Facebook 2Q16 Earnings Call Notes

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Facebook (FB) Mark Elliot Zuckerberg on Q2 2016 Results

$1.1B people use FB every day

” Our community continues to grow around the world. 1.7 billion people now use Facebook every month and 1.1 billion people use it every day. Our business is growing at a healthy rate as well. Total revenue grew by 59% year-over-year to $6.4 billion and advertising revenue was up 63% to $6.2 billion.”

Video will be at the heart of all our apps and service

” Ten years ago, most of what we shared and consumed online was text. Now it’s photos, and soon most of it will be video. We see a world that is video first with video at the heart of all of our apps and service.”

Deep learning

“This quarter, we announced DeepText, a deep learning based engine that can understand the context of several thousand posts per second across 20 different languages. This is a long-term project, but it also has some near-term benefits like helping show people more of what they want to see and filtering out less of what they don’t want to see.”

Importance of Pokemon go is that it shows that the phone will be the first way that AR becomes mainstream

“Well, I, like everyone else, am enjoying Pokémon Go. And the biggest thing that I think we can take away from this as we invest in augmented reality in addition to virtual reality, is that the phone is probably going to be the mainstream consumer platform that a lot of these AR features first become mainstream rather than glasses form factor that people will wear on their face.”

Sheryl K. Sandberg – Chief Operating Officer & Director

Example of a small business boosting sales with FB

“For example, Lighting Etc., a third generation family-owned business used Facebook and Instagram ads to drive in-store sales. They targeted 25-year-old to 45-year-old homeowners interested in interior design living within 35 miles of their showroom in Fort Worth, Texas. It was striking to them that on Facebook, the size of our community meant that they could reach over 300,000 people even with such specific targeting. They’ve seen a 40% increase in revenue in 2016, and they attribute this increase to their ads on Facebook and Instagram.”

David M. Wehner – Chief Financial Officer

Price per ad increased 9%, total ad impressions increased 49%

“‘ Advertiser demand was particularly strong in Q2 across a broad range of verticals and advertiser objectives. Additionally, supply side factors, including growth in users, time spent and ad load, all contributed to our Q2 revenue growth. In Q2, the average price per ad increased 9% while total ad impressions increased 49%. The reported increase in price was again driven by the continued mix shift towards mobile where we only show higher price News Feed ads compared to the mix of News Feed ads and lower priced right-hand column ads on personal computers.”

Majority of hires was in technical functions

“We ended Q2 with approximately 14,500 employees, up 32% year-over-year. We added about 900 employees in the quarter, the majority of those in technical functions. We are seeing continued success with our efforts to hire top talent in a market that remains very competitive.”

Expecting lower revenue growth rates going forward

“As I discussed on our last call, while we expect the main drivers of our advertising revenue growth will continue throughout 2016, we will face tougher comparables as the year progresses, given the accelerating revenue growth rates we experienced in the second half of 2015. Consequently, we anticipate lower advertising revenue growth rates in each successive quarter in 2016.”

Peaking out on ad load

“Additionally, we anticipate ad load on Facebook will continue to grow modestly over the next 12 months, and then will be a less significant factor driving revenue growth after mid-2017. Since ad load has been one of the important factors in our recent strong period of revenue growth, we expect the rate at which we are able to grow revenue will be impacted accordingly.”

Teens continue to use our service

“On the teen front, younger users, we continue to be the best way to reach the largest global audience of teens and millennials. Teens remain very – remain engaged on Facebook. Clearly, how they’ve used our service has evolved over the years. And in addition to Facebook, they’re using Instagram, Messenger and WhatsApp. So, from a teen perspective, that’s some color there.”

The optimal ad load is an art and a science

“We do expect that ad load will be a less significant factor driving overall growth, especially after mid-2017. The optimal ad load is really a mix of art and science. We’ve carefully tracked the impact of ads on the user experience over the last several years. We aren’t seeing a cause for concern. We also want to be thoughtful about making sure that each person’s overall feed experience has the right balance of organic and ad content.”