Facebook 2Q17 Earnings Call Notes

Mark Zuckerberg

2B people use FB every month

“This quarter we reached an important milestone for our community. 2 billion people now use Facebook every month, and more than 1.3 billion people use it daily. ”

AI police on FB

“I am excited about how AI will improve people’s experiences across our products. We’re finding AI is both delivering consistent improvements to many of our systems, like News Feed, search, ads, security, and spam filtering and more. But more than just improving these existing experiences, I expect AI to change the way that we do business in some important ways. So for example, today to keep our community safe, we rely on people flagging content that might violate our community standards for us to review. In the future, AI will be able to help flag more of this content faster before people have even seen it. Now we’ve started using AI to fight terrorism and keep propaganda and extremist accounts off Facebook. We’ve even started experimenting with using AI to understand texts that might be used to promote terrorism.”

Now AI can target you with Ads

“On the business side, we’re seeing a large shift in the way that marketing works. In the first wave of marketing, people would buy ads and media they thought their customers might watch like a TV show that had similar demographics, but they wouldn’t know who saw their ads. The Internet gave people the power to target their messages to people who actually might be interested and to measure results much more precisely, and that was a big improvement. And now AI is taking this a step further. Now you can put a creative message out there, and AI can help you figure out who will be most interested.”

Sheryl Kara Sandberg – Facebook, Inc.

David M. Wehner – Facebook, Inc.

Slower supply growth leads to higher pricing

“I would really just point to the overall dynamics of the system. And again, what we’re seeing is with slower supply growth, that’s going to play out to higher pricing. And again, are we effective? And we’ve been effective at delivering good return on investment for our advertisers and getting better at converting what we have as inventory into what they care about as outcomes. And that from a systemic point of view is what’s playing through there.”

Alphabet 1Q17 Earnings Call Notes

Sundar Pichai – Alphabet, Inc.

Transitioning to an AI first company

” I’m really happy with how we are transitioning to an AI-first company. The Google Assistant is one of our first steps towards that future. This quarter, we brought the Assistant to your wrist with Android Wear 2.0, announced that it’ll soon come to Android TV, and began rolling it out to hundreds of millions of people with Android phones running Nougat and Marshmallow. We also continue to announce new integration partners for the Google Assistant, so you can now ask it to do things like dim the living room lights. Stay tuned for more to come.z’

Advances in machine learning are making many Google products better

“Advances in machine learning are helping us make many Google products better. One example from this quarter is the launch of parking predictions in Google Maps. Beyond that, we continue to set the pace in machine learning and AI research. We introduced a new technique for training deep neural networks on mobile devices called Federated Learning. This technique enables people to run a shared machine learning model while keeping their underlying data stored locally on mobile phones. DeepMind is bringing AlphaGo to China in May, pairing AI with the world’s best players at the Future of Go Summit. And it’s very exciting to see the incredible things that developers and researchers are building on the TensorFlow platform. There are more than 6,000 GitHub projects and counting.”

There’s an understanding that we have pivoted to be a deep enterprise company

“In general, I think there is a very strong recognition that we are have pivoted to being a deep enterprise company, and our conversations are very strategic. We are engaging at the highest levels within companies. And so, overall, I can see qualitative lead and momentum there. When we are in the middle of deals, we find we are very competitive, and there are areas where customers perceive us as best-in-class already. So it’s been exciting to see.”

AI will help make text to speech much much better over time

“Now, artificial intelligence will help us push all that further. Just to give an example, we will make text to speech much, much better over time. Yesterday, we announced our Neural Machine Translation is launching in nine new languages. So all that starts accruing to the Assistant, and I think we’ll overall improve the customer experience pretty dramatically. We’ll talk about all this a lot more at Google I/O, so stay tuned.”

Twitter 4Q16 Earnings Call Notes

Jack Dorsey

Reversed and reaccelerated usage

“We started 2016 by resetting and focusing on why people use Twitter. It’s the fastest way to see what’s happening, and what everyone is talking about. We reset and refocused on our strengths, and we achieved one of the hardest things to do for a consumer services scale. We reversed and reaccelerated our usage. We’re thrilled to report that daily active usage accelerated for the third quarter in a row, and we see that strong growth continuing.”

Impact continues to grow

“The whole world is watching Twitter. While we may not be meeting everyone’s growth expectations, there’s one thing that continues to grow and outpace our peers: Twitter’s influence and impact. You don’t go a day without hearing about Twitter, how it is used as the fastest way to send a message to the world in an instant, how it carries some of the most important commentary and conversations, how it mobilize people into action. That’s powerful, it’s valuable, it’s fundamental, and it’s the reason we’re all here fighting so hard for the service and company we love. It’s been hard, it will continue to be hard, and it’s all worth it. Twitter changed the way the world communicates. And we’ll do it again.”

President’s use of twitter shows the power of the platform

“Sure. Thank you. Mark. On your first question what I would say is that the President’s use of Twitter has broadened the awareness of how the platform can be used and it shows the power of Twitter. When he tweets, it sparks conversation and discussion. So at a macro level discussion on the platform really helps us be the best at showing what’s happening in the world and more discussions strengthens our key differentiators in comprehensive and fast.”

Hard for one person to drive impressions growth

“As it relates to impressions growth, which is another area we look at, as I mentioned earlier, the magnitude of the impressions of the platform is so large, it’d be very hard for an event or a single person to drive sustained growth in impressions growth. All of that said, having the world’s leaders on our platform, talking about global issues, people being passionately expressing their points of view, that’s all positive for Twitter, and that’s what we’re focused on. ”

We can break news faster than any other service

” as I look into 2017 and we look at what we can do, I just think the superpower we really provide the world is we can break news and get information to people faster than any other service in the world. And in order to do that, people have to do just a ton of work right now to dig through everything that may not matter to them to find something that really does. And that’s why I am excited about really making sure that we apply artificial intelligence and machine learning in the right ways and that we really meet that superpower of being that little bird that told you something that you couldn’t find anywhere else. And that when you get into the application and when you get into the service, that it is as easy as looking out the window to see what’s going on. And we have a lot of work to do.”

Anthony Noto

Weak revenue trends are lagging previous engagement declines

“We do believe that is a matter of when, not if. The budget allocations that are reflected in our guidance they really reflect our audience and pricing trends 6 to 12 months ago when we had no growth in audience or even a decline in audience, and the headlines really questioned our abilities to sustain our audience growth. Those long lead times caused the outlook to reflect 6 to 12 months ago, and the benefit that we’re seeing today to be on the comps 6 to 12 months from now. So what are we doing to (18:50) the audience growth and the engagement growth, we’re sitting down with branded advertisers and we’re sharing with them the positive trends. We’re taking them through the increased inventory, the higher scale, the greater growth, all of which we think can lead to better ROI and helping them run through their models, so that we can get better allocations over the next 6 to 12 months.”

Facebook 4Q16 Earnings Call Notes

Mark Elliot Zuckerberg – Facebook, Inc.

taking on fake news

“In the past, we’ve taken steps to reduce spam and clickbait, and now we’re approaching misinformation and hoaxes the same way. In Q4, we started working with third-party fact-checkers in the U.S. to flag disputed stories and make them less likely to appear in News Feed. We’ve made it easier to report and identify misinformation and we’re working to build stronger ties between Facebook and the news industry. Our primary goal here is to do the right thing for our community. If we can help people stay informed and make Facebook a better place to understand what’s going on in the world, then we think that’s going to make our community stronger and a more positive force for good in the world.”

We have 3x as many messages sent per day on WhatsApp and Messenger than peak SMS

“My understanding from looking at a bunch of analytics is that the peak of global SMS reached somewhere in the low 20 billion messages per day, and we already have many times more than that. Three times or more, more than that across WhatsApp and Messenger. And, of course, there are other messaging products in the world besides these as well. So we’re pretty confident that this is going to keep on growing.”

We can train AI to make sure objectionable content stays off the network

“Another area where I’m really excited about this is our ability to keep the community safe, right? So there’s an increasing focus on objectionable content, right, and a lot of unfortunate things, right, that people share on Facebook. And it’s a minority of the content, but I’m really focused on making sure that our company gets faster at taking the bad stuff down. And we can do better with people, but ultimately the best thing that we can do is build AI systems that can watch a video and understand that it’s going to be problematic and violate the policies of our community and that people aren’t going to want to see it and then just not show it to people before bad experiences happen and things like violence gets spread through – violent content gets spread through the network.”

Sheryl K. Sandberg – Facebook, Inc.

David M. Wehner – Facebook, Inc.

Mobile represents 84% of rev

“Mobile ad revenue was $7.2 billion, up 61%, and represented approximately 84% of total ad revenue. Desktop ad revenue grew 22%, despite a decline in desktop usage, helped by our efforts to limit the impact of ad blockers on advertisements served on personal computers.”

We continue to expect that our ad revenue growth rate will come down meaningfully in 2017

“Consistent with my comments on the Q3 call, we continue to expect that our ad revenue growth rate will come down meaningfully in 2017. The factors driving this expectation remain the same. We also expect that our full year 2017 payments and other fees revenue will decline compared to full year 2016.”

Expect expenses to ramp meaningfully

“Consistent with what I said last quarter, we expect that 2017 will be an aggressive investment year. We saw hiring growth accelerate in Q4, and we plan to accelerate hiring further in 2017 from the 34% growth rate. In addition to head count, we expect to increase investments in R&D, content, sales and marketing and other areas as we execute on our near, medium and long-term priorities. We expect that full year 2017 total GAAP expenses will grow 40% to 50% compared to the full year 2016.”

Opportunities for price

“In terms of the opportunities for price, it’s really just continuing to focus on making our ads better targeted, more relevant, improving all the different ways in which we can drive better outcomes for our advertisers and sort of meeting them with the results that they care about and delivering those results. We think there’s – continue to be great opportunities to do that, and how the supply-demand dynamics play out will kind of impact the overall direction of price. And it’s going to depend obviously also on regional mixes too, because some regions have obviously lower prices”

Have built the engineering infrastructure to hire in several locations

” One thing that we’re optimistic about is our ability to hire technical talent outside of the Bay Area as well as in the Bay Area. And that’s because we’ve built up engineering locations in key areas like Seattle, London, New York, Boston, Tel Aviv. So we’ve got other markets in which we can recruit and grow engineering and other technical team. And that’s really different from where we were a couple years ago. So that’s an important part of the infrastructure that we’ve put in place in the last two years that we’re pleased with.”

Google 4Q16 Earnings Call Notes

Ruth Porat – Alphabet, Inc.

Sundar Pichai – Alphabet, Inc.

Computing is moving from a mobile first to AI first architecture

“First, machine learning and access to information. As I’ve shared before, computing is moving from a mobile-first to AI-first with more universal ambient and intelligent computing that you can interact with naturally, all made smarter by the progress we are making with machine learning. 2016 was the year that this became central to who we are as a company and the products that we built. We had more than 350 launches powered by machine learning across areas like search, maps, messaging and Google Play.”

The year that mobile shopping went mainstream

“We had another successful holiday season where we saw two clear trends. First, this was the year that mobile shopping went truly mainstream, with shoppers using phones as their door to the store to locate nearby retailers, find promotions and comparison-shopped. We recently introduced promoted places in Google Maps, helping advertisers stand out with branded location icons, showing promotions and live updates of popular times right when someone’s looking for it.”

I think we’re now competing in areas which we have differentiation

“I think as I said in my remarks, overall, 2017 I expect to have a lot of momentum because we have moved well beyond the table stakes. Now, we are really competing on areas which we think we have differentiation. I talked about data analytics and machine learning, security and so on. So I think we are well-positioned. The momentum when we look at the numbers internally and as well as the traction we see in competitive situations, I definitely think we are going to have a great year and hopefully in the next conference coming up, Diane and team will share a lot more details.”

Computing increasingly embedded in many things

“The thing which I get excited about is computing is increasingly moving rather than just one device which is a dedicated computing device to being there for users in their context and you’ll see computing increasingly embedded in many things, and we have a comprehensive strategy. ”

Alphabet at Credit Suisse Conference Notes

Sridhar Ramaswamy – Senior Vice President, Ads and Commerce of Google Inc.

Machine learning has been an integral part of our system since 2003. New methods have come along.

“machine learning has been an integral part of the ad system pretty much since the time I joined. And gosh that was like 2003. And as new ways of machine learning whether it is algorithm based on boosting or more recently algorithm based on deep learning and neural network have been developed. We are often either an early adopters of this technology. And so deep learning and neural networks now are an integral part of how ads are served both on search and on display. ”

Trying to figure out how to run ads with maps

“It’s still super early. We are very conscious of the need to be again very thoughtful about user experience and user value. And efforts announced and some of the reporters were like oh are you going to show ads that are driving direction that might be distracting. So we are still iterating on the format. We are running a number of experiments. It’s pretty early to say anything definite about it. But it is an area that we’ll continue to invest in.”

As we move to a voice driven world, the days of three top text ads are a thing of the past

“We are keeping an open mind about the kind of monetization opportunity that they are going to be. I think it can range from being purely transactional meaning we make it convenient for you to fulfill a transaction with this assistance or it can involve promotion. But one thing that we are all clear about is the days of three top text ads followed by 10 organic results is a thing of the past in the voice driven world. So we are very much keeping an open mind on what this needs to be and focusing much more on what’s the consumer experience, it’s scale, we’ll figure that as we talk about.”

Our way to fight adblock will have to start with making a better ad experience

“Yes. It is a real problem. And as you correctly point out it is consumer-ish. I think there are still too many site in which the ad experience is pretty ad. Whether its ads that start auto playing a video or ads that completely color up a screen and you can’t quite find the ad, all of us have been through it and it can be very frustrating. So we announced recently just a couple of months ago that we are going to be a part of coalition that the IAB in New York which is a US advertising body, we are starting, this is coalition for better ad. We are working with them to come up with a quantitative standard for what an acceptable ad experience is going to be. And then we want to work with a larger ecosystem of browsers for example to make sure that there is pressure and self regulation on the part of advertisers and publishers to only lead on that consumer don’t find offensive. I think that is very, very sorely needed and we think that’s the right way out of this current problem. I think without self policing there is going to be more and more bad experiences and more and more consumers turning off ad kind of across the whole. And I think frankly all of us suffer because it is going to drive a lot of small publishers that are valuable site that you and I use on a regular basis out of business. ”

Facebook 3Q16 Earnings Call Notes

Facebook (FB) Q3 2016 Results

Mark Elliot Zuckerberg

1.2 billion DAUs

“We’re pleased to see nearly 1.8 billion people now use Facebook every month and nearly 1.2 billion people use it every day. It’s also great to see the continued growth and strength of engagement on our platform, and our ads growth is growing at a healthy rate as well. ”

We have 33k bots live in messenger

“So I mentioned this stat earlier that we have about 33,000 bots that are live in Messenger, including experiences across a range of verticals, from news to e-commerce to local businesses and all kinds of different things, and we’re seeing some early progress. I’d say we’re still pretty early on in getting this to be widely rolled out. I think we’re going to need many more than 33,000. And the number of people using them, I think it’s still pretty early in terms of there are more than 1 billion people using Messenger, so we need to get that rolled out pretty widely. So I’m not sure that I have an answer for you just yet on exactly when we’re going to move to the third phase.”

What we’re doing with AI

“I did not fully understand the first question, so I’m going to talk about our AI work overall. In general, what we want to do is try to understand the content that people are sharing and that’s out there for them to see as best as possible. So for example, that means being able to read and understand news articles or posts that people make or messages that a person might send to a business so we can help that business auto-reply to them and get information back to the person really quickly, or understand the content so we can better understand what might be interesting to a person and show it in News Feed. Similarly, aside from the conversational and linguistic understanding, there’s a whole thread of the work that we’re doing on visual understanding. So understanding photos, what’s in photos, what’s in videos, what people are doing.”

Sheryl K. Sandberg

David M. Wehner

Net income up 166%

“Total revenue grew 56% and exceeded $7 billion for the first time. And we delivered $2.4 billion in GAAP net income, up 166%. We saw healthy growth and engagement in our community as well as broad-based strength in our mobile ads business.”

As we slow ad load we’re gonna slow ad load as well

“So I do think as we look into 2017, we do expect that as you get to mid-2017, ad load will be a less significant factor contributing. We’ll continue to get benefits of being able to grow our revenue with advertiser demand and continuing to innovate there. But I do think that as we slow ad load growth, we’re going to have a slowing in revenue as well. So that’s our expectation, but obviously we’re going to continue to work hard to innovate in the ad product space.”

Facebook 2Q16 Earnings Call Notes

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.”

Google (GOOGL) Senior Vice President Diane Greene Interview

Google (GOOGL) Senior Vice President Diane Greene highlighted Google cloud’s security edge

“We are providing the most secure cloud environment.  Google has over 600 full time security engineers protecting clients.  We notified people of 4,000 attacks from state sponsored attackers per month.”

Google (GOOGL) Senior Vice President Diane Greene said the company’s engineers want to make their users happy

“Every engineer at Google wants to make their end users happy.  But what they’ve been doing is making their internal users very happy, now [that we’ve opened up the platform] we can make the whole world happy.  The core of Google is collaboration, technology, and really high quality people.”

 

 

 

Source: Fortune Interview July 11, 2016 https://www.youtube.com/watch?v=wD_bmXkUaZ4

Linkedin at JP Morgan Conference Notes

Mike Gamson – Head of Global Sales

Recruiter gave companies the ability to do direct sourcing in house

“And so we went to market with really just the one-two punch of Recruiter, an opportunity to do direct sourcing, something that had been only possible through external executive search before, now made more possible and more scalable and accessible really to any company for the first time. And that was all about educating the market on taking a process that they had historically done out of house and bring that in house.”

New version should expand the potential footprint

“So if you think about, say ABC Co. has maybe 100 full time Recruiters, maybe 300 or 400 general talent professionals who do other things and then maybe 1,000 hiring managers, traditionally our footprint for Recruiter, the original product, was only to those full time sourcing Recruiters who are real experts. Today with this new version it should open up for us people who are much less expert and who are not full time Recruiters. And so, it expands the potential footprint pretty significantly and has the opportunity to really drift into a hiring manager.”

Not seeing anything to suggest that the sky is falling from a macro standpoint other than in Brazil

“I went back and I looked at the transcripts too from the last couple quarters, and my personal perspective is that we’ve been pretty consistent in trying to talk about the macro, and for whatever reason the narrative got some momentum on its own that the sky was falling. We were concerned about the macro. We read the same headlines that you guys read and there is a lot of stuff going on in the world that we kept thinking was going to have the possibility of impacting the businesses, so we wanted to comment on it. But I travel around the world a lot with our customers and I have seen nothing personally or heard of on my team that makes me think the sky is falling again anywhere but Brazil. And even in Brazil, to be honest with our business, its actually moving along pretty well given the crazy backdrop.”

Brazil is a good test case of how the worst environment affects us

” if we look at Brazil as a test case for that, which I mean it literally can’t be pretty much going worse than what’s going on there right now. How does that impact us? And what we’re seeing is the strong companies double down, they go bigger, they are trying to get share.”

Moving to lower skilled workers is part of our vision but not this year

“The vision is our bigger goal and that’s about the 3 billion workers, trying to create economic opportunity for the 3 billion workers in the world. Our mission is about connecting the world’s professionals to make them more productive and successful of whom there are only about 780 million. So, I share that to say going after the next middle skill and lower skilled workers for us is going from mission to vision, something that we do see on the horizon, but its not going to happen this year and we’re not going to probably focus on it. In two years I could start seeing some of that perhaps.”

We are focused on GAAP profits and reducing stock based compensation

“Yes, listen, we’re very focused on GAAP profits, and I think all companies in our space who use both stock and cash are focused on it. And I think we’ve got a very clear commitment with our compensation committee about the goals that we’re moving towards and I think so far so good on tracking towards them.”