So I think that if we can — as we are able to roll out the business AIs, I think that, that can really unlock and grow the business — messaging business in a big way, but we have a lot of work to do to get there. So that’s kind of a basic view on how I think this will affect the engagement in business.
Susan Li: I’m happy to take the second question. Thanks, Doug. We obviously have not shared a 2024 revenue outlook yet. You asked about what are some of the significant puts and takes, and I’d maybe point back to what I said earlier about the Q4 outlook just to highlight what a volatile macro environment we believe we’re in. I think that will obviously have a big impact on the advertising market next year, and it’s something we’ll be keeping a very close eye on. But ultimately, we’re very subject to volatility in the macro landscape. Certainly, our own ads performance is an area where we have invested a lot, and we’ve seen a lot of increased value that we’ve been driving for marketers. We’ve been increasing the conversions we deliver, higher — and offering higher return on their ad spend so we think that will be an important factor.
We’re continuing to enroll a lot of new features, both gen AI and not in our ads tool, and we’re continuing to improve the ranking and delivery models that underlie our ads infrastructure. We’ll also be obviously lapping stronger periods, especially in — as you saw with this quarter’s results. So all of those factors, I think, will play into the 2024 revenue outlook. You also asked about the kind of the expense philosophy next year, whether expense growth will be tied to revenue growth. Obviously, the revenue outlook is uncertain. We talked a little bit about the — what’s going into the preliminary expense guide for 2024. The big components there are around infrastructure expenses. We do expect, given the increased capital investments that we have made in recent years, that depreciation expenses in 2024 will increase by a larger amount than in 2023.
And we expect to incur higher operating costs from running a larger infrastructure footprint. The second big driver is on payroll. We anticipate payroll growth driven by the spillover of hiring that we had intended for 2023 into 2024. And we do expect that Family of Apps will be a larger source of payroll expense growth than Reality Labs in 2024. Additionally, hiring will generally be concentrated in technical roles, which will continue to shift our workforce composition towards a higher cost basis. And of course, the final piece being Reality Labs operating losses, which we expect to increase in 2024 across both the expense growth from higher payroll costs as well as higher non-headcount cost to support the development of our next-gen VR and AR products.
How the expense and revenue outlook come together? Obviously, that’s — as we get more information on the revenue outlook for next year, that will influence that. Ultimately, we have talked about the framework that we introduced in the past. We recognize that we have very ambitious investments on the horizon, including over a long-time horizon with our Reality Labs work and newer, equally ambitious investments we’ve added in the gen AI road map more recently. And we recognize that we have to earn the ability to invest in all of those things by delivering consolidated operating income growth over time. So that’s something we’re very much focused on.
Operator: Your next question comes from the line of Justin Post with Bank of America Merrill Lynch.
Justin Post: Great. Thank you. I guess I’ll ask about the DSA and DMA and also press reports that there could be a subscription offering in Europe. Maybe, Mark, how do you think about subscription usage for Facebook? Maybe an update on how Meta Verified is going and how you’re thinking about the evolution of the model in Europe. Maybe we’ll start with that. And then for Susan, I know you’ve talked a lot about Chinese advertisers. How do you think that could affect the growth as you comp that next year? Thanks a lot.
Susan Li: Hi, Justin. Thank you for the question. I think there are multiple parts there and I will do my best to address all of them, but of course, let me know if I miss anything. So the first question was sort of around operating in Europe, in particular, the legal basis for ads. So as we announced in August, we intend to evolve our legal basis for processing personal data for ads to a consent model in the EU, the EEA in Switzerland, given the recent regulatory developments in those regions. We don’t have any further details to share on the exact implementation at this time. We’re continuing to engage with the DPC and other regulatory authorities on our proposed consent model, but we’re committed to making this move as soon as possible, and we will provide an update when we have it.
The second question you asked was about Meta Verified. So we’re still, I think, quite early here but we’ve rolled out Meta Verified for creators to most markets globally. We continue to hear positive feedback from creators as we’ve helped them more easily establish their presence on Facebook and Instagram. We also have recently begun testing Meta Verified for businesses on Facebook and Instagram in select countries, and we have plans to expand that to businesses on WhatsApp in the future. And this will allow businesses to more easily stand out on our apps and build confidence with their customers and let their customers know that they’re chatting with the right business. So we’re encouraged by the early signs that we’re seeing there, but again, very early and not a lot more to share right now.
The third part of your question was around Chinese advertisers. So spend from Chinese advertisers further accelerated for us in Q3. We have benefited from strong investments from a few of our larger clients. We’ve also seen generally broader-based strength from other China advertisers, and we believe factors such as lower shipping costs and easing regulations on the gaming industry have served as tailwinds here. But I think there has been a broader story of improved growth across all advertiser regions in Q3, and even excluding China advertisers, revenue growth has accelerated nicely. And you kind of alluded to whether there’s — the sustainability of the China advertising revenue. And even though we’ve seen particularly strong growth this year, I would say that there has been a longer-term trend of overall growth with this segment dating back to past years and also periods of volatility in the past, like in the last two years, we’ve seen periods with higher shipping costs with lockdowns, with regulation weighing on demand.
So we recognize there’s the potential for volatility in the future as well and especially given that there are so many macro factors at play that are quite hard to predict. Operator Your next question comes from the line of Youssef Squali with Truist.
Youssef Squali: Thank you very much. Two quick questions for me. First, can you share any early read into demand for Quest 3? It’s been out for 10 days but I think you’ve been taking orders from these last three weeks? And is it priced to be at least gross profit breakeven or not necessarily? And then second, Susan, for 2024 as we think about growth, can you speak maybe about political spend contribution that you’ve had back in 2020 and how that may inform how we should think about its contribution for 2024? Thank you.
