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Facebook,Inc.(FB)FirstQuarter2017ResultsConferenceCallMay3rd,2017OperatorGoodafternoon.MynameisMikeandIwillbeyourconferenceoperatortoday.AtthistimeIwouldliketowelcomeeveryonetotheFacebookfirstQuarter2017EarningsCall.Alllineshavebeenplacedonmutetopreventanybackgroundnoise.Afterthespeakers'remarks,therewillbeaquestionandanswersession.Ifyouwouldliketoaskaquestionduringthattime,pleasepressstarthenthenumber1onyourtelephonekeypad.Thiscallwillberecorded.Thankyouverymuch.Ms.DeborahCrawford,Facebook’sVicePresidentofInvestorRelations,youmaybegin.DeborahCrawford,VPInvestorRelationsThankyou.GoodafternoonandwelcometoFacebook’sfirstquarter2017earningsconferencecall.JoiningmetodaytodiscussourresultsareMarkZuckerberg,CEO;SherylSandberg,COO;andDaveWehner,CFO.Beforewegetstarted,Iwouldliketotakethisopportunitytoremindyouthatourremarkstodaywillincludeforward-lookingstatements.Actualresultsmaydiffermateriallyfromthosecontemplatedbytheseforward-lookingstatements.Factorsthatcouldcausetheseresultstodiffermateriallyaresetforthintoday’spressrelease,andinourannualreportonform10-KfiledwiththeSEC.Anyforward-lookingstatementsthatwemakeonthiscallarebasedonassumptionsasoftodayandweundertakenoobligationtoupdatethesestatementsasaresultofnewinformationorfutureevents.DuringthiscallwemaypresentbothGAAPandnon-GAAPfinancialmeasures.AreconciliationofGAAPtonon-GAAPmeasuresisincludedintoday’searningspressrelease.Thepressreleaseandanaccompanyinginvestorpresentationareavailableonourwebsiteatinvestor.fb.com.Andnow,I’dliketoturnthecallovertoMark.MarkZuckerberg,CEOThanks,Deborah.Andthankseveryoneforjoiningtoday.Westartedtheyearoffwithagoodquarter.Ourcommunitycontinuestogrowwithmorethan1.9billionpeoplenowusingFacebookeverymonthandalmost1.3billionusingiteveryday.Ouradsbusinessisdoingwell,too.Totalrevenuegrewby49%year-over-yearto$8.0billion,andadvertisingrevenuewasup51%to$7.9billion.InmylettertoourcommunitybackinFebruary,Italkedabouthow,forthepastdecade,Facebookhasfocusedonconnectingfriendsandfamilies.Now,withthatfoundation,ournextfocuswillbebuildingcommunity.
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There'salottodohere.Buildingglobalcommunityisbiggerthananyoneorganization,butwecanhelpbydevelopingsocialinfrastructureforcommunity--forsupportingus,forkeepingussafe,forinformingus,forcivicengagement,andforincludingeveryone.
Buildingaglobalcommunitythatworksforeveryonestartswithbuildingmillionsofsmaller,supportivecommunities.Thisisespeciallyimportantsincemembershipinmanyphysicalcommunitiesisdeclining.Werecentlyfoundthatmorethan100millionpeopleonFacebookaremembersofwhatwecall"verymeaningful"groups,likeparentingorrarediseasesupportgroupsthatareanimportantpartoftheirsupportstructure.Myhopeistohelpmorethanabillionpeoplejoinmeaningfulgroupstostrengthenoursocialfabricoverthenextfewyears.Tohelpbuildasafecommunity,welaunchedCommunityHelp,atoolthatallowspeopletogiveandgetthingslikefood,shelterortransportationinthewakeofanaturaldisaster.Wealsolaunchedanewfundraisingtoolthatallowspeopletoraisemoneyforthemselves,afriendoracausethatisn'talreadyonFacebook.
Butit'sclearwehavemoreworktodo.We'regoingtocontinuebuildingnewtoolstokeeppeoplesafeonourplatform.Overthenextyear,we'llbeadding3,000peopletoourcommunityoperationsteamaroundtheworld--ontopofthe4,500wealreadyhavetoday--toreviewthemillionsofreportswegeteveryweek,andtoimprovetheprocessfordoingitquickly.Tohelpbuildamoreinformedcommunity,wemadechangestoourNewsFeedrankingtoreducethefinancialmotivationtospreadhoaxes.We'reworkingwithindependentfactcheckerstogivepeoplemoreinformationaboutwhetheranarticlehasbeendisputed.WelaunchedaneducationaltoolatthetopofNewsFeedin14countriestohelppeoplespotfalsenews.Andwe'rebeginningtotestRelatedArticlesthatappearbeforeyoureadanarticletogiveyoueasieraccesstomoreperspectivesandinformation.
We'realsohelpingbuildmorecivically-engagedcommunities.InMarch,welaunchedTownHalltohelppeoplefindandconnectwiththeirgovernmentrepresentativesonalocal,stateandfederallevelintheU.S..Injustthefirstmonth,wecreatedmorethan1millionnewconnectionsbetweenpeopleandtheirrepresentatives.WealsorolledoutatoolinFranceaheadoftheirelectionthatallowscandidatestosharestatementsaboutwheretheystandondifferentpolicyissues.Thesearesomeofthechangeswe'vemadetohelppeoplebuildstrongercommunities.NextIwanttogiveaquickupdateonwhatwe'rebuildingoverthreetimehorizons:howwe'remakingourcoreservicesmoreusefulandengagingrightnow;howwe'rebuildingecosystemsaroundproductsthatalotofpeoplealreadyuseoverthenextfiveyears;andhowwe'reinvestinginthetechnologiesthatwillgivemorepeopleavoiceandmakesharingmoreimmersiveoverthenext10years.Thisquarterwelaunchedasetofnewcameras.Photosandvideoarebecomingmorecommonthantext,sothecameraisbecomingmorecentralthanthetextboxinallourapps.IntheFacebookapp,youcannowswiperightfromNewsFeedtoaccessournewcamerawithmasks,framesandfilters.We'vedevelopednewcomputervisiontoolsthatcanapplythestyleofapaintingtoa
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photoorvideo—andwecandoitinreal-timeonyourphoneforthefirsttime.Thisispartofmakingthecamerathefirstaugmentedrealityplatform.WewanttogivedevelopersthepowertobuildallkindsofARtoolsintothecamerasomorepeoplecanexperienceaugmentedrealityontheirphones.Creatingthefirstopencameraplatformisahugestepforward,andwe'reexcitedtokeeppushingaugmentedrealityforward.WealsoexpandedtheStoriesformattogivepeoplemorenewwaystoshare.InstagramStoriesnowhasmorethan200milliondailyactivepeopleusingit.Andjustacouplemonthsafterwelaunchedit,WhatsAppStatushasmorethan175milliondailyactivepeopleusingit.Morerecently,wealsorolledoutMessengerDayandFacebookStories,andwe'regoingtokeepputtingvideoatthecenterofallourservices.Overthenextfiveyears,we'regoingtobuildecosystemsaroundourproductsthatalotofpeoplearealreadyusing.IputLivevideointhiscategory.Lastmonth,weannouncedthatoneineveryfiveFacebookvideosisalivebroadcast--andoverthepastyear,dailywatchtimeforFacebookLivebroadcastshasgrownbymorethan4x.ThisyearwealsogavepeopletheabilitytogoLivein360.Messengerisinthiscategory,too.Andwejustannouncedthat1.2billionpeopleuseMessengereverymonth.AtF8,welaunchedthesecondgenerationofourMessengerplatformandintroducedaDiscovertabtomakeiteasiertofindthebestexperiencesquickly.Finallyoverthenext10years,we'redevelopingconsumerusecasesaroundtechnologiesthatareabigpartofourfuture,butwon'tbeabigpartofthebusinessforawhile.Ontheconnectivityside,inAprilwesuccessfullysimultaneouslybeamed16gigabitsofdataineachdirectionbetweenalocationonthegroundandaCessnaaircraftcirclingmorethan7kmaway.Eventually,we'regoingtousethistechnologyalongwithAquila,oursolar-poweredplanewe'rebuilding,tobeaminternettopartsoftheworldthatcurrentlydon'thaveaccess.InVR,welaunchedFacebookSpaces,thefirstsocialvirtualrealityplatformthatletsyoucreateyourownavatarandhangoutwithyourfriends.AndwealsoreleasedtheFacebook360appforGearVRthatmakesiteasiertodiscoverandexperience360photosandvideos.AndwecontinuetoshipRiftandTouchtopeopleeverywhereanddeliverastrongcontentecosystemacrossbothRiftandGearVR.Aspeoplesharemorevideo,asweexploremorethingslikeaugmentedreality,andaswebuildmoretoolstokeepourcommunitysafe,we'regoingtokeepinvestingaggressivelyintheinfrastructureweneedtogrowandserveourcommunity.That'swhyweannouncedthatournexttwonewdatacenterswillbebuiltinOdense,DenmarkandPapillion,Nebraska.We'vemadesomegoodprogress,butwehavealotmoretodotohelpbuildcommunityandconnecttheworld.Iwanttothankourcommunity,ourteams,ourpartners,andallofyouforbeingapartofthis
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journeywithus.
Now,here'sSheryl.SherylSandberg,COOThanksMarkandhieveryone.Wehadastrongfirstquarterandagreatstarttotheyear.Q1adrevenuegrew51%yearoveryear.Mobileadrevenuewas$6.7billion,up58%year-over-year,andwasapproximately85%oftotaladrevenue.Growthagainthisquarterwasbroad-basedacrossregions,marketersegments,andverticals.Ourgoalistobuildmeaningfulconnectionsbetweenbusinessesandpeople.We’redoingthisbyfocusingon3keypriorities:helpingbusinessesleveragethepowerofmobile,developinginnovativeadproducts,andmakingouradsmorerelevantandeffective.Ourfirstpriorityishelpingbusinessesleveragethepowerofmobile.Morebusinessesaroundtheworldareshiftingtomarketingonmobile.Over70millionbusinessesarenowusingFacebookPagesaroundtheworldonamonthlybasis,andmoreandmoreofthemarebecomingadvertisers.Wealsorecentlyannouncedthatover5millionbusinessesareactivelyadvertisingonFacebook,includingmorethan1millioninemergingmarkets.MostoftheseadvertisersstartbyusingourfreePagesproductbecauseit’seasytouse.Peopleareincreasinglyrecognizingthatthesmallscreenisbig.OurCreativeHubisprovidingtoolsthatmakeiteasiertocreateadsoptimizedformobile–whatwetalkaboutas“thumb-stoppingcreative”.MarketerscanseepreviewsoftheiradsacrossFacebookandInstagrambeforerollingthemoutandgettipstohelpdrivebusinessresults.Oursecondpriorityisdevelopinginnovativeadproductsthathelpbusinessesmakethemostoutoftheircampaigns.WecontinuetoimproveDynamicAdswhichenableadvertiserstopromotetheirfullrangeofproductsacrossalldevices.AdvertiserscannowtargetDynamicAdstobroadaudiencesandareseeinggreatresults.Lastweek,IvisitedhomeretailerWayfairinBoston.TheyusedDynamicAdstoreachalargeaudiencewithpersonalizedrecommendationsfromtheircatalogofover8millionitems.Byfindinghigherrevenuecustomersatalowercost,thecampaignbeatWayfair’sreturnonadspendgoalbymorethan20%.
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We’realsohelpingmarketersusevideotocaptureshoppers’attention.PeoplearewatchingmorevideoonFacebookthaneverbeforeandit’schanginghowtheyconnectwithbusinesses.InarecentstudyFacebookcommissionedwithKantar,30%ofmobileshopperssaidvideoisthebestwaytodiscovernewproducts.Thisquarter,weintroducedanewadformatcalledCollection.Collectionhelpsmarketerstellstoriesonmobilebycombiningcreativevideosorphotoswithproductimages.Clickingontheproductsleadstoanimmersiveshoppingexperience,drivingpurchaseconsiderationandultimatelysales.Forexample,AdidaswhichishowyoupronouncethemattheirheadquartersanditsagencyiProspectcreatedavideohighlightingtheinnovativefeaturesofitsZNERoadTripHoodie.UsingourCollectionadformat,Adidasfeatured4moreitemsfromtheirproductcatalogbelowthevideo.Theysawa5.3timesreturnonadspendanda1.8timesdecreaseincostperconversion.It’sstillearlyforthisnewformat,butit’sagreatexampleofhowwecandeliverinnovativemobileexperiencesthatworkforadvertisersandworkforpeople.Thisquarterwealsolaunchedfullscreen,sound-onadsinInstagramStories.Advertiserscannowreachover200milliondailyactivesonStoriestodoeverythingfrombuildingbrandstosellingproducts.Ourthirdpriorityismakingouradsmorerelevantandeffective.Measurementiscritical.Werecentlyintroducednewandexpandedverificationpartnerships,andcommittedtoauditswiththeMediaRatingCouncil.Whethermarketersaretryingtogetpeopletobuysomethingontheirwebsiteorintheirstore,wenowhavesystemsinplacetohelpthemmeasureresultsandthird-partypartnershipstoverifythoseresults.Theseareimportantstepsaswecontinuetobuildtheadvertisertrust.BudLight’sNFLcampaignisagreatexample.Topromotethedesignsoftheirnewteam-specificcans,BudLighttookanationalandregionalapproach.Theyranvideoadsfeaturingthenewcanstopeopleages21-49intheUS.Thentheyalsoranmoretargetedadsineachregion,featuringthe2cansoftheteamsplayingeachother.UsingFacebookpollingandOracledatacloud,theysawa24-pointliftinadrecallanda4.4timesreturnonadsales.Weknowmarketerswanttocompareresultsacrossplatformsandplacements.Historicallywe’veenabledlargermarketerstodothis.InQ1,westartedtestingasetofadvancedmeasurementtoolsthatmakeiteasierformarketersofallsizestocomparetheeffectivenessofFacebook,InstagramandAudienceNetworkalongsideotherpublishers.Weareofftoastrongstartin2017.Wearehelpingmarketersleveragethepowerofmobile,developinginnovativeadproducts,anddeliveringprovenandmeasurableresults.Weareexcitedaboutthegrowingadoptionofourplatformsandwearegoingtocontinuetoinvestinhelpingbusinessesandpeopleconnect.
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Thanksandnowhere’sDave.DavidWehner,CFOThanksSherylandgoodafternooneveryone.Q1wasastrongquarterforFacebook.Wecontinuedtoseehealthygrowthandengagementtrendsacrossourcommunityaswellasbroadbasedgrowthinouradsbusiness.Let’sstartwithourcommunitymetrics.InMarch,1.28billionpeoplevisitedFacebookonanaverageday,up18%comparedtolastyear.Thisdailynumberrepresented66%ofthe1.94billionpeoplethatvisitedFacebookduringthemonthofMarch,whichwasup282millionor17%comparedtolastyear.OurcommunitygrowthinQ1wasdrivenbyproductimprovements,Internet.org,andongoingthirdpartypromotionaldataplansinmarketslikeIndia.Notethatwedonotcontrolthetimingortermsofthesepromotions.Beforedivingintothefinancials,Iwanttohighlightthatwearenolongerreportingnon-GAAPexpenses,income,taxrateorEPS.Giventhatstockisanimportantpartofourcompensationstructure,webelievethatinvestorsshouldfocusonourfinancialperformancewithstock-basedcompensationincluded.Turningnowtothefinancials.Allofourcomparisonsareonayear-over-yearbasisunlessotherwisenoted.Q1totalrevenuewas$8.0billion,up49%.Adrevenuewas$7.9billion,up51%.Exchangeratesdidnotaffectouroverallgrowthratethisquarterasheadwindsincertaincurrencieswereoffsetbytailwindsinothers.Intermsofregionaladvertisinggrowth,RestofWorldandAsiaPacificwereourstrongestgrowersinpercentagetermsat66%and60%respectively.Bothregionsbenefittedfromparticularlystrongadvertiserdemand.EuropeandNorthAmericabothgrewat47%.Mobileadrevenuewas$6.7billion,up58%andrepresentedapproximately85%ofadrevenue.Desktopadrevenuegrew22%,despiteadeclineindesktopusage,andwasaidedbyourrecenteffortstolimittheimpactofadblockingtechnologies,whichwebeganinQ3oflastyear.Ourmobileadsbusinesscontinuedtobedrivenbyhealthysupplyanddemanddynamics.InQ1,theaveragepriceperadincreased14%andthetotalnumberofadimpressionsservedincreased32%,primarilydrivenbymobilefeedads.
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PaymentsandOtherFeesrevenuewas$175million,down3%.Q1totalexpenseswere$4.7billion,up40%.In2017,wehavecontinuedtoaccelerateourhiringefforts.Weaddedover1,700employeesinQ1–predominantlyintechnicalandrecruitingfunctions–andendedthequarterwithapproximately18,800employees,up38%comparedtolastyear.Thismarkedanaccelerationfromthe34%growthrateinQ4.Q1operatingincomewas$3.3billion,representinga41%margin.Ourtaxratewas10%,whichreflectstheadoptionofASU2016-09inthefourthquarter.Excludingthisadoption,ourtaxratewouldhavebeenapproximately9percentagepointshigher.Notethatthenewaccountingguidancedoesnotimpactthecashtaxeswepay,butmerelyhowthetaxprovisionispresentedunderGAAP,wherebynowexcesstaxbenefitsareflowingthroughtheP&LandinthisquarterpositivelyimpactedEPS.Netincomewas$3.1billion,or$1.04pershare.Q1capitalexpenditureswereapproximately$1.3billion,drivenbyinvestmentsindatacenters,servers,officefacilitiesandnetworkinfrastructure.InQ1,wealsobrokegroundonourninthdatacenterinNebraska.Wegeneratedapproximately$3.8billioninfreecashflow.Inthefirstquarter,werepurchased$228millionofourClassAcommonstockandused$771millionincashfortaxespaidrelatedtothenetsharesettlementofequityawards.Weendedthequarterwith$32.3billionincashandinvestments.Turningnowtotheoutlook.Withregardstorevenue,wecontinuetoexpectthatouradrevenuegrowthrateswillcomedownmeaningfullyoverthecourseof2017.Weexpectthatadloadwillplayalesssignificantfactorindrivingrevenuegrowthaftermid-2017.Wealsoexpectdesktopadrevenuegrowthratestoslowinthethirdquarterwhenwebegintolapoureffortstolimittheimpactofadblockers.Wecontinuetoexpectthatourfull-year2017Payments&OtherFeesrevenuewilldeclinecomparedtofull-year2016.Asareminder,Payments&OtherFeesrevenueisprimarilygeneratedfrompaymentsrelatedtogamesplayedonpersonalcomputers.
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Turningtotheexpenseoutlook,wecontinuetoexpectthatfull-year2017GAAPexpenseswillgrow40-50%comparedtofull-year2016.Iwouldnotethataswelookinto2017andbeyondtherearegoingtobeanumberofinitiativeswebelievearevaluabletothecommunityandtothecompanyinthelongtermbutaregoingtobenetnegativeonouroperatingmargins.Weareembarkingonasignificantrampupininfrastructuresupportingglobalgrowth,andwecontinuetoexpectthatfull-year2017capitalexpenditureswillbeintherangeof$7-$7.5billiondollarswhichisupover50%comparedtolastyear.Turningnowtotax.Aswenotedinthelastcall,underthenewaccountingguidanceourtaxratewillvarybasedonourstockprice.Atcurrentstockprices,weexpectthatourQ2andfull-year2017taxrateswillbothbeinthemid-teens,soupfromthefirstquarterrate.Insummary,Q1wasastrongquarterandagreatstarttotheyear.GrowthintheFacebookcommunityremainsstrong.Engagementacrossourfamilyofappsishealthyandgrowing.Andadvertiserdemandfromourgrowingbaseofmarketersisrobust.Importantly,wecontinuetoinvestaggressivelytobuildourbusinessanddrivevalueforourcommunityoverthelongterm.Withthat,operator,let’sopenupthecallforquestions.
Operator: Wewillnowopenthelineforaquestionandanswersession.Toaskaquestion,
pressstarfollowedbythenumberoneonyourtouch-tonephone.Pleasepickup
yourhandsetbeforeaskingyourquestiontoensureclarity.Ifyou’restreaming
today’scall,pleasemuteyourcomputerspeakers.
YourfirstquestioncomesfromthelineofEricSheridanfromUBS.
EricSheridan: MaybeonethematicquestiononInstagramforMarkandSheryl.Wantedto
understandwhatyou'reseeingintermsofthedevelopmentofthecommunityon
theusergrowthside,theengagementsideaswellasonthemonetizationsidewith
respecttobreadthofadvertisersandadproductevolution,whatthatmeansfor
Instagram'sfutureandhowitcomparestomaybewhatyou'velearnedgrowingthe
businessontheFacebooksideoverthelastcoupleofyears?
DavidWehner: Eric,whydon'tItakethebeginningofthatandthenSherylcanaugmentwithsome
additionalcolor.SowhenyouthinkaboutInstagram,we'reseeinggreatgrowth
therewiththecommunity.Sothispastquarter,weannounced700milliondaily--
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sorry,monthlyactivessothatwasabigannouncement.Andthat'sbroad-based
growthacrosstheglobesowe'repleasedwiththat.Intermsofthedevelopmenton
theadvertisingside,we'renotspecificallybreakingoutInstagramrevenue,asyou
know,becausethat'ssoldthroughthesameFacebookadinterfaces.
Butwe'reseeingreallygoodcontributionandgoodgrowththere.Andwe're
developingitacrossawidevarietyofadproductssoDR'sbecomingamore
significantpartoftheInstagramStorieswhereitwasoriginallymorebrand-focused,
butwe'veexpandedtheproductofferingsonthedirectresponsefront.Andwe're
continuingtobringmoreadproductstoInstagram.
SherylSandberg: We'reprettyexcitedaboutwhat'shappeningintheInstagramadspacebecause
FacebookandInstagramarethetwomostimportantmobileadplatforms.And
there'saspecialpropertywithInstagram,whichisthattheincreasingvisualization
ofadsandthecreativecanvasitofferswiththesciencebehindtheFacebook
targetingandmeasurementsystemsisreallyaprettyunusualcombination.
We'realsoseeingverybroadadoptionincludingsmallcustomers.We'repretty
excitedtohave1millionadvertisersand8millionInstagrambusinessprofilesonthe
platform.Toshareoneexample,anonlinestoreinBrazilcalledLojaNama,theysell
decorativeitemsandaccessories.Theirbusinessowner,Joanna,tookphotosofher
productsonherphoneandthencreatedadswithourShopNowbutton.
ShetargetedyoungaudiencesinBrazilwhoareinterestedinfashion,decoration,
moviesandarchitecture.Andduringtheperiodofhercampaign,Instagram
accountedfor78--79%ofhersales.Ithinkwhatthatshowsisthepowerofthe
verysophisticatedtargetingweofferacrossourplatforms,alongwithreallythe
abilitytouseverysimpletoolslikeaphonetocreateverysophisticatedbutvisually
compellingads.
Operator: YournextquestioncomesfromthelineofDouglasAnmuthofJPMorgan.
DouglasAnmuth: OneforMarkandthenperhapsoneforSherylorDave.Mark,first,justonthevideo
strategy,washopingyoucouldtalkalittlebitabouthowthat'sevolvingintermsof
thetypeofcontentthatyou'relicensingandfeaturingwithintheFacebookvideo
tab.Andthenifyouhaveanymoreclarityjustonhowtheeconomicsaregoingto
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worktherearoundrevenueshareandgrossmargins.Andthenonadrevenue,the
U.S.andCanadawasverystrongat47%growth,butatthesametime,italsodid
decelalittlebitmorethanwe'veseeninrecentquarters.Wasjustwonderingif
there'sanythingelsetocalloutthere.Thankyou.
DavidWehner: Yes,Doug,whydon'tItakethedecelquestionontheU.S.andCanada?Idon'tthink
therewasanythingparticularlysurprisingaboutthedecelerationinthegrowthin
U.S.andCanada.We'vebeentalkingaboutexpectingadecelerationinadrevenue
growth,andwesawthatplayoutU.S.,Canadamodestly.Obviously,we're
particularlypleasedthattherewasreallystrongdemandthatbenefitedregionslike
APACandRestofWorldsoreallybroad-basedstrengthinAPAC.AndthenRestof
World,wesawareboundinLatinAmerica.Soespecially,Brazilsowe'reseeing
someparticularstrengththere.SoIthinkthat'ssortof--Ithinkwasabighighlight.
Onthecontentfront,we'relookingatinvestinginkickstartinganecosystemfor
longer-formcontentonFacebook.Andthatinvolvesusworkingwithcontent
providerstodevelopthatcontent.Inthelongrun,weexpectittobearevenue
sharemodelontheplatform.Andobviously,we'regoingtobe--we'regoingtobe
inanareawherewe'resharingrevenuewithcontentproviderssoit'sgoingtohave
adifferentmarginprofilethancoreFacebookNewsFeedfromanexpenseprofile
perspective.
MarkZuckerberg: Ithinkyouprettymuchgotthat.
DavidWehner: OK.
Operator: YournextquestioncomesfromthelineofBrianNowakfromMorganStanley.
BrianNowak: IhaveoneforMarkonMessengermonetization.Canyoujusttalkaboutsomeof
thebiggesttrendsyou'remonitoringandwhatyou'remostexcitedaboutasyou
thinkaboutwaystomonetizeMessengeroverthenext2or3years?Andthenon
engagement,youcontinuetogrowInstagramandMessengeruserbasesreally
helpfully.Iguess,I'dbecurioustohear,doyoustillcontinuetoseerisingtimespent
peruseracrossall3ofthoseplatformsevenastheDAUsbasegetsbigger?
MarkZuckerberg: Youwanttostartwiththestats,Wehner?
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DavidWehner: Yes,Icanstartwiththestats.Soon--yes,Mark,ontheengagementfront,we're
seeingtimespentgrowthperDAUacrosstheFacebookfamilyofappsandthat
includesFacebookitself.Instagramhasbeenstrong,especiallywithfeedranking
andStories.We'renotbreakingoutspecifictimespentstatsonaquarterlybasison
those.AndthenontheMessengermonetizationfront.
MarkZuckerberg: Icantalkaboutthestrategy.Yes,sothefirstthingthatweneedtodoonMessenger
andWhatsAppisgetalotofbusinessesusingitorganicallyandbuildthebehavior
forpeoplethattheyreachouttobusinessesfordifferentthings,likecustomer
supportorforgettingnewscontent,thingsthatmaynoteventuallybethebig
businessusecasesbutestablishthebehaviorofpeopleinteractingnotonlywith
theirclosefriendsbutalsowithbusinesses.Intermsofmakingmoneyonthat,once
wehavethatbehavior,Ithinktherearegoingtobeanumberofwaystoamplify
that.
We'realreadyexperimentingwithacouple.OneisadsthatactuallydisplayinNews
Feed,notinMessengerorWhatsAppbutthatlinkedtotheabilitytocommunicate
withabusinessdirectlyinMessengeroreventuallyWhatsApp.Andthat'sgreat.I
mean,itconvertsbetterforthebusinesses.Theycanhaveabetterdialoguewith
theperson–apersistentrelationship.Sothat'sonewaythatisvaluable.
Theotherwayis,ofcourse,eventuallyshowingpaidcontentinMessengerwhether
that'sintheinboxorinrelevantwaysthroughouttheproduct.Butthetoppriority
rightnowisjustbuildingupthebaseoforganicinteractionbetweenpeopleand
businessesthattheywanttointeractwith.Andoncewegetthattoabigbase,I
thinktherearegoingtobealotofopportunitiestobuildthebusiness.Andthe
businesswillbeproportionaltotheamountofthatactivitythatpeoplewanttodo
organically.
Operator: YournextquestioncomesfromthelineofJustinPostfromBankofAmericaMerrill
Lynch.
JustinPost: Acoupleofthingsonadvertisingandmodeling.WhenwethinkaboutQ1,canyou
helpusatalltothinkabouthowmuchtheadloadgrowthiscontributing?Andwhat
drovetheimprovementinpricinginthequarter?AndthenDave,whenyoulookout
tothethirdquarterandyoukindoflaptheadblockingondesktop,aretheremore
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adblockingsyoucandotohelpmaintainthatgrowth?Orarethereotherdriversfor
desktopthatwecouldthinkabout?Thankyou.
DavidWehner: Sure,Justin.Notbreakingoutspecificdriversonthesupplyside,supplygrowthwas
healthyandwehadcontributionsfromuserstimespentandadloadinthequarter.
Intermsofwhatdrovetheimprovementinthepricing,it'sstrongdemand;that's
playingthroughinthefaceofalittlebitslowersupplygrowth.Andsoyou'reseeing,
ofcourse,theauctiondrivepricingandtheirinterplaybetweenthesupplygrowth
andthepricinggrowth,andwe'reseeingstrongdemandplaythroughonthepricing
side.
Whenwegettolappingoureffortsondesktop,Idothinkyou'regoingto--you
haveaseculartrendawayfromdesktop,sothat'sgoingtobeanoverallfactorin
desktop--ourabilitytogrowandmaintainthedesktopbusiness,soIthinkthat'san
underlyingfactor.We'realwaysgoingtobeinabackandforthwithadblockerson
thedesktopsidesoIthinkthat'sgoingtoconstantlybeathingthatplaysintothe
desktoprevenue.
Operator: YournextquestioncomesfromthelineofColinSebastianfromBaird.
