Meta's costly Muse calls for rethink on profit

Meta Platforms

Today 14:45

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Karen Kwok
NEW YORK, Oct 21 (Reuters Breakingviews) - Just as ChatGPT kick-started the chatbot era, Muse is a watershed moment for personalized assistants. New artificial intelligence out of Meta Platforms META.O that can handle mundane tasks from booking flights to canceling subscriptions is an enticing proposition. Turning it into a sustainable business looks challenging, however, especially as Wall Street braces for Mark Zuckerberg's company to start burning cash.
Personal “agents” are the latest obsession. After Meta rolled out Muse last month, OpenAI followed with Dots as $10 billion startup Instinct also vies for attention. Unlike chatbots that simply answer questions, agents can plan and interact with websites and apps on complex, multistep tasks.
The price of convenience is steep. Running an agent requires reasoning about a user’s stored information, a more-or-less predictable expense. But completing an action informed by that data involves a wildly variable amount of computing grunt. Compared to human-led chat prompts, the average agentic task done through OpenRouter burns 7 times as many tokens, the fundamental unit of AI output. 
Zuckerberg says Muse's free tier includes up to 100 million tokens of weekly usage. A user nearing that limit could generate more than $40 in monthly costs for “inference,” lingo for computing inputs and responses, Deutsche Bank analysts estimate.
Finding ways to defray that expense is the hard part. If retailers could be convinced that helping agents carry out online shopping will boost business, they might contribute. Even a fee equivalent to 2% of each transaction, however, would require a heavy user to spend around $2,000 a month, judging by Deutsche Bank’s cost projections.
It's a hefty sum. The top 1% of consumers spend barely more than $900 a month on AI products, YipitData suggests. If users turn to Muse for all their shopping, maybe it would free up budgets.
Advertising is what made Meta worth $2 trillion. The company generated nearly $17 in revenue per daily average user in the latest quarter, while a Muse fanatic might rack up $123 of costs over a three-month span. The social media colossus is projected to report negative free cash flow of $8.5 billion for the third quarter, according to estimates compiled by Visible Alpha. Adding another money-loser seems ill-timed.
Subscriptions offer a potential boost, but competition will make all routes harder. Rivals have every incentive to shut out other agents. Amazon.com AMZN.O and banks including JPMorgan JPM.N already restrict access. Maybe Muse can help users shop around for the best price.
     
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CONTEXT NEWS
Meta Platforms is due to release its third-quarter financial results on October 21. 
The company on October 8 rolled out an AI assistant called Muse that can autonomously send emails, sell a car and book travel on a person's behalf. A basic version of the agent will be made available for free, while Meta will offer subscriptions priced at $20 a month and $100 a month for heavier usage.

(Editing by Jonathan Guilford; Production by Maya Nandhini)
((For previous columns by the author, Reuters customers can click on KWOK/karen.kwok@thomsonreuters.com))