facebook, inc. (fb) second quarter 2016 results … · facebook, inc. (fb) second quarter 2016...
TRANSCRIPT
1
Facebook,Inc.(FB)SecondQuarter2016ResultsConferenceCallJuly27th,2016OperatorGoodafternoon.MynameisChrisandIwillbeyourconferenceoperatortoday.AtthistimeIwouldliketowelcomeeveryonetotheFacebooksecondQuarter2016EarningsCall.Alllineshavebeenplacedonmutetopreventanybackgroundnoise.Afterthespeakers'remarks,therewillbeaquestionandanswersession.Ifyouwouldliketoaskaquestionduringthattime,pleasepressstarthenthenumber1onyourtelephonekeypad.Thiscallwillberecorded.Thankyouverymuch.Ms.DeborahCrawford,Facebook’sVicePresidentofInvestorRelations,youmaybegin.DeborahCrawford,VPInvestorRelationsGoodafternoonandwelcometoFacebook’ssecondquarter2016earningsconferencecall.JoiningmetodaytodiscussourresultsareMarkZuckerberg,CEO;SherylSandberg,COO;andDaveWehner,CFO.
Beforewegetstarted,Iwouldliketotakethisopportunitytoremindyouthatourremarkstodaywillincludeforward-lookingstatements.Actualresultsmaydiffermateriallyfromthosecontemplatedbytheseforward-lookingstatements.
Factorsthatcouldcausetheseresultstodiffermateriallyaresetforthintoday’spressrelease,andinourquarterlyreportonform10-QfiledwiththeSEC.Anyforward-lookingstatementsthatwemakeonthiscallarebasedonassumptionsasoftodayandweundertakenoobligationtoupdatethesestatementsasaresultofnewinformationorfutureevents.
DuringthiscallwemaypresentbothGAAPandnon-GAAPfinancialmeasures.AreconciliationofGAAPtonon-GAAPmeasuresisincludedintoday’searningspressrelease.Thepressreleaseandanaccompanyinginvestorpresentationareavailableonourwebsiteatinvestor.fb.com.
Andnow,I’dliketoturnthecallovertoMark.MarkZuckerberg,CEOThanks,Deborah.Andthankseveryoneforjoiningtoday.Wehadanothergoodquarterandfirsthalfoftheyear.Ourcommunitycontinuestogrowaroundtheworld.1.7billionpeoplenowuseFacebookeverymonth,and1.1billionpeopleuseiteveryday.Ourbusinessisgrowingatahealthyrateaswell.Totalrevenuegrewby59%year-over-yearto$6.4billion,andadvertisingrevenuewasup63%to$6.2billion.Ourresultsshowourprogressasweworktomaketheworldmoreopenandconnectedacrossourthree-,five-andten-yearhorizons.Overthenextthreeyearswearefocusedoncontinuingtobuildourcommunityandhelppeoplesharemoreofwhatmatterstothem.Thenextfiveyearsareaboutbuildingournewerproductsintofullecosystemswithdevelopersandbusinesses.Andoverthenexttenyearsweareworkingtobuildnewtechnologiestohelpeveryoneconnectinnewways.
2
I’llgiveanupdateonourprogressacrosstheseareas,startingwithhowwe’reworkingtodeliverbetterexperiencesforourcommunityandmorewaysforpeopletosharemoreofwhattheycareaboutwithanyonetheywant.Wecontinuetoseeexcellentgrowthinourcommunity.Overthepastyearwehaveaddedover200millionpeopleusingFacebookonamonthlybasis.Andinthesecondquarter,timespentperpersonincreaseddoubledigitpercentagesyear-over-yearacrossFacebook,InstagramandMessenger.Andthatdoesn'tevenincludeWhatsAppyet.Oneofthebiggestopportunitiestogrowourcommunityisindevelopingcountrieswhereconnectivityislessadvancedthanwhatwetakeforgrantedhereathome.Sooverthepastcoupleofyears,we’vebeganmakingsteadyimprovementstoourappstomakethemworkregardlessofthedeviceorconnectionpeopleareusing.Wealsobuiltalight-weightversionofourAndroidapp,calledFacebookLite,thatistunedtoworkon2Gnetworksandisnowusedbymorethan100millionpeople.Wearealsoworkingonnewtoolstohelppeopleexpressthemselvesandunderstandwhat'sgoingonwiththepeopletheycareabout.10yearsago,mostofwhatwesharedandconsumedonlinewastext.Nowit'sphotos.Andsoon,mostofitwillbevideos.Weseeaworldthatisvideofirst,withvideoattheheartofallofourappsandservices.OverthepastsixmonthswehavebeenparticularlyfocusedonLivevideo.Liverepresentsanewwaytosharewhat'shappeninginmoreimmediateandcreativeways.ThisquarterCandacePayne'sChewbaccamaskvideowasviewedalmost160milliontimes.Liveisalsochangingthewayweseepolitics,asnewsorganizationsanddelegatesgoLivefromtheRepublicanandDemocraticconventions.AndwehaveseeninMinnesotaandDallashowLivecanshinealightonimportantmomentsastheyhappen.Thisquarterwealsolaunched360photos.Youdon’tneedaspecialcameratotakethem–youjusttakeapanoramaorusea360cameraapponyourphoneandpostit.Sincewelaunched,morethan4million360photoshavebeensharedonFacebook--with1millionmorebeingsharedeveryweek.We'remakinggoodprogressoncoreserviceswithintheFacebookapp,likeSearch.Agrowingwaypeopleusesearchistofindwhatpeoplearesayingaboutatopicacrossmorethan2.5trillionpostsinournetwork.Nowpeoplearedoingmorethan2billionsearchesaday,betweenlookinguppeople,businessesandotherthingsthattheycareabout.Continuous,steadyimprovementtoserviceslikesearchareanimportantpartofhelpingpeopleconnectandrealizingourmission.We'realsoimprovingtheexperienceforourcommunitybybuildingourbusinesswithmoreengagingads.WehavealwaysemphasizedtheimportanceofmeasurementandvalueindrivingrealresultsforthebusinessesthatuseFacebook--andthatmeanshelpingthemcreatemorerelevantandengagingads.
3
Overthenextfiveyearsweareworkinghardtobuildecosystemsaroundsomeofournewerproducts.Instagramnowhasmorethan500millionmonthlyactives,withmorethan300milliondaily.Nowwe’reworkingtomaketheexperiencemoreengaging.Recently,Instagrambegantorankitsfeedbecauseweknowthatpeoplehaveabetterexperiencewhentheyseemoreofthestoriestheycareabout.We'realreadyseeingapositiveimpactintermsoftimespentandtheamountofcontentpeoplearesharing.We’vealsointroducedouradvertisingtoolsonInstagramandwe’reseeingmarketersengagewithpeopleincreativeandinnovativeways.InthetwoyearssinceweseparatedMessengerfromthemainFacebookapp--whichwasacontroversialdecisionatthetime--we'veimprovedperformanceandgivenpeoplenewwaystoexpressthemselves.Now,forthefirsttime,morethan1billionpeopleareusingMessengereverymonth.I’malsohappywiththeupdateswe'remakingtoWhatsApp--whichalsohasacommunityofmorethan1billionpeople.Thisquarterwelaunchednewdesktopappsandend-to-endencryption,andmillionsofpeopleareusingWhatsApp'svoicecallingfeatures.Thescalewe’veachievedwithourmessagingservicesmakesitclearthattheyaremorethanjustawaytochatwithfriends.That’swhywe’realsomakingiteasierforpeopletoconnectwithgroupsandbusinessesaswell.Wearegoingtokeepfocusingonthisoverthenextseveralyears.I’malsoexcitedabouttheearlyprogresswe’remakingonour10-yearinitiatives.Weareinvestinginnewtechnologiestogivemorepeopleavoice--includingthe4billionpeoplearoundtheworldwhoaren’tyetonline--andhelpingmorepeopletakeadvantageoftheopportunitiesthatcomewiththeinternet.We’restillearlyinourjourneywithlotsofhardworkahead,butwe'remakinggoodprogress--likethefirstsuccessfulflightofAquila,oursolar-poweredaircraftthatwillbeaminternettoplacesthathaveneverbeenconnected.Eventually,we'regoingtoworkwithtelecomoperatorsandgovernmentsaroundtheworldtoconnectpeopleontheoutskirtsofcities,ruralareasanddisasterzoneswhereyoucan'tgettraditionalconnectivitytoday.We'vealsobeenmakingprogresswithourinitiativesaroundartificialintelligenceandvirtualreality.ThisquarterweannouncedDeepText,adeeplearning-basedenginethatcanunderstandthecontextofseveralthousandpostspersecondacross20differentlanguages.Thisisalong-termprojectbutitalsohassomenear-termbenefits,likehelpingshowpeoplemoreofwhattheywanttoseeandfilteringoutwhattheydon’twanttosee.We'realsoinvestinginnewplatformstohelppeopleconnectandshare.Webelievethatvirtualrealitycanhelppeoplesharericherexperiencesandhelpeveryoneunderstandwhat’sgoingonaroundtheworld.It’sreallyearlyforusinVRbutwe’rehittingsomeimportantmilestones.Asofthesecondquartermorethan1millionpeopleamonthareusingOculusonmobilephonesthroughourGearVR
4
partnershipwithSamsung.Morethan300appsarealreadyavailableattheOculusstoreforGearVR,we’vefilledallofourpre-ordersforOculusRiftandweareseeingincreasingdemandfromretailasstoresplanfortheholidays.Whileit’sstillearlyforaugmentedreality,we'redoingARresearchandareseeinglightweightversionsofARtechnologytodayinmobileappslikeMSQRD.Sothat’sarecapoftheprogresswe’remakinginour10yearplan.WehaveasayingatFacebookthatourjourneyisonly1%done--andwhileI'mhappywithourprogress,wehavealotmoreworktodotogrowourcommunityandconnectthewholeworld.Thatmeansmakingbiginvestmentsandtakingrisks--focusingnotjustonwhatFacebookis,butonwhatitcanbe.Iwanttothankeveryoneinourcommunity,allourteams,ourpartnersandourshareholdersforbeingapartofthisjourneywithus.Andnow,here'sSheryl.SherylSandberg,COOThanksMarkandhieveryone.Wehadagreatsecondquarter.Q2adrevenuegrew63%.Mobileadrevenuereached$5.2billion,up81%year-over-year,andwasapproximately84%oftotaladrevenue.Ourgrowthwasbroad-basedacrossverticals,marketersegmentsandregions.We'reexcitedtoannouncethatwenowhave60millionmonthlyactivebusinessPagesonFacebook.Wealsocontinuetogrowthenumberofactiveadvertisersonourplatform.Thisshowsthatbothourfreeandpaidproductsareprovidingvaluetomarketersofallsizesaroundtheworld.Wecontinuetofocusonourthreepriorities—capitalizingontheshifttomobile,growingthenumberofmarketersusingouradproducts,andmakingouradsmorerelevantandeffective.First-capitalizingontheshifttomobile.For62years,theadvertisingindustryhasgatheredinCannestocelebratecreativity.Peoplehaveshiftedtomobileandmarketersknowtheyneedtocatchup.Mobileisnolongera“nice”todo—it'sa“must”doandwe'reworkingcloselywithmarketerstohelpthemmakethistransition.Thebestmarketersunderstandthatpeoplewatchvideodifferentlyinmobilefeed.Thegoalistocreatewhatwethinkof“thumbstoppingcreative”—videosthatgrabattentioninthefirstfewseconds,evenwithoutsound.Forexample,todriveawarenessforSourPatchKidsGum,Mondeleztargetedteenswithnon-chocolatecandyinterests.WorkingwithVaynerMedia,Carat,andtheFacebookCreativeShop,theycreatedpunchy10-secondloopingvideostailoredforFacebookandInstagram.ThecampaignhelpedtheSourPatchKidsportfoliobeatsalesbenchmarksfortheentirecandyindustry.We'reexcitedtobringmorerelevantvideoadstopeoplebothonandoffFacebook.InMay,we
5
expandedAudienceNetworktoincludevideoforbrandobjectives.ThismeansthatadvertiserscanplacebrandvideoadsnotjustonFacebookandInstagrambutacrossanetworkofappsandsites.Oursecondpriorityisgrowingthenumberofmarketersusingouradproducts.OverathirdofsmallandmediumbusinessesintheU.S.don'thaveawebsite—andhavingamobilepresenceisevenmoredifficultandexpensive.CreatingabusinessPageonFacebookisaseasyassettingupapersonalProfile.ThisiswhyFacebookPagesarethemobilesolutionformanyofthe60millionbusinessesusingourproductseachmonthintheU.S.andaroundtheworld.We’vemadeiteasyforbusinessownerstomanagetheirFacebookPagefromtheirmobiledevice.Over85%ofactivebusinessPagesusemobileand40%ofactiveadvertisershavecreatedaFacebookadontheirmobiledevice.InQ2werolledoutnewtoolstomakeiteasierforbusinessestopromotepostsandtrackperformancedirectlyfromtheInstagramapp.We’veworkedhardtomakebecominganadvertiseraseasyaspossibleforthesebusinesses.Withjustafewsteps,andforaslittleasafewdollars,businessescanboosttheirpoststoreachmorepeople.Simplifyingouradproductsiskeytoadvertiseracquisition–over80%ofnewadvertisersinQ2startedwithsimplifiedproducts,likeboostedposts.Oncethesebusinessesbeginadvertisingwithus,wemakeiteasyforthemtotakeadvantageofevenourmostsophisticatedcapabilities.Forexample,LightingEtc.,athird-generationfamily-ownedbusiness,usedFacebookandInstagramadstodrivein-storesales.Theytargeted25-45-year-oldhomeownersinterestedininteriordesign,livingwithin35milesoftheirshowroominFortWorth,Texas.ItwasstrikingtothemthatonFacebookthesizeofourcommunitymeanttheycouldreachover300,000peopleevenwithsuchspecifictargeting.They'veseena40%increaseinrevenuein2016andtheyattributethisincreasetotheiradsonFacebookandInstagram.Ourthirdpriorityismakingouradsmoreeffectiveandrelevant.Ourgoalistohelpourclientsgrowtheirbusinesses–whetheritbemovingproductsoffshelves,drivingonlinesalesorbuildingtheirbrands.Oursystemconstantlylooksforthemostefficientandeffectivewaytodrivetheseobjectives.Businessesthatwanttobuildtheirbrandsneedtoreachalargeaudiencewithacompellingstory,andthey'reseeingstrongresultsfromimmersiveformatslikeVideoandCanvasAds.Businessesworkingtoacquirenewcustomersneedtoreachhighqualityleadsandconvertthemtoaction.WeintroducedLeadAdsinQ1tomakeiteasyforpeopletofilloutformsonmobiledevicesrightfromNewsFeed.InQ2wemadeitpossibleforadvertiserstoretargetpeoplewhoopenedorcompletedaLeadAdform.Forexample,NissanTurkeyandtheSEMAgencyusedLeadAdstocollectover20,000high-qualityleadsfrompeopleinterestedinbuyinganewcar.TheythenusedretargetingtoshowrelevantadstopeoplewhohadcompletedtheseLeadAdsandultimatelydrovevehiclesales.Thecostofahighqualityleadwas9.3timesloweronFacebookthanallotheronlinemedia.
6
Businessessellingproductsaregettingsearch-likeROIfromDynamicAds.DynamicAdsallowadvertiserstouploadtheirproductcatalogueandtargetpeoplewithspecificproductsinrealtime.Over300millionpeopleseeDynamicAdseachmonthandover2.5billionuniqueproductshavebeenuploadedbymarketers.InQ2weexpandedDynamicAdstoInstagramandalsolaunchedDynamicAdsforTravel.Forexample,youcannowadvertisespecificdestinationsanddatesforhotelrooms.We'repleasedwiththevaluewe'redrivingforourpartnersandtheprogresswe'remakingacrossourthreepriorities.Withonlyasmallfractionofour60millionbusinessPagesadvertising,wehavealotofopportunityahead.Wealsohavealotofhardworktodotohelpbusinessesmaketheshifttomobileandtodriveresultsforourclients.Iwanttothankourclientsaroundtheworldfortheirpartnershipandtheirongoinginput,whichinformsourproductdevelopment.Ialsowanttocongratulateourglobalteamsontheresultsoftheirhardworkandthankthemfortheirdedicationtoourmission.Thanks,everyone,andnowhere'sDave.DavidWehner,CFOThanksSherylandgoodafternooneveryone.Q2wasanotherstrongquarterforFacebook.Totalrevenuegrew59%to$6.4billion,andwegeneratedover$2billioninfreecashflow.Theseresultshighlightthecontinuedgrowthandengagementofourglobalcommunityandthestrengthofouradsbusiness,asadvertisersbenefitfromourincreasinglybroadanddeepportfoliooftargeting,creativeandmeasurementtools.Let’sstartwithourcommunitymetrics.Thispastquarterwasourstrongestquarterinover3yearsintermsofabsoluteyearoveryeargrowthofmonthlyanddailyactivesonFacebook.InJune,1.13billionpeopleusedFacebookonanaverageday,up17%comparedtolastyear.Thisdailynumberrepresents66%ofthe1.71billionpeoplewhovisitedFacebookinthemonthofJune.Mobilecontinuestodriveourgrowth,withover1billionpeopleaccessingFacebookviamobiledevicesonanaveragedayinJune,up22%comparedtolastyear.Thegrowthofourotherservicesalsocontinuestobestrong.WhatsAppandMessengernoweachhaveover1billionmonthlyactives,andInstagramrecentlysurpassed500million.Turningnowtothefinancials.
7
MycommentstodaywillfocusonourGAAPfinancialmetricsandallofourcomparisonsareonayear-over-yearbasisunlessotherwisenoted.AreconciliationofGAAPtonon-GAAPfinancialmetricsisincludedinourpressreleaseandearningsslides.TotalQ2revenuewas$6.4billion,up59%.Q2adrevenuewas$6.2billion,up63%.Exchangeratesdidnotimpactouroverallrevenuegrowthratesthisquarterasheadwindsincertaincurrencieswereoffsetbytailwindsinothers.US&CanadaandAsia-Pacificwereourfastestgrowingregionswithadvertisinggrowthratesof69%and67%,respectively.Mobileadrevenuewas$5.2billion,up81%andrepresentingapproximately84%oftotaladrevenue.Let’sturntothesupplyanddemandfactorsthatcontinuetodriveourgrowth.AdvertiserdemandwasparticularlystronginQ2acrossabroadrangeofverticalsandadvertiserobjectives.Additionally,supply-sidefactorsincludinggrowthinusers,timespentandadloadallcontributedtoourQ2revenuegrowth.InQ2,theaveragepriceperadincreased9%,whiletotaladimpressionsincreased49%.Thereportedincreaseinpricewasagaindrivenbythecontinuedmixshifttowardsmobilewhereweshowonlyhigher-pricedNewsFeedadscomparedtothemixofNewsFeedadsandlowerpricedright-handcolumnadsonpersonalcomputers. The49%increaseintotaladimpressionswasdrivenprimarilybygrowthinadimpressionsservedintheFacebookmobileNewsFeed,wherethemajorityofouradsareshown.Payments&OtherFeesrevenuewas$197million,down8%.RememberthatPayments&OtherFeesrevenueislargelygeneratedfromgamesplayedonpersonalcomputerswhichhasdeclinedaspeoplespendlesstimeontheirPCs.Q2totalexpenseswere$3.7billion,up33%,inclusiveof$825millionofsharebasedcompensationexpensesandrelatedpayrolltaxesaswellas$193millionofamortizationofintangibleassets.Q2operatingincomewas$2.7billion,representinga43%operatingmargin.Wecontinuetobepleasedwiththeprofitablegrowthofthebusinesswhileweinvestforthelong-term.WeendedQ2withapproximately14,500employees,up32%year-over-year.Weaddedapproximately900employeesinthequarterwiththemajorityofthoseintechnicalfunctions.Weareseeingcontinuedsuccesswithoureffortstohiretoptalentinamarketthatremainsverycompetitive.OurQ2taxratewas26%.GAAPnetincomewasapproximately$2.1billionor$0.71pershare.
Q2capitalexpenditureswere$1billion.Year-to-date,capitalexpenditurestotaled$2.1billion,drivenbyinvestmentsindatacenters,servers,officebuildingsandnetworkinfrastructure.
8
Facebookgeneratedover$4billioninfreecashflowinthefirsthalfof2016,andasofJune30th,wehadover$23billionincashandinvestments.Turningnowtotheoutlook.First,somecoloronrevenue.Wehavebeenpleasedwiththestrengthofouradvertisingrevenueinthefirsthalfof2016.AsIdiscussedonourlastcall,whileweexpectthemaindriversofouradvertisingrevenuegrowthwillcontinuethroughout2016,wewillfacetoughercomparablesgiventheacceleratinggrowthratesreportedin2015andweanticipateloweradvertisingrevenuegrowthratesineachsuccessivequarterin2016.Additionally,weanticipateadloadonFacebookwillcontinuetogrowmodestlyoverthenext12-monthsandthenwillbealesssignificantfactordrivingrevenuegrowthaftermid-2017.Sinceadloadhasbeenoneoftheimportantfactorsinourrecentstrongperiodofrevenuegrowth,weexpectourabilitytogrowrevenuewillbeimpactedaccordingly.Turningnowtoexpenses.Basedonourupdatedviewoftheremainderoftheyear,wearetighteningourexpenseguidanceranges.Weexpectthatfull-year2016totalGAAPexpensegrowthwillbeapproximately30-35%narrowedfromourpriorrangeof30-40%Weexpectfull-year2016amortizationexpensestobeapproximately$700-$800million,andthatfull-year2016stock-basedcompensationexpensestobeapproximately$3.1-$3.3billion.AccordinglyweanticipatethatourtotalNon-GAAPexpenses,whichexcludestockbasedcompensationandamortization,willgrowintherangeof45-50%,narrowedfromourpriorrangeof45-55%.Weanticipatefull-year2016capitalexpenditurestobeapproximately$4.5billionasweinvesttosupporttherapidgrowthofthebusiness.Finally,weexpectthatourQ3andfullyear2016taxrateswillbesimilartoourQ2rates.Insummary,Q2wasanothergreatquarterforFacebook,illustratedbythestronggrowthandengagementofourglobalcommunityandcontinuedbroad-basedstrengthinouradsbusiness.We’repleasedwiththeresults,andwewillcontinuetoinvestinordertobestpositionFacebookforourlong-termgrowthopportunities.Withthat,Chris,let’sopenupthecallforquestions.Question&AnswerSession
Operator: Thankyou.Wewillnowopenthelinesforaquestion-and-answersession.
9
Toaskaquestion,pressstarfollowedbythenumberoneonyourtouch-tone
phone.Pleasepickupyourhandsetbeforeaskingyourquestiontoensureclarity.
Andifyou’restreamingtoday’scall,pleasemuteyourcomputer’sspeakers.
YourfirstquestioncomesfromthelineofEricSheridanwithUBS.
Yourlineisopen.
EricSheridan: Thanksfortakingthequestions.Maybetwo.Oneonthevideoplatformgoing
forwardandhowyouthinkaboutvideoasadistributionmechanism.Howshould
wethinkaboutinvestmentsthatneedtobemadeinvideoonboththetechnical
infrastructuresideaswellasthesourcingofcontentsidetosortofbroadenoutthe
videoofferingoverthenextcoupleofyears?
Thenmaybeonthelastcommentonadload,justwanttogobacktothatfora
minuteintermsofwhatyou'reseeingonadloadbyregion.Becauseweareseeing
awideninggapinrevenueperuserbetweenUSandCanadaandtherestofthe
world.Howmuchofthatmightbedrivenbyadloadoradproduct?
Thankyousomuch.
DaveWehner: Sure.
IcantakethequestiononvideodistributionasitrelatestoCapExandtheadload
questionandthenmaybeonthesourcingofcontentI'llpassitbacktoSheryl.
Soonthevideoplatform,clearlyfromaninvestmentperspectiveyou'veseenus
stepupourCapExthisyearprettysubstantiallyandthat'sbakedintotheguidance
of$4.5billionofCapExwhichifyourecallisthehighendofourpriorrange.Weare
investingacrossourinfrastructuretoprepareourselvesforgrowthacrossallofour
differentservicesandapartofthatinvestmentisreallytosupportvideo.
Thatisdefinitelymoretaxingonthenetworkandwe'reinvestingheavilyonthe
networkside.Andaswell,itdoesalsoimpactouroverallneedswithinthedata
center,serversandthelike.Soit'scertainlyanareawe'reinvestinginheavilyand
weexpecttobeinvestinginheavilygoingforward,Eric.
Andthenontheadloadquestion,adloadisnot--it'snotsomethingthatvariesthat
dramaticallybyregion.Soyou'rereallylookingatanumberoffactors.Really
10
what'sdrivingthatisjustthedispersionofoveralladdemandacrossregions.We're
seeingreallygoodstrengthacrosstheglobeonthatfrontbutadloadisnotabig
driverofdiscrepanciesinARPUthatyousee.That'sreallysomethingthatmapsvery
closelytothesizeofthemobileadmarketsperpopulationinthosecountries.So
it'snotanadloadquestion.
AndthenI'llhanditovertoSheryltotalkaboutvideofromacontentperspective.
SherylSandberg: Whenyouthinkaboutwhat'shappeningonvideoonourplatformwe'rereally
excitedbytheproductionandconsumptionofvideoandwe'reseeingthefullrange
frompeoplepostingthethingsintheirpersonallives;thepowerofwhatamobile
phonecanproduceanddistributenowisprettyincrediblewhenyoucompareitto
justafewyearsagotosomeofthemostsophisticatedcontentproducersinthe
worldproducingforus.
We'reexperimentingacrossawidevarietyofthings.We'redoingapartnership
withtheNBAtostreamsomeUSmen'sOlympicteamgamesinthenextcoupleof
weeks.Thatsaid,ourprimaryfocusisonshortformcontent,notlongformcontent
andwe'reprettyexcitedtoseethedifferentformsofcontentpeoplewillcreate,
bothtosharemessagestocreatenewcontentandtoengageaudiencesaroundthe
world.
Operator: ThenextquestionisfromDouglasAnmuthofJPMorgan.Yourlineisopen.
DouglasAnmuth: Thanksfortakingthequestions.Ijusthavetwo.Firstonengagement,obviously
theDAUandMAUnumberswerestrongandyougavetheincreaseinthedaily
activityaswellinthedoubledigitsbutcanyoujustgiveussomecolorontheuser
trendsunderneaththatalittlebit,morespecificallyperhapswhatyoumightbe
seeingintermsofyoungerusersanddifferentagedemographics?
Secondly,justgoingbacktotheadload,wehaveinthepastheardsomecaution
fromyouguysbeforeinthatarea.Granteditwasafewyearsagoandatamuch
earlierstage.ButIguessmyquestionisiftargetingcontinuestoimprovealongwith
click-throughrateandultimatelyROI,whydoesadloadhavetobecomelessofa
factorgoingforward?Thanks.
11
DaveWehner: Thanks,Doug.OntheDAUandMAUfront,couplethings.OneisDAUandMAUare
upsequentiallyandyear-over-yearinallregionsandwithtrendsthatarelargely
consistentwithpastquarters.Soreallygood,stronggrowthacrosstheglobeona
DAUtoMAUratio.Wedon'tdospecificbreakdownsofthosemetricsby
demographic.
We'reobviouslypleasedwithouroveralllevelofgrowthandengagement.Onthe
teenfront,youngerusers,wecontinuetobethebestwaytoreachthelargest
globalaudienceofteensandMillennials.TeensremainengagedonFacebook.
Clearlyhowthey'veusedourservicehasevolvedovertheyearsandinadditionto
Facebookthey'reusingInstagram,MessengerandWhatsApp.Sofromateen
perspective,that'ssomecolorthere.
Ontheadloadfront,adloadisdefinitelyupfromwherewewereafewyearsago.
It'sbeenanimportantdriverofinventorygrowthandreallyIthinkoneofthethings
that'senabledustogrowadloadhasbeenimprovingthequalityandtherelevance
oftheadsasyoumentioned.Andwe'vebeenabletodothatwithoutnegatively
impactingtheuserexperience.
Wedoexpectthatadloadwillbealesssignificantfactordrivingoverallgrowth
especiallyaftermid-2017.Theoptimaladloadisreallyamixofartandscience.
We'vecarefullytrackedtheimpactofadsontheuserexperienceoverthelast
severalyears.Wearen'tseeingacauseforconcern.
Wealsowanttobethoughtfulaboutmakingsurethateachperson'soverallfeed
experiencehastherightbalanceoforganicandadcontent.Andthatfactorsinto
howwethinkaboutadloadandwherethatmightultimatelybe.Andthat'sreally
whywe'retalkingaboutourexpectationthatasyougetintomid-2017adloadwill
notbeabigfactorindrivingoverallinventorygrowth.
Westillseetheopportunitytogrowinventoryfromthegrowthofpeopleand
engagementonFacebookaswellasourotherserviceslikeInstagram.Instagram
doeshavealoweradloadthanFacebook.
Operator: ThenextquestionisfromBrianNowakfromMorganStanley.Yourlineisopen.
12
BrianNowak: Thanksfortakingmyquestions.Ihavetwo.ThefirstoneontheUSadvertisingwas
particularlystrong.Anyspecificadcategory,branded,directresponse,etcetera,or
adunitlikevideothat'sdrivingthisgrowthintheUS?
AndthenthesecondonejustonLiveVideo.Recognizingit'sveryearlywithLive
VideobutanyhelpatallonwhatpercentageofyourusersareengagingwithLive
Videoandthetypeofupliftyou'reseeingonengagement?Thanks.
SherylSandberg: Ourgrowththisquarterwasverybroad-basedacrossalloftheregions.Wehad
especiallystronggrowthinAPACandtheUSandCanada.Sothatwaspartofthe
growth.IntermsofourmarketersegmentsfrombrandstodirectresponsetoSMBs
todevelopers,thegrowthisreallystrongthereaswell.We'rereallyexcitedtoday
toannouncethatwehave60millionsmallbusinesspagesthatareusingFacebook
onamonthlybasis.
Andwe'reveryfocusedontheopportunitytoupsellthemtoadvertisingproducts.
Wethinkwehaveagoodtrackrecordthere.We'realsoseeingalotofstrengthin
brandsandIthinkthat'sbecausewehaveacombinationofthecreativeandthe
storytelling.Sotheartwiththescienceofthetargeting.Andwhenpeopledothat
welltogether,youseegreatopportunities.
Sotoshareoneexample.JackintheBoxusedourCanvasAdswhicharevery
immersiveads;they’rereallygoodforourbrandexperiencetorolloutanewmenu
item,theirDoubleJackBurger.Theyworkedwithagencies,Horizon,Davidand
GoliathandAdaptly.TheytargetedMillennialsonFacebooktocreatetwodifferent
customaudiencegroups.Onegroupwascustomerswhovisitedtherestaurantweb
pageorengagedwithpreviousvideoads.
Andthesecondgroupwerepeoplethathadn'tengagedwiththemdirectlybutwere
quickservicerestaurantpurchasers.Theyhadanaverageviewrateof23seconds
acrossthoseCanvasAds,soclearlypeoplewerereallyengagedinthebrand
experienceoftheadandtheyhada13pointliftinadrecallandaninepointliftin
purchaseintent.
Ithinkwhatyou'reseeingisthatacrossalloftheobjectivespeoplehavefrom
brands,marketerstodirectresponsetoSMBstodevelopers,asouradproductsget
moresophisticatedourtargetingandmeasurementgetbetter,theyhavean
13
increasedopportunitytogrow.Andthat'swhywethinkourgrowthtodate
continuestobebroad-based.
DaveWehner: Yes,andBrian,I'lltaketheLiveVideoquestion.It'shardtocompetewithadouble
Jackburger.
IntermsofLiveVideo,it'sreallyearly.We'rereallyexcitedaboutitintermsofit
providinganauthenticandrealformofsharingforpeopleandwe'rereallytryingto
givepeoplethefullrangeoftoolstosharewhattheycareaboutwithanyonethat
theywantandLiveisreallyeffectivethere.
We'veseenexperiencesbothintermsoflightheartedlike(CandacePayne)andalso
moreseriousissuesaroundtheUSandaroundtheglobe.Soit'sreallyanimportant
partofwhatwe'reofferingforpeopletosharerealexperiences.
Videoasawholeismakingasignificantcontributiontotimespentgrowth.When
wetalkaboutthetimespentperDAUgrowingworldwideacrossourfamilyin
double-digitpercentages,videoismakingacontributiontheremorebroadly.
Operator: ThenextquestionisfromJustinPostwithMerrillLynch.Yourlineisopen.
JustinPost:Yeah,acouple.First,Mark,maybeoncoreFacebook,there'sbeen
commentaryouttherethatmaybethere'slesspersonalsharing.Justmaybe
commentsonthedirectionofFacebook,whattheactivitiesaregoingon,howyou
feelaboutthat.
Andthenjustabouttheadloads,howareyoudecidinghowmuchadstoshow?
Couldyouholdbackabitanddrivehigherpricing?Howareyoubalancingthatand
whynotholdbackalittlebitmorenowforlongevitythere?Thankyou.
MarkZuckerberg: Sure,soI'lltalkaboutsharingandthenIthinkDavecanprobablytalkaboutadload
andpricing.SotheoveralllevelofsharingisuponFacebookandwhatwe'reseeing
isthathowpeopleshareisevolving,aswemovefromdesktoptomobile.Soyou
canimaginemorephotosonpeople'smobilecameras,fewerlongfullphotoalbums,
moreabilitytocapturevideo,probablyalittlebithardertotypeonmobile.
Sothere'sthisevolution.Theotherthingthatweseeisthatnowpeoplehavetools
tosharemoreprivatelyaswell.SowhenyouthinkaboutsharingonFacebook,you
14
shouldn'tjustthinkaboutthekindofsharingthatyouseeinNewsFeed.Sosharing
withallyourfriends,sharingingroupsonFacebookandpublicsharing,whichare
thetrendsthatIwasjusttalkingabout.
Butanotherareathat'sgrowingincrediblyquicklyisprivatemessaging.Between
MessengerandWhatsAppIthinkwe'rearound60billionmessagesadaywhichis
somethinglikethreetimesmorethanthepeakofglobalSMStraffic.
Thatissomethingthatisgrowingreallyquicklyandthatwe'rereallyexcitedabout
aswellandwe'regoingtocontinueworkingongivingpeoplethebesttoolsacross
thespectrumfromprivatetopublicandacrossthespectrumfromtextbasedand
simplecommunicationtorichertypeofmedialikephotos,videosandthen
eventuallymoreimmersiveformslikeVR.
DaveWehner: And,Justin,Intermsofadloadwetalkedaboutthedifferentfactorsthatgointoit.
Obviouslyjustindrivingtheoverallbusiness,advertiserdemand,thatwas
particularlystrongthisperiod.Andthenalsowematchedthatwithsupply.
Thesupply,thetwobigdriversareuserandtimespentandthenadload.And
gettingthebalanceandmixrightisimportantandclearlyhowthepricingplaysout
isviatheauction.Andwe'vehadagoodbalanceofdemandgrowthandsupply
growthandthat'sledtoourgood,strongfinancialresultsandourabilitytodeliver
verystrongROItoadvertisers.
Sowethinkwe'reinagoodzoneontherightadloadandwedothinkthere's
opportunitiestogrowthatmodestly.Butaswelookforwardinto2017wethinkit
willbealesssignificantfactordrivinginventorygrowth.Westillthinkthere's
opportunitiestodriveinventorythroughusergrowthandtimespent.
Idon'tthinkwewouldthinkaboutnecessarilydroppingadloadtodrivepricing.
We'realsoverycognizantofprovidinggoodvaluetoadvertisersandgettingthat
balancerightisimportanttodrivingoverallROIaswellasobviouslyprovidingbetter
targetingandmeasurementtoolsforouradvertisers.
Operator: ThenextquestionisfromAnthonyDiClementewithNomura.Yourlineisopen.
AnthonyDiClemente:Great.Thankyoufortakingmyquestions.
15
IhaveoneforMarkandoneforSheryl.Mark,youmentionedsearchinyour
preparedremarks,2billionsearchesadayonFacebook.Ialsonoticedyousaid
you'remakingiteasierforuserstoconnecttobusinesses.Howfarawayareyou
fromcommercialsearchonFacebookbeingviable?Whycan'tyoudothattoday?
Andhowbigofanopportunitycouldcommercialsearchbe?
AndthenSheryl,youmentionedtheexpansionoftheFacebookAudienceNetwork.
CanyoutalkmoreabouttherevenueopportunityofbringingFacebook'stargetting
toolstoothervideopublishers,howfastisAudienceNetworkmonetization
growing,isitacceleratingforexampleandhowyouseetherevenueopportunityof
expandingtheAudienceNetworkacrossthemobilewebaswell?Thankyou.
MarkZuckerberg: Icantakesearch.SowhenwetalkaboutourstrategyIoftentalkabouthowwhen
wedevelopnewproductswethinkaboutitinthreephases.First,buildinga
consumerusecase.Then,second,makingitsothatpeoplecanorganicallyinteract
withbusinesses.Andthenthird,ontopofthat,oncethere'salargevolumeof
peopleinteractingwithbusinesses,givebusinessestoolstoreachmorepeopleand
pay.Andthat'sultimatelythebusinessopportunity.
SoI'dsaywe'rearoundthesecondphaseofthatinsearchnow.Wehaveapretty
bignavigationalusecasewherepeoplelookuppeopleandpagesandgroupsthat
theywanttogettoandlookatandsearch.Oneofthebiggrowingusecasesthat
we'reinvestingalotinislookingupthecontentintheecosystemandthatisanarea
thatwe'reveryexcitedaboutwhichhelpspeoplefindmorecontent.
Butcertainlythere'sareasonableamountofbehaviorintherewhichislookingfor
thingsthatovertimecouldbemonetizeableorcommercialintenseandatsome
pointwewillprobablywanttoworkonthatbutwe'restillinthephaseofjust
makingiteasierforpeopletofindallthecontenttheywantandconnectwith
businessesorganically.
SherylSandberg: OntheAudienceNetwork,wecontinuetoinvestinadtechandtheAudience
Networkisakeypartofourfocusthere.
Wedon'tbreakoutrevenuebyourdifferentplatformsbuttheopportunitytotake
notjustvideoadsbutotheradformatswehave,bringthemtotherestoftheweb
andotherappswithourabilitytotargetandmeasure-wethinkisabigone.And
16
whatwe'restartingtoseeisthatpeopleareusingFacebook,Instagram,and
AudienceNetworktodrivetheirobjectivesinacohesiveway.
Sotoshareanexample.GarminlaunchedtheFenix3Sapphirewatchandtheydid
itwithVideoadsonFacebookthatworkedwithoutsound.Theytargetedoutdoor
enthusiasts,thenretargetedpeoplewhoviewedtheInstagramvideoswithcarousel
adsonFacebookthathighlightedtheproductfeatures.Thentheyextendedthose
adsonAudienceNetworktomaximizereachandtheyusedtheFacebookpixelto
measuretheincrementalsalesandgottoa9.7timesreturnonadsales.
That'sareallygoodexampleofhowyoucantaketargetingandtheabilitytotarget
acrossAudienceNetwork,FacebookandInstagramanddrivepeoplealltheway
downthefunnelandwethinkmoreandmorepeoplewilldothatparticularlyaswe
doabetterjobofcombiningtheinterfaces.Forexampleyoucanbuynowinone
interfaceonFacebook,InstagramandAudienceNetwork.
DaveWehner: Anthony,justonethingtoaddontopofthat.Werecognizethemajorityofour
thirdpartyadvertisingrevenueistheaudiencenetworkonanetratherthangross
basis.Thatwillalsominimizetheimpactthatwillhaveonthetopline.
Operator: ThenextquestionisfromMarkMahaneywithRBCCapitalMarkets.Yourlineis
open.
MarkMahaney: Mark,whenyouseewhatseemslikephenomenalsuccessofPokemonGo,whatare
yourreactionstothat?
AndthenDavid,couldyoutalkaboutthemonetizationrampthatyou'veseenon
themessagingplatforms.Iknowit'sstillveryearlydays.Anythingintherethat
strikeyouasbeingparticularlysubstantiveformaterialyet?Thankyou.
MarkZuckerberg: IlikeeveryoneelseamenjoyingPokemonGo.ThebiggestthingthatIthinkwecan
takeawayfromthisasweinvestinaugmentedrealityinadditiontovirtualrealityis
thatthephoneisprobablygoingtobethemainstreamconsumerplatformthatalot
oftheseARfeaturesfirstbecomemainstream,ratherthanaglassesformfactorthat
peoplewillwearontheirface.
Ithinkwe'reseeingthisinanumberofplaces,whetherit'slocationthrough
Pokemonorsomeofthefacefilteractivity,IreferencedtheMasqueradeappthat
17
weacquiredearlierinmyremarks.That'skindofafunwaytoaugmentsocial
experiencesthatyou'rehavingwithsomeone.
Ithinkthere'sabigopportunitytobuildoutthatplatformandalotmore
functionalityaroundthat.Andoneofthebigthemesthatwe'retalkingabouthere
isbecomingvideofirst.Andaspeoplelookforricherandricherwaystoexpress
themselves,justlikepeopleinthepasthavesharedalotoftextandphotoson
Facebook,wethinkinthefuturemoreofthatisgoingtobevideoandmoreofthese
augmentedrealitytoolsIthinkaregoingtobeanimportantpartofdeliveringthat
experienceandmakingthatfuntouseandexpressiveasitcanbe.
DaveWehner: AndMark,we'vetalkedaboutourstrategyonhowwegoaboutmonetizingthe
differentappsinourportfolioandweusuallytalkaboutitintermsofthreephases.
Phaseoneisreallygrowingtheuserbaseandengagementandwe'rereallypleased
withwherewearewithMessengerandWhatsAppfromthatperspective,bothover
1BMonthlyactives.
Secondphaseisreallyworkingonbuildingorganicinteractionsbetweenbusinesses
andconsumers.Andthenfinallythethirdphaseisaboutbuildingthosecommercial
opportunities.WithMessengerwe'rereallyatthebeginningofphasetwo.
Messengertodayhasabillionorganicinteractionsbetweenbusinessesand
consumerseachmonth.
Intermsofwhereweareinhavingintermsofactualmonetization,incrediblyearly
onthatfront.We'rereallyinthatphasetwo,we'rereallytalkingaboutbuilding
thoseorganicinteractions.
Operator: ThenextquestionisfromHeatherBelliniwithGoldmanSachs.Yourlineisopen.
HeatherBellini: Great.Thankyouverymuch.Iwaswondering,Iguessthisisafollow-upon
Anthony'squestion,isthereawaytothinkaboutmaybethepercentageofyour
kindoftop100customersorhoweveryouwanttodefineitthatmightbeusingFAN
asanadd-ontotheirFacebookspending?
AndIguessI'mwonderingifyou'reseeingincreasingleverageofFAN?Andthenthe
otherquestionwouldjustbepoliticalspendingobviouslywasn'tabigdriverforyou
guysin2012butitdoesseemlikeitispotentiallyagreatopportunityintheback
18
halfoftheyear.Wasjustwonderingifyoucouldcommentonthatatall.Thank
you.
SherylSandberg: Onthepoliticalspending,ourbusinessisbroadbasedenoughthatnooneevent
drivesourbusiness.We'reprettylargeanddiversified.Whilethepolitical
campaignobviouslyalotofmoneyisspentinads;that'salsotrueofanOlympics.
It'salsotrueofaWorldCup.It'salsotrueofaSuperbowl.
Withalloftheseeventstakingplacearoundtheworldthere'snooneeventwe
thinkdrivesahugeportionofrevenue.Thatsaidwearepleasedbywhat's
happenedonFacebookfortheelectioncycle.Notjustonthepaidsidebutactually
ontheorganicsideaswell.WereallyseeFacebookbeingembracedbypoliticians
allovertheworldtogetintouchwiththeirconstituentsandwe'repleasedwith
that.
EverymemberofCongressrightnowhasaFacebookpresenceandwe'reseeing
peoplelikeoneexampleisEliseStafanikwhoistheyoungestpersoninthe
Congress.Shemadeapledgewhenshewaselectedthatshewouldexplainevery
voteshetakesandsheexplainseveryvoteshetakesonFacebookwithshorter
explanationsifthey'renotcontroversialbutlongerexplanations.
That'sthekindofmissionbasedworkwe'rehappyaboutbecauseitbringspeople
closertothepeoplewhoarerepresentingthem.Wedon'tbreakouthowmany
advertisersareadvertisingontheAudienceNetworkbutwe'reseeingsolidand
growingadoptionoftheAudienceNetworkacrosstheboardaswearewith
Instagram.
Andwethinkalloftheseplatformstogetherreallyhelpgiveustheabilitytoserve
ourclientsinaveryleveragedwayandusethetargetingandmeasurement
capabilitieswe'veinvestedinacrossmultipleplatforms.
Operator: ThenextquestionisfromCarlosKirjnerwithBernstein.Yourlineisopen.
CarlosKirjner: Hi.Thanksfortakingmyquestion.First,somepeoplebelievethatmuchofwhat
usersseeinthenewsfeedisdrivenbytheirbehaviorandpreferences.Andasa
consequence,thestoriestheyendupseeingarealmostalwaysinlinewiththeir
existingviewsandpreferences.Doesthisphenomenonintheendincrease--does
19
thisphenomenonleadtoincreasedadoptionintheuseofFacebook,creatingmore
polarizationofviewsandlesseffectivecommunication?Atleastinsomeareasof
people’slives?
Mark,howdoyouthinkaboutthislineofthoughtthatbecausepeopleseethings
thatarealreadyinlinewithwhattheybelievecommunicationishindered?Whenit
comestovideoadformats,areyouphilosophicallyopposedtopre-rolls,andifyes,
why,andifnot,whatismissingforyoutoadoptthem?Thankyou.
MarkZuckerberg: Sowehavestudiedtheeffectthatyou'retalkingaboutandpublishedtheresultsof
researchthatshowthatFacebookisactuallyandsocialmediaingeneralarethe
mostdiverseformsofmediathatareoutthere.Andbasicallywhat--thewayto
thinkaboutthisisthatevenifalotofyourfriendscomefromthesamekindof
backgroundorhavethesamepoliticalorreligiousbeliefs,ifyouknowacouple
hundredpeoplethere'sagoodchancethatevenmaybeasmallpercent,maybe5or
10or15%ofthemwillhavedifferentviewpointswhichmeansthattheir
perspectivesarenowgoingtobeshowninyourNewsFeed.
Ifyoucomparethattotraditionalmedia,wherepeoplewilltypicallypicka
newspaperoraTVstationthattheywanttowatch,andjustget100%oftheview
fromthat,peopleareactuallygettingexposedtomuchmoredifferentkindsof
contentthroughsocialmediathantheywouldhaveotherwiseorhavebeeninthe
past.Soit'sagoodsoundingtheoryandIcangetwhypeoplerepeatit.Butit'snot
true.SoIthinkthatthat'ssomethingthatiffolksreadtheresearchthatweputout
there,thenthey'llseethat.
Whatwastheotherquestion?
DavidWehner: Preroll.
MarkZuckerberg: Preroll.Icantakethatonetoo.Sowedon'tthinkitwouldbeagoodexperiencein
newsfeedbecausealotofwhenpeoplearefindingvideosonFacebookisyou're
scrollingthroughnewsfeed,you'relookingatwhatstoriesseemsinterestingtoyou
whichiswhywedidtheautoplayvideossothatratherthanhavingtotakean
actionyoucanstartexperiencingthevideoautomaticallyandcontinuewatchingif
it’ssomethingthatyou’reinterestedin.
20
Butifwestartedplayinganadinthemiddleoffeedbeforeyougottothevideo
thenthatwouldreallygoagainstthat.Ithinkpeoplewouldjustwatchalotlessof
theorganicvideosthatwerepostedbecauseofthat.Buttheimportantthingto
keepinmindonthisiswedon'tneedtodoprerollsbecauseourmodelisnotone
whereyoucometoFacebooktowatchonepieceofcontent.
Youcometolookatafeedandputtingtheadsinbetweenthestoriesisamuch
moreeffectivewaytodoitbetterfortheuserexperience.
Operator: ThenextquestionisfromRossSandlerwithDeutscheBank.Yourlineisopen.
RossSandler: Great.IhadtwoquestionsforMark.Mark,youguysmentionedwhenyoureleased
thelatestInstagramMAUcrossingthe500millionmarkyougiveoutthebreakdown
ofUS,international.LookslikeUShasbeenaround100millionforaboutthepast
ninemonths.
Isthatjustapausealongthegrowthpathoristheresomethingelsethatyou're
seeingthat'scausingthatgrowthtostalloutabitinlightofwhatyoujustsaidabout
engagementbeingupsinceyoudidthealgorithmicreranking,anycolortherewould
behelpful.
SecondquestionisjustanyupdateonMessengerMandhowdoyouseethat
productpotentiallyimpactingengagementmonetizationonMessenger?Thanks.
DaveWehner: OnanyupdateonM,Icanstartwiththatone.
MarkZuckerberg: Iwasgoingtotakethatone.
DaveWehner: You'regoingtotakethatone?OntheInstagramMAUquestion,Idon'tthinkwe're
breakingoutbyregionInstagram’sMAU.Sono,Idon'tthinkthere'sanyupdate
therethatI'mawareof.
MarkZuckerberg: Okay.Yeah,sowejusthaven'tupdatedthestats.
DaveWehner: Yeah.
MarkZuckerberg: SoforM,we'vereleasedtheMessengerplatformandbotsinthelastsixmonths.F8
wasthebigannouncementthere.IthinksincethenIthinkwe'veannouncedwe
21
havemorethan10,000botsinthesystemwhicharebasicallymakingitsothat
differentbusinessescanbuildautomatedwaystocommunicatewithpeople.
ThewaywethinkaboutthisexperienceisthatqualitativelyIdon'tknowasingle
personreallywhowantstocallabusinesstogetsupportorinteractwithit,whether
that'stryingtogetareservationforarestaurantorgettingcustomersupportor
callingthebuysomething.Thoseareslowinteractions.They'resynchronous.
Theyconsumeyourwholeattentionwhileyou'redoingthem.Ifwecanmakeitso
thatyoucanhavesomeofthoseinteractionsinanautomatedwaywhereyoufire
offatextandthenjustgetaresponsebackquickly butasynchronouslysoitdoesn'ttakeupyourfullattention.Isubmitthat'sgoingtobeamuchbetterexperience
thatpeoplereallyenjoyandlike.
Sowe'reintheexperimentationphaseIthinkwiththeplatform.We'reseeingalot
ofgoodideasgettingtriedoutandI'm--Ipersonallyenjoyalotofthedifferentbots
peopleareusingormakingespeciallythenewsoneswhereyougetthesedigestsat
theendofthedayofdifferentkindsofcontent.
AndbetweenthatandMwhichiskindofourowninternalbotthatwe'rebuildingI
thinkthisisgoingtobeaninterestingareatowatchandencouragemore
interactionbetweenpeopleandbusinessesinthatspace
Operator: ThenextquestionisfromBenSchachterwithMacquarie.Yourlineisopen.
BenSchachter: CouplequestionsforMark.Thefirstone,whatarethelessonsyou'releveringfrom
seeingthegrowthofSnapchatandsomeoftheothernewernetworksparticularly
amongyoungpeople?
ObviouslyFacebookcontinuingtodowellbutthesethingsaregrowing.Second,
relatedtovideo,whatarethekeyproblemsthatyoureallythinkyouneedtosolve
forconsumersandforvideoproducersandhowisFacebookgoingtoevolvetohelp
solvethoseproblems?Thanks.
MarkZuckerberg: Sure.Andthey'rerelated.Sooverallpeoplearespendingmoreandmoretimeon
mobileandthatmeansthattherearealwaysmoreservicesthatpeopleuse,
22
whetherit'sYouTubeorthere'ssomereallyinterestingoneswithyoungerfolks
especiallylikeMusicallyandLivelythatIthinkareprettyinterestingaswell.
TheSnapchatwhichyoumentioned.PartofwhyIthinkyouseethisisthatthere
aresomanydifferentwaysthatpeoplewanttoshare,somanydifferentkindsof
contentrangingfromtexttophototovideotojustricherandrichermore
immersivecontent.
Alsothere’sarangefromprivateoneononetypesharingtosmallgroups,allyour
friendsatonce,largeintra-spacecommunitiesandthenultimatelyfullypublic.
Therearedifferentappsthatexploredifferentregionsofthatspaceanddoagood
jobwithitandofferideasthatIthinkthewholemarketneedstolearnfrom.
Rightnowthebigthemeandstrategythatwe'reexecutingiswe'regoingtobecome
videofirstandwhatImeanbythatisthatthere'sthistrendwhere10yearsback
mostofwhatyousawandsharedonlinewastext.Thenwewentthroughaphase
wheremostofitwasphotos.
Wereallybelievethatincallitfiveyears,whatevertheperiodoftimethatittakes
togetthere,Ithinkmostofwhatpeopleconsumeonlineisgoingtobevideo.And
thatmeansthatthereneedtobeawholerangeofnewproductiontoolsand
consumptionexperiencesforenablingthat.
ForproductionIthinkthatmeansthatyouneedtogetthecameraexperience,and
theexperienceforcapturinganduploadingvideosthatyoucapturedtobemuch
betterandamorecentralpartoftheexperience.Onconsumption,thereare
innovationsthatwe'vehadlikeautoplayandfeed.What'sthenextversionofthat
thatmakesitsopeoplecanhaveanevenmorenativeanddefaultvideoexperience
whenthey'reinnewsfeedaswellasprivateareaslikeMessengerandWhatsApp.
Ithinkyou'regoingtoseethisacrossallofourapps,morefocusonproducingthis
kindofcontentandmakingitfirstclasstoconsumeaswell,bothinprivateand
publiccontext.AndIthinkthat'sjustabigtrendacrossthemarketandoneofthe
bigthingsthatifwegetrightIthinkit'sgoingtounlockalotofsharingand
opportunity.
23
DaveWehner: AndthenjustfollowinguponRoss'questiononInstagramandUS,becauseIthink
Rossyouwereasking,we'veprovidedsomeroughpercentagesaroundinternational
andUSandIjustwouldn't--Iwouldn't--thosewereveryapproximateandI
wouldn'tbaseanytrendingonthat,onthosepercentages.
Operator: ThenextquestionisfromJohnBlackledgewithCowen&Company.Yourlineis
open.
JohnBlackledge: Great.Thanks.ForInstantArticlesIthinkitwentlivegloballyforallpublishers
aroundthetimeofF8inApril.Justwonderingifyoucanprovideanupdateonthe
progressandhowyouseeInstantArticlesevolvingoverthenextcoupleyears.And
thenmaybeDaveonthe49%year-over-yearimpressiongrowth,howmuchofthat
wasdrivenbyadloads?Thankyou.
MarkZuckerberg: IcantakeInstantArticlesquickly.Ithinkit'sgoingwell.It'sagooduserexperience.
Peoplelikeit.Thehypothesiswhenwerolleditoutwasthatifweremovedthe
latencywhichisoften10to15secondsofopeningupawebviewfornewsfeeds
thatmorepeoplewouldreadnews.Ithinktheinitialdatasuggeststhatthat's
probablytrue.
Sothat'sgood.We'regettingmorepartnersonandoverthelongtermIthinkone
ofthebigthingsthatweneedtodoisseeifwecannotonlymakethisgoodfor
engagementforourpartnersbutalsoareallypositivebusinessdriverforthemtoo.
That'ssomethingI'mexcitedaboutandwe'llhopefullyhavemorenewsonthat
comingup.
DaveWehner: Onthe49%year-over-yeargrowthinimpressions,we'renotprovidingaspecific
breakdownthere.Iwouldsaythatit'sprimarilydrivenbygrowthinFacebook
mobilenewsfeed.We'vetalkedaboutthedriversofsupplybeinggrowthinDAU,
growthintimespentperDAUandadload.
Andobviouslywe'vegivenstatsaround--roughstatsaround--we'vegivenspecific
statsaroundDAU.WetalkedabouttimespentperDAUbeingupdouble-digit.I
thinkyoucanmakesomeassumptionsaroundthat.Sothat'sprobablythewayto
triangulateonthat.
24
Ithinkwehavetimeforonemorequestion,Chris.
Operator: Certainly.ThefinalquestionisfromMarkMaywithCiti.Yourlineisopen.
MarkMay: Thanksalot.Ihadtwoaswell.Youprobablywon'tgivespecificrevenuenumbers
butjustifyoukindofinaggregatelookatsomeofthenon-Facebookapprevenue
streams,ifit'sFAN,Instagram,etcetera,curioustogetasenseofthetractionand
materialityofthose.
Wouldyouexpect,Dave,thatinaggregatethatthosewouldbecomekindof
materialmeaningthatsortof10%plusthresholdsometimethisyear?Justtryingto
getaballparksenseoftheleveloftractionanddiversificationofrevenueoutside
thecoreFacebookapp.
Andthenalongthelinesofyourcommentaryaroundadload,howshouldwebe
thinkingaboutyourMAUsareobviouslyverysignificant.DAUtoMAUquitehigh.
Doyoucontinuetoseethatasbeingaprimarydriverofadimpressionandad
revenuegrowthgoingforwardaswell?Thanks.
DaveWehner: Yeah,thanks,Mark.Likeyousaid,we'renotspecificallybreakingoutrevenue
numbers.OnethingtojustkeepinmindisInstagramisanownedandoperated
propertyisrepresentedgrossinourrevenue.WhereasImentionedtheAudience
Networkbyandlargeisgoingtoberecognizednetratherthangross.Thatisgoing
tomakeitsmallerinhowit'sgoingtoappearintherevenuenumbers.
TheoverallgrowthisstillbeingdrivenpredominantlybyFacebook.Instagramis
clearlymakingacontribution,asistheAudienceNetwork.Intermsofadload,asI
said,it'sbeenoneofthefactorsdrivingsupply.It'scertainlybeenhelpful.
Butthere'salsoDAUgrowthandtimespentperDAUgrowth,timespentperperson
andwecontinuetofeelthereareopportunitiestoexecuteonthoseandcontinueto
growinventoryinthatway.Sothat'swherewewouldfocus.AswedriveDAU
fasterthanMAU,thenthat'sgoingtoincreasethatratiobutwe'rereallyfocusedon
drivingDAUandtimespentperperson.