Meta’s (META) Muse Launch Turns the AI Debate toward Subscription Economics

Meta Platforms, Inc. (NASDAQ: META), the parent company of Facebook, Instagram, and WhatsApp, recently launched Muse, an artificial intelligence assistant designed to assist customers and small businesses. This AI model, called Muse Spark, is part of Meta's ongoing efforts to improve its recommendation systems for content and advertisements. With billions spent on AI development, the company seeks to leverage Muse for both consumer adoption and monetization.

According to Evercore ISI, there's a more than 50% chance that Meta will successfully roll out AI agents to consumers and small businesses. Analyst Mark Mahaney has maintained an "Outperform" rating on the stock with a $860.00 price target. Muse is not just a chatbot; it can operate across connected apps, browse the internet, fill out forms, make purchases, and continue working in the background. Users can also opt out of their interactions being used to train Meta's AI models.

Muse is available in the US as a standalone app and through WhatsApp. The company is optimistic about Muse's potential to drive adoption and monetization, given its 3.6 billion daily users and 15 million small businesses across its platforms. Users can access a basic version for free, while heavier users can subscribe for $20 or $100 per month. Despite Evercore ISI's positive outlook, the success of Muse still faces execution risks, particularly in terms of adoption and monetization.

However, trusting a personal AI agent comes with its own set of risks. Muse runs on a secure virtual machine with separate safety architecture, but users must still feel comfortable granting it access to sensitive information like emails, calendars, and payments. Meta has faced trust issues in the past, including lawsuits related to platform addiction, child safety, and data practices, which may further impact consumer confidence.

Hedge funds' sentiment around Meta's stock has also cooled, with the number of funds holding the stock decreasing in the second quarter, though short interest remains relatively low at 1.27% of the public float. While Mahaney's note focuses on the potential for Muse to convert users into paid subscriptions, it remains to be seen if the subscription revenue can offset the compute costs required to serve them.

Overall, Meta's AI opportunity is expanding, but the financial and trust-related risks associated with Muse present a potential hurdle for the company's growth.