ColinSebastian: Great,thanks.Firstoff,Iguess,asafollow-upontheearliervideoquestionfrom
Doug.Couldyouaddsomeperspectiveonengagementtrendswithvideocontent
andvideoadssuchasaverageviewingtime?Andwhetherthosemixiswhatis
impactingimpressiongrowth?Andthenmorebroadly,ifyoucanoffersome
perspectiveonhowmuchofthevideoadspendingonFacebookapplicationsare
incrementaltotelevisionbudgetsorifthere'sanyevidenceyou'reseeingofashare
shift?Thankyou.
DavidWehner: Sure,Colin.I'lltakethatfirstone.Soyes,impressiongrowthwas32%inQ1asI
noted.Andthatwasabitslowerthaninpreviousquarters.Thoseofyouwhohave
beenfollowingusforawhileknowthatperiodically,wemakechangestothe
productthatisgoingtoimpactsomeofthemetrics.OneofthethingsthatIwould
calloutinQ1asacontributingfactorontheimpressiongrowthsidewasour
decisiontoranklonger-formvideohigherinNewsFeed.Thatmeansmoretimein
video.AndthatdoescomeattheexpenseofsomeimpressiongrowthinNewsFeed.
SoIthinkyoudoseesomeinterplaythereontheimpressiongrowthsideduetoour
focusonvideo.AndthenSherylisgoingtofollow-uponvideoadspending.
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SherylSandberg: OnTV,wearedefinitelyseeingpeoplecontinuetoadvertiseonTVanduseusasa
complement.Overtime,webelievethatthedollarsshiftwitheyeballs,andwewant
toearnitfromourclientstobethebestdollarandthebestminutetheyspendand
helpthemmeasureacrosschannels.Ithinkincreasingly,thequestionisnotyoucan
dowithoutTVbutifyoucandowithoutmobile.Andwe'reworkinghardtohelp
advertisersdevelopthevideocreativethatreallyworksformobilebecausethat
makesthereallybigdifference.
Andwethinkthecombinationofthecreativeworkingformobilebutalsothe
measurementandtargetingwecandoisaverypowerfuloffer.Toshareoneofmy
favoritenewexamples,Subwayworkingwiththeiragentthrough360i,developed
videoadsandimagesforFacebookandInstagramtopromotethelimited-timeoffer
Reubensandwich.AndtheyusedAudienceInsights,targetingpeopleaged18to49
whopurchasemeatandcheese.Andthat'sjustprettyincredibletargeting.
NowhereelseIdon'tthinkyoucanactuallytargetthatwayandpeopleinterestedin
fastfoodandencouragethemtovisitSubways.TheythenusedNielsenBrand
Effectsandwereabletomeasurea16-pointliftinadrecallanda5-pointliftin
intenttovisitSubway.Soit'sareallyuniquecombinationofthepowerofcreative
thatwasdesignedforvideoformobilewithveryspecifictargetingandveryspecific
measurement.
Operator: YournextquestioncomesfromthelineofJohnBlackledgefromCowen.
JohnBlackledge: Twoquestions.Mark,youmentionedadding3,000reviewersofcontentat
Facebook.Couldartificialintelligencebeusedovertimetohelpsolvesomeofthe
monitoring?Andthenjustmorebroadly,howisAIbeingemployedinprocessesat
thecompanynowversusacoupleofyearsago?
Andthenseconditemwouldbecouldneweradunitslikemid-rollvideohelp
mitigatethedecelfromtheloweradloadgrowthcontributioninsecondhalf'17?
MarkZuckerberg: I'lltalktothecontentandAIquestionandthensomeoneelsecantalkaboutthead
piece.Theshortanswerisyes.AItools,overtime,willbeabletodoabetterjobof
flaggingthingsforthesetofpeoplewhoareinthecommunityopsteamsthatwe
14
canprioritizewhatwelookat.Alotofwhatwe'retryingtodohere,it'snotjust
aboutgettingcontentoffFacebook.
Lastweek,thereisthiscasewheresomeonewasusingFacebookLivetobroadcast,
orwasthinkingaboutsuicide,andwesawthatvideoandactuallydidn'ttakeit
downandhelpedtogetintouchwithlawenforcementtousethatLiveVideoto
communicatewiththatpersonandhelpsavetheirlife.Soalotofwhatwe'retrying
todoisnotjustabouttakingthecontentdownbutalsoabouthelpingpeoplewhen
they'reinneedontheplatform,andwetakethatvery,veryseriously.
Overtime,theAItoolswillgetbetter.Rightnow,therearecertainthingsthatAIcan
dointermsofunderstandingtextandunderstandingwhat'sinaphotoandwhat's
inavideo.Thatwillgetbetterovertime.Thatwilltakeaperiodofyearsthoughto
reallyreachthequalitylevelthatwewant.Soforawhileourstrategyhasbeento
continuebuildingasgoodoftoolsaswecan.Becausenomatterhowmanypeople
wehaveontheteam,we'renevergoingtobeabletolookateverything,right?So
that'sgoingtobeabigchallenge.
Butgiventheimportanceofthis,howquicklyLiveVideoisgrowing,wewantedto
makesurethatwedoubledownonthisandmakesurethatweprovideassafeofan
experienceforthecommunityaswecanwhichiswhywe'realmostdoublingthe
sizeofthecommunityopsteamtofocusonsomeoftheseissuesaroundsafetyon
LiveVideo.Butovertimeforsure,moreAIwilldothisbutthisisoveraperiodof
years.
DavidWehner: John,Ithinkyourquestionthenwasonadbreaksandthemid-rolltypeofformats.I
thinkthere,we'retestingtheabilityandareputtingshortadbreaksintolonger-
formliveandon-demandvideos.Testsaregoingwellbutit'sreallyearlydaystotalk
aboutthatbeingasignificantcontributor.Sowe'reworkingtocontinuetomake
thoseproductsbetterandcontinuingthosetests.Butit'searly.Weare--onthat
front--we'refocusedonbuildingoutthebestvideoexperiencesforourcommunity
andgrowinglonger-formcontentasapriority.Andadbreakisgoingtoallowusto
haveamonetizationstrategywiththatlonger-formcontent.SolikeIsaid,it'searly.
Operator: YournextquestioncomesfromthelineofHeatherBellinifromGoldmanSachs.
15
HeatherBellini: IguessIhadaquestionjustrelatedtoInstagramandFacebookstories.Imean,
we'vetalkedalotaboutadloadgrowthoverthelastyear,andDave'sbeentalking
aboutthependingslowdown,whichIthinkwe'reallexpecting.Buthowdowethink
aboutthesenewapplicationsornewwaystoengagewiththeappsatthetopofthe
--atthetopofyourphonewhereyou'restartingtoseeadinsertionshowupas
well?Isthatthoughtofasdifferentthanthegeneraladloadcommentthat,Dave,
you'remaking?
AndI'msorrytosplithairsherebutI'mjusttryingtogetasenseofhowtothink
aboutwhenthey'restartingtoshowupinnewplaces.Andthen,Iguess,Ijusthada
follow-upforSheryl.Andonequestioninparticularwasifthere'sanymeasurement
metricsthatadvertisersareaskingfornowthatifyoucouldhelpthemwith,it
wouldmakethemevenmoreeagertoshifttheirbudgetsoverfromTVandfollow
theireyeballs?
DavidWehner: Soyes,Heather,onthe--onStories,again,it'saprettysimilaranswer,Ithink,the
adbreaksinthesensethatit'searlyintermsofusing--putting--usingthead
formatinstories.Wecertainlyrolledthoseout.Theyarenotintheadload
calculationperse.Soitisdifferentasyousaid,fromtheadloadcommentarythat
I'vegiven.Butobviously,it'sveryearlyonthoseproducts.AndthenSheryl,youhad
thequestionaboutmeasurementmetrics?
