Snap’s (SNAP) Q1 2017

Evan Spiegel – Co-Founder and CEO

On competition from Facebook

“if you want to be a creative company you’ve got to get comfortable with and basically enjoy the fact that people are going to copy your products if you make great stuff….And I think, at the end of the day, just because Yahoo, for example, has a search box, it doesn’t mean they are Google.”

 

Imran Khan – Chief Strategy Officer

18-34-year-olds are their prime audience

“…Nielsen found that 45% of 18- to 34-year-olds in the U.S. are reached by Snapchat on any given day. This is nine times more than the average daily reach of the top 15 TV networks and nearly 5 times more than the top TV network. 87% of our U.S. daily active users between the ages of 18 and 34 cannot be reached by any top 15 TV network.”

They are growing internationally

“in Q1, 14% of our revenue came from international market. That is up from 7% a year ago. I think we’re still early on with many market, like for example in Germany, we’re just getting started. We’re just getting started in Nordic markets and Netherlands and things like that.”

Drew Vollero – CFO

The North American markets remains key

We believe North America remains a leading indicator for the scale potential of our business. North American ARPU was $1.81, more than double our global average which was up 170% versus last year.

 

Facebook (FB) Q1 2017

Mark Elliot Zuckerberg – Facebook, Inc.

On augmented reality

“One of the examples I showed at F8 was around using object recognition and computer vision to be able to point your camera at something and then tap on it and get a card of information and maybe even a buy button. So there are lots of different ways that over time this kind of content is going to both augment existing real-world objects and eventually replace them, which I think is going to be an interesting opportunity. maybe not on augmented reality on the phone but on glasses eventually. When you have that, I think we’re going get to a point where things like TVs, you no longer need a physical TV. You’ll get a $1 app that you can watch it screen on.”

AI will take time

“Over time, the AI tools will get better. Right now there are certain things that AI can do in terms of understanding text and understanding what’s in a photo and what’s in a video. That will get better over time. That will take a period of years, though, to really reach the quality level that we want.”

Sheryl Kara Sandberg – Facebook, Inc.

The shift to mobile

“Mobile ad revenue was $6.7 billion, up 58% year over year, and was approximately 85% of total ad revenue….Our first priority is helping businