Facebook, Inc. (FB) Second Quarter 2016 Results … · Facebook, Inc. (FB) Second Quarter 2016...
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1 Facebook, Inc. (FB) Second Quarter 2016 Results Conference Call July 27 th , 2016 Operator Good afternoon. My name is Chris and I will be your conference operator today. At this time I would like to welcome everyone to the Facebook second Quarter 2016 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time, please press star then the number 1 on your telephone keypad. This call will be recorded. Thank you very much. Ms. Deborah Crawford, Facebook’s Vice President of Investor Relations, you may begin. Deborah Crawford, VP Investor Relations Good afternoon and welcome to Facebook’s second quarter 2016 earnings conference call. Joining me today to discuss our results are Mark Zuckerberg, CEO; Sheryl Sandberg, COO; and Dave Wehner, CFO. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in today’s press release, and in our quarterly report on form 10-Q filed with the SEC. Any forward-looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events. During this call we may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today’s earnings press release. The press release and an accompanying investor presentation are available on our website at investor.fb.com. And now, I’d like to turn the call over to Mark. Mark Zuckerberg, CEO Thanks, Deborah. And thanks everyone for joining today. We had another good quarter and first half of the year. Our community continues to grow around the world. 1.7 billion people now use Facebook every month, and 1.1 billion people use it every day. Our business is growing at a healthy rate as well. Total revenue grew by 59% year-over-year to $6.4 billion, and advertising revenue was up 63% to $6.2 billion. Our results show our progress as we work to make the world more open and connected across our three-, five- and ten-year horizons. Over the next three years we are focused on continuing to build our community and help people share more of what matters to them. The next five years are about building our newer products into full ecosystems with developers and businesses. And over the next ten years we are working to build new technologies to help everyone connect in new ways.
Transcript of Facebook, Inc. (FB) Second Quarter 2016 Results … · Facebook, Inc. (FB) Second Quarter 2016...
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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.
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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.
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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
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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
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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.
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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.
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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.
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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.
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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
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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.
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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.
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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
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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
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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.
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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
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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
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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
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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
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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
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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,
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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.
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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.
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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.
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DeborahCrawford:Great.Thankyouforjoiningustoday.Weappreciateyourtimeandwelook
forwardtospeakingwithyouagain.
Operator: Ladiesandgentlemen,thisconcludestoday'sconferencecall.Thankyouforjoining
us.Youmaynowdisconnectyourlines.