SherylSandberg: Yes,weknowthatmeasurementissocritical.Andwereallywanttomeasurecore
businessresultsandfocusonbecomingthenumberonegrowthdriverforour
clients.Wearecontinuingtoconstantlyreviewourmetricssowhenwefindbugsor
errors,we'rereportingthemtoourclientsandaddressingtheissueandcontinuing
withthatanalysisasweworkthroughallofourmetrics.We'realsoveryfocusedon
expandingmeasurementpartnershipsandthird-partyverification.
Thislastquarter,weextendedviewabilitymeasurementtotheAudienceNetwork,
addedanotherverificationpartner,DoubleVerify,forvideoanddisplay
measurementandintroducedourMMMportal,sothatwecanhelppeople
measureacrossallofthedifferentplatformsandcomparetheeffectivenessoftheir
adspendnomatterwhattheirendgoalis.
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Operator: YournextquestioncomesfromthelineofAnthonyDiClementefromNomura
Instinet.
AnthonyDiClemente:IhaveoneforMarkandoneforSheryl.Mark,atF8andinyourcommentstoday,
youtalkedaboutmakingthecameracentraltotheappinthecamera,thefirst
augmentedrealityplatform.Iknowit'searlybutcanyoumaybesharewithusyour
thoughtsaboutthepotentialcommercialapplicationofaugmentedrealityasyou
seeittoday?
AndthenSheryl,there'sbeenmorelatelyabouttheuseandeffectivenessof
influencermarketingonbothFacebookandInstagram.HowisFacebookthinking
aboutsharingintheeconomicsofwhenbrandsusecelebritiesorinfluencersto
markettheirproductsusingtheirFacebookposts?Isitbybringingmore
transactionsontotheplatform,buildingontheshoppingexperienceonFacebook
andhowisFacebookgoingtoshareinthoseeconomics?Thankyou.
MarkZuckerberg: Allright.Well,Icanstartbytalkingaboutaugmentedreality.Thebigstepforward
thatweannouncedatF8isthattherearelotsofdifferentappsthathavecamerasin
themright?Orthatindependentdevelopersjustbuildanappthathasasingle
cameraeffect.Butwhatwe'rebasicallyseeingisthatthere'ssomuchinnovation
andsomanydifferenttypesofeffectsthatpeoplearecreatingthatwedidn'twant
developerstohavetobuildtheirownseparateappandgettoahugescaleinorder
tobuildsomenewkindofvisualtool.
Sowebuiltthat--we'remakingthecamerasinsidethewholefamilyofappsinto
thefirstaugmentedrealityplatform--intoanopenplatform,whichisdifferent
fromwhatanyotherappsthathasacamerahasdonebefore.It'sgoingtoopenup
amuchgreaterdiversityofusecases,notonlymakingitsothatusecaseslike
Facemasksorstyletransfersthatwealreadyhave,you'renowgoingtohave
thousandsofoptionsinsteadofjust10or20atatime.Buttherearealsogoingto
beallofthosekindsofthingswe'renotevenbuildingtodaythatdeveloperswillbe
abletoexperimentwith.
OneoftheexamplesIshowedatF8wasaroundusingobjectrecognitionand
computervisiontobeabletopointyourcameraatsomethingandthentaponit
andgetacardofinformationmaybeevenaBuybutton,right?Sotherearelotsof
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differentwaysthat,overtime,thiskindofcontentisgoingtobothaugmentexisting
real-worldobjectsandeventuallyreplacethem,whichIthinkisgoingtobean
interestingopportunity,maybenotonaugmentedrealityonthephonebuton
glasseseventuallywhenyouhavethat--Ithinkweregoingtogettoapointwhere
thingslikeTVyou’llnolongerneedaphysicalTV,you'llget$1appthatyoucan
watchascreenonanditwilljustinterestingexercisetoseehowmanyofthethings
thatwehavethatarephysicalthingsdon'tactuallyneedtobephysicalinthat
world.
Andhowmuchinnovationthatopensupindependentdevelopersallaroundthe
worldandalotofpeopledon'thaveafactory.SotheycanbuildaTVbutthink
abouthowmanykidsindifferentdevelopersaroundtheworld,kidsindormrooms
andallthesedifferentplacesgoingtobeabletocreatethingsthattodaythey
couldn't.SoIthinkthisisgoingtocreateaprettyinterestingeconomy,soalotof
thatstuffisprettyfarout,5,10years.Butwewanttobepushingthisforward.And
we--Ithinkwe'realittlebitlatetothetrendinitiallyaroundmakingcamerasthe
centerofhowsharingworks.ButIdothinkatthispoint,we'reprettymuchaheadin
termsofthetechnologythatwe'rebuildingandmakingitanopenplatform,Ithink,
isabigstepforward.Alotofpeopleareusingtheseproductsacrossourfamilyof
apps,andIwouldexpectustocontinueleadingthewayforwardonthisfromthis
pointon.
SherylSandberg: Whenyouthinkaboutinfluencermarketing,wedefinitelyseepublishersinterested
init,brandsinterestedinit.Andsowe'veworkedonbrandedcontent,theabilityto
tagasponsorandshareapostoraninsight,andthefinancialarrangementremains
betweenasponsorandapublisher.It'searlybutwe'reseeingsomepositiveresults
withpublishersofmanydifferenttypesbringingbrandedcontenttoFacebook.In
Q1,weopenedthisuptounverifiedPages,sowecouldenablemorepeopletotake
advantageofthiskindoftargeting.
Weseethisinthebroadercontextofbettertargeting.Whenyouthinkaboutwhat
reallydrivesgreatperformanceforbothpeoplewhoareusingFacebookbutfor
marketers,it'swell-targetedads.Andsoinfluencermarketingisonewaytoget
therebutwe'refocusedonaveryfullrangeofabilitytotargetwell.We'vebeen
reallypleasedwiththeadoptionofourtargetingproductsfromCustomAudiences
tolook-alikestoDynamicAds.Andwethinkallofthesecanimprovetherelevance
18
oftheadbymakingadsmoretargetedbecausewhenthey'remoretargeted,they
havehigherreturnsformarketersandthey'remoreenjoyableandrelevantfor
people.
Operator: YournextquestioncomesfromthelineofMarkMahaneyfromRBC.
MarkMaheney: Great,thanks.Firstthing,it'sagreatmovetogoallinGAAPintermsofreporting.
Second,David,whenyoutalkedaboutthead,youradloadcommentary,Icouldn't
telliftherewasasubtleshifttherewhenyou'resayingthattheadloadpressure
wouldoccuraftertheendoftheyearratherthaninthesecondhalfoftheyear.And
thenthird,thisisforSherylandMark,therecentstoriesaboutgenderbiasamongst
theengineersatFacebookandIknowyouquicklyrespondedtothatandsaidif
anythingtheremaybearankbias.But,inmymind,kindofcreatestheopportunity
potentiallyforFacebooktobettertapintowhatisprobablyunderappreciated
femaleengineeringtalentintheValleyandacrosstechnology.Howdoyouthink
aboutthatasanopportunityforthecompany?Thankyou.
DavidWehner: AndI'lljustrealquicklyaddresstheadloadissue,Mark.Sorryifitwasn'tclear.
Reallynochangeinoutlookthere.Wecontinuetoexpectthatwe'llseedeceleration
inadrevenuegrowth.Andthat'sgoingtobeparticularlypronouncedaswegetinto
thesecondhalfof2017becauseadloadwillbealesssignificantfactordriving
growthstartinginthesecondhalf.
SherylSandberg: OntheissueyouraisedoftheFacebookfemaleengineers,I'mreallygladtohavea
chancetoaddressthisbecausethisisanissueItakeveryseriously.Onthespecific
reportonthisstudy,thestudywasconductedbyaformeremployeewithvery
incompletedata.Whenthatstudywassharedwithpeopleinternallyandwehave
thatculturewherepeopledostudiesandsharethings,andwe'rereallyglad
becausethathelpssurfaceissues,weimmediatelyconductedourownresearch
usingthefulldata.
Andwhatwefoundisthatthemainreasoncodewassentbackatdifferentrates
wasnotcorrelatedwithgender.Itwascorrelatedwithlevels,andthefactthatwe
havemoremaleseniorengineerswasexplainingit.Ifyoucomparednowand
femaleengineersatthesamelevel,therewasnotthisdiscrepancy.
19
Wellthenthatleadstotheobviousquestionis,areyoupromotingmenandwomen
atthesamerate?Andthebroaderquestionofareyoupayingmenandwomen
fairly.Andwedoacomprehensivelookatthateverysinglepromotionandpayand
performancecyclewehave,whichis6months.Andweknowthatwe'repromoting
menandwomenatthesamerateasmen.Nowthatsaid,ourindustrystillhas
issuesandwestillhaveissues.Wedon'thaveenoughseniorfemaleengineers.We
don'thaveenoughwomengoingintocomputerscience.
Andwetakethisveryseriouslyfromtheworkwe'vedonewithLinkedIntogetCS
andevenLeanInCirclesallovercollegecampusestoencouragemorewomenand
underrepresentedminoritiestocomeintoourfield.We’vehadareallynice
programinextrainternshipwherewe'retakingpeoplewhoarenotyetmajoringin
computerscience,butwethinkhavetheabilityandteachingthemforasummer
andseeingthemreturntotheworkwe’redoingwithourfemaleengineerstomake
surethatallformsofbiasaresurfacedandeliminated,andwecancontinuetouse
thefulltalentofthepopulation.Nothingismoreimportanttous.
Operator: OurnextquestioncomesfromthelineofRossSandlerfromBarclays.
RossSandler: Justhad2questionsonvideo.Weknowit'skindofearly,butwhatkindoftraction
doyouseewiththevideotabthat'sinbeta?Anddoyouthinklongerterm,the
videoconsumptionisgoingtobeinthatdedicatedtaborwillitstayintheNews
Feedbasedonwhatyou'reseeingrightnow?AndthenDave,justafollow-upon
oneofyourpreviousanswers.Soonthecostrelatedtovideoadrevshareor
licensingofvideocontent,isthatbakedintoyourOpExguidancefor'17?Oristhat
somethingthatwillstepupafterthisyear?Thankyou.
MarkZuckerberg: Idon'tknowifwehaveanypublicstatsonthevideotab,probablynot.Butinterms
ofthestrategy,Icantalkaboutthatquickly.Thereare2basicusecasesforchecking
inwithFacebookandseeingwhat'sgoingonintheworld.Whatpeopledowith
NewsFeedalotofthetimeistheyhaveafewfreeminutesoryouwanttositdown
formaybealongersession,seeeverythingthat'sgoingonintheworld,youdon't
haveaspecificintentiontowatchaspecifictypeofcontent.Youkindofjustwantto
checkinandseewhat'sgoingonintheworld.
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There'sthiswholeotherusecasearoundcontent,whichisgoingbecause--goingto
theapporsittingdownatTVbecausethere'ssomecontentthatyouwanttowatch
andyouwanttogodirectlytoit.Andthat'swhatwe'retryingtodowiththevideo
tabtomakeitsothatallthedifferentfolkswhetherthey’repagesthatyoufollowor
creatorsthatyoulike,whoyouwanttosubscribetoandkindofgettheupdatesto
whatthey'redoingthatyouhaveaplacethatyoucangotowithmoreintentto
consumethatcontent.
Thereasonwhyitneedstobeadifferenttaboratleastadifferentservicefrom
NewsFeedisbecausepeoplecometoitwithadifferentintent.Ithinkyou'regoing
tostartinthefuturegettingpeoplecomingtoFacebookfortheNewsFeeduse-case
ofcheckinginandpeoplecomingwithanintenttogotothevideotabtowatch
specificvideos.Sothat'swhatwe'redoingthere,that’sthestrategy,andIguess
we'llupdateonstatswhenwehavethem.
DavidWehner: AndRoss,onthecostsrelatedtothevideoadrevshare,yes,ourguidanceontotal
costsisallinclusive,soitincludesalltheR&Dinvestmentswe'remaking.Itincludes
thecontent.Itincludesthingslikethecommunityoperationsinvestmentsthatwe
talkedabouttodayintheannouncement.ButIwouldsaythatthenatureofthe
typesofvideocontentdealsthatwe'redoingwillmakethemmorelikelytoshowup
after2017sothere'llbesomecontentexpensein2017butIthinkit'llbesomething
youwillseestepupafter2017.
Operator: YournextquestioncomesfromthelineofMarkMayfromCiti.
MarkMay: Thankyou.Mark,inyourpreparedremarks,youtalkedaboutdoingmoretofoster
localcommunitiesandgroupsanditwouldseemlikeoneofthemoreinteresting
testcasesherealreadyisinlocalMarketplaces.Justwonderingifyoucouldtalkto
usalittlebitaboutthekindofadoptionandengagementthatyou'veseenwithlocal
Marketplacesandmaybeanythingthatyou'velearnedthatyoucanapplytosome
ofthenewerinitiativesthatyou'relookingat.
Andthensecondly,probablyforSheryl,foradbreakstoscale,itappearsthat
contentcreatorsneedtoadapttheirprogrammingforthis.Andofcourse,users
needtoengagewiththeads.Iguess,thequestionishowarekindofcompletion
ratesforadbreaks?Iknowit'searlybutkindofwhat'syour--whatareyouseeing
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sofar?Andhowwouldyoucharacterizethewillingnessofcontentcreatorsto
adopt?
MarkZuckerberg: IcantalkaboutMarketplaceandGroupsfirst.SoIthinkyourbasicpointisrightthat
thereasonwhywestartedworkingonmarketplaceandthetabaroundthatis
becausewhenwewereexploringwhatthebiggestusecaseswereofGroups,we
uncoveredthataverylargenumberofpeople,hundredsofmillions,usedGroupsto
buyandselldifferentthings.Andsothesewholecommunitiesthathaveformed,
whichwassomewhatsurprisingtoushonestlybecausewehadn'tdevelopedthe
productspecificallyforbuyingandselling.Itwasforgroupcommunicationand
that'swhatpeopleareusingitfor.
Sowedecided,'Hey,we'regoingtoputtogetherateamthat'sgoingtoinvestin
makingthisactuallygoodforbuyingandsellingandseehowmuchwecangrow
thateconomy.'SoIdon'tknowthathaveanypublicstatsonthatyet,butthat'san
areathatI'mcertainlyveryexcitedabout.
Andthenintermsoflocalcommunities,oneofthebigtrendsintheworldthat
we'veseenisjustthatparticipationinallkindsofdifferentphysicalcommunities,
whetherthey'resportsteamsorsomereligiousgroupsordifferentkindsofdifferent
things,havebeendecliningalotoverthepastseveraldecades.Andthat,Ithink,isa
bigsocialissuethatiserodingthesocialfabricofthewholesociety,notjustour
country,butaroundtheworld.
Andthat'sonewhereIlookatthatandIwonderifFacebookcanplayarolein
helpingtostrengthenthat.Andwelookat--therearemorethan1billionpeople
everymonthwhouseourGroupsproduct.Butifyouthinkaboutyourownuseof
theGroupsproduct,youprobablyareamemberofabunchofdifferentgroupsthat
youmaybecheckingonveryinfrequently.Sothat'sverydifferentfromthere'sa
handfulofpeople,around100millionorabitmore,whoareamemberofwhatwe
callaverymeaningfulgroup.
Soit's--thatcouldbeaparentinggrouporyou'rediagnosedwithararedisease,
andyoucannowconnecttopeopleallaroundtheworldtosharestoriesaround
that.Thesearegroupsthatuponjoiningmaybecomeoneofthethingstheyspend
22
themosttimewithonFacebook,oneofthemostimportantpartsofyour
experienceandareallyfundamentalpartofyourreal-worldsupportstructure.
Sowelookedatthatandweaskedthequestionof,'Hey,if100millionpeoplearein
thoseverymeaningfulgroupstoday,canwegetthattobe1billionpeopleoverthe
nextseveralyears?'Andifso,thenthatcanhelpreversesomeofthedeclinein
communitymembershipsandhelpstrengthenthesocialfabricnotonlyinour
countrybutaroundtheworld.Sothat'sabigpartofwhatwe'refocusedonacrossa
numberofdifferentinitiatives.
SherylSandberg: AndI'lltalkalittlebitabouttheadbreak,whatwe'reseeing.It'sreallyearlybothin
termsoftestingtheadsandgettinganyfeedbackfromuserssopeoplewhouse
Facebook,sowedon'thavethatdatatoshare.Butwe'repleasedthatthetestis
active,we'repleasedthatit'sgoingwellandthatwecandobothliveanduploaded
videos.
Wethinkovertimethatmarketerswillfollowwherepeoplearespendingtheirtime.
Andiftheadscanbewelltargeted,wethinkwe'llbeabletoseeengagementand
wealreadyseethat.Whenadsarereallywelltargetedandtakingfulladvantageof
thekindoftargetingweoffer,thatyou'reshowingpeoplesomethingtheywantto
see,weseeengagementthatwethinkisreallycritical.
It'salsoworthnotingthatthemetricsthatreallymatterattheendaredrivingsales.
Andsoanyoftheengagementwithadmetrics,whetherit'srememberinganad
goingbacktopeoplehavebeenmeasuringthatforalongtimetohowlongavideo
adisviewed,ouronlyproxymetrics--whatmattersistheimpactonsales.Andso
wethinkthebetterwecandoatgettingthemeasurementtowhatactuallymatters,
whichistheendbehaviormarketersaretryingtodrive,themorepeoplewillshift
theirfocustobusinessmetrics,thebetteritwillbeforthereturntheygetand
ultimately,ourbusiness.
Operator: YournextquestioncomesfromthelineofMichaelNathansonfrom
MoffettNathanson.
23
MichaelNathanson:Thanks.Ihave3philosophicalquestionsonvideoforyouguysand,thefirstoneis
it'sinterestingtoseetheNFLgamesgofromTwitterandAmazon.AndIwondered,
dotheNFLgames,thevideostrategy,whyorwhynot?That'sone.
TwoisIknowthemodelisrevenuesharebutalotofmoretraditionalcompanies
wouldlikealicensefeeortheabilitytoselltheirowninventoryonyourplatform.Is
thatsomethingthatyouconsider?
Andlastbutnotleast,thequestionaboutmonetization,whyismid-rolloptimalto
pre-rollandcanyoushareanythingaboutthetestingofthatconcept?
MarkZuckerberg: Icantalkaboutsports.Sointermsofexperimentingwithdifferentcontent,Ithink
we'lltryanumberofdifferentthingshere.Intermsofworkingwithfolkstoproduce
allkindsofcontent,sportsisprobablysomethingthatwe'llwanttotryatsome
point.Butagain,likeDavesaidbefore,thegoalisgoingtobecreatingsomeanchor
contentinitiallythathelpspeoplelearnthatgoingtothevideotab,thatthey--that
that'sagreatdestinationwheretheycanexploreandcometoFacebookwiththe
intenttowatchthevideothattheywant.Andthenthelong-termgoalisactuallynot
tobepayingforspecificcontentlikethatbutdoingarevenuesharemodeloncethe
wholeeconomyaroundvideoonFacebookisbuiltup.Butwe'reworkingonthat.
AndIthinkwe'llprobablylookatdifferentpiecesofcontentlikethisaroundthe
world,butatthispointdon'tfeellikeanyspecificoneofthemisamust-haveforus.
DavidWehner: AndIthinkMarktouchedonthequestionofabusinessmodelhere,andourfocus
reallyisonrevenueshare,willbeinvestingtokickstarttheecosystemwithcontent,
sode-riskingitforsomeofourcontentpartnerstostartoffwithbutthefocusis
reallytobuildarevsharemodelovertimethat'ssustainable.That'sthefocusas
opposedtoothermodels.
Intermsofwhymid-rollispreferabletopre-roll,Facebookiswell-suitedforshorter
formcontent.We'rerankingthingstobelonger-formaswellsowe'rerankinglong-
formvideobutthat'sstillrelativelyshortvideoviews.Andforthatreason,wethink
mid-rollisagood--isabetteruserexperience.
DeborahCrawford:Operator,Ithinkwehavetimeforonelastquestion.
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Operator: YourlastquestioncomesfromthelineofPeterStablerfromWellsFargo.
PeterStabler: Thanksverymuch.OneforSheryl.Sheryl,you'vetalkedalotaboutthetargeting
advantageofFacebook.Andyouhaveanumberofdatasignalsandsources
informingthat.Wonderingifyoucouldtalkabouttherelativeimportanceof
collectingsignalsontheplatformversusofftheplatform,forinstance,thebehavior
ofFacebookusersinteractingwiththird-partywebsites.Isthisthedepth–the
depthofyouroff-platformcollection,isthisasignificantcompetitiveadvantagefor
you?Thankyouverymuch.
SherylSandberg: Wethinkthattargetingandmeasurementaresignificantcompetitiveadvantages
forus.We'reveryfocusedontheprivacyofwhatpeopledo,wherevertheydoit
andusingtheinformationwehaveinaveryresponsibleway.Webelievethat
becausepeoplearesharinginterestsbecausepeoplearethemselvestheirreal
identityontheFacebookplatform,wehaveasignificantadvantage.Justinbasic
targetingitself,justageandgender,we're38%moreaccuratethanbroad-based
targetingaccordingtoNielsenintheU.S.Andthat'sjustageandgender.
AndthenifyouthinkaboutsomeofthecasestudiesIshared,targetingpeoplewho
purchaseacertainitem,targetingpeoplewhoareinterestedinacertainitem,we
thinkthat'sverysubstantial.Wealsothinkthatthere'sarealcompetitiveadvantage
infocusingonbusinessresultsaswehave.We'rereallyworkingonshiftingpeople
tounderstandingwhattheirrealobjectivesaresothattheycanfocusondriving
businesses.Attheendoftheday,whenyoushowanad,youwanttomovea
productoffalot,offashelf,intoashoppingcart,whetherit'sonlineoroff-line.And
that'swhereourfocusisandwillcontinuetobe.
DeborahCrawford:Thankyouagain,everybodyforjoiningustoday.Weappreciateyourtime,andwe
lookforwardtospeakingwithyouagain.
Operator: Ladiesandgentlemen,thisconcludestoday'sconferencecall.Thankyouforjoining
us.Youmaynowdisconnectyourlines.