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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.

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.

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DeborahCrawford:Great.Thankyouforjoiningustoday.Weappreciateyourtimeandwelook

forwardtospeakingwithyouagain.

Operator: Ladiesandgentlemen,thisconcludestoday'sconferencecall.Thankyouforjoining

us.Youmaynowdisconnectyourlines.