directly monetizing LLaMa by beginning to charge for access in the future. However, this seems unlikely given that LLaMa is entirely based on the concept of being open source. Given this, Meta is likely to continue using LLaMa as a backbone for building AI tools through which it can create opportunities. As more developers make applications using LLaMa, the company could sell advertisements in these apps. With LLaMa being free, a large ecosystem of these apps could emerge, driving ad revenue.
Another opportunity is Meta AI. However, on the company’s latest earnings call, Chief Executive Officer Mark Zuckerberg said monetization of Meta AI “remains outside of '25, for the most part." The company has previously talked about eventually charging for premium Meta AI features. LLaMa also feeds into its Reality Labs segment, powering the intelligence in its Ray-Ban glasses.
Overall, LLaMa feeds into the firm’s entire business model, integrating AI into every facet. Putting AI at the center of its business has already generated strong results for its advertising segment. Given this, the development of LLaMa looks poised to be accretive to Meta shares going forward as different monetization avenues materialize over time.