Could diffusion models become YouTube and Meta’s next growth drivers?
Investing.com -- Generative AI and diffusion model tools may represent the next major growth catalyst for YouTube and Meta Platforms (NASDAQ:META), according to Morgan Stanley.
In a new report this week, the bank highlighted how both platforms are rapidly expanding their image and video creation capabilities, which could drive greater user engagement and advertising revenue.
“Every 1% lift in each of these factors leads to an incremental $1bn/$5bn of YouTube/META revenue, more durable growth and potential multiple expansion,” the analysts wrote.
Google’s YouTube is “well positioned to benefit from and drive video and image creation adoption,” Morgan Stanley said, citing its Veo 3 and Imagen 4 models as “best in class.”
Tools like Dream Screen and Flow are said to already be enabling creators and advertisers to generate cinematic video content directly from text or image prompts.
Meanwhile, META is rolling out its own diffusion-based AI tools, including Emu and MovieGen, which can generate or edit videos using text inputs.
New ad features such as Video Generation and Video Highlights “have the potential to drive efficiencies in ad creation while also making ads more personalized and performant.”
Adoption is growing quickly, according to the bank. Roughly 57% of GOOGL advertisers and 56% of META advertisers are already using image/video generation tools, according to Morgan Stanley surveys.
Crucially, they believe these tools could also enhance personalization and engagement.
“We see larger algorithms and META/GOOGL’s leading data sets combined with video and image generation tools driving improved personalization, contextual relevancy, engagement and monetization,” Morgan Stanley said.
“Improvements to engagement and monetization across YouTube’s 2bn global users can be meaningful as every 1% lift in engagement and monetization in ’27 would lead to a ~$1bn uplift in YouTube revenue,” stated Morgan Stanley.
While that’s modest for GOOGL overall, the bank says the impact on long-term growth and investor sentiment could be significant.
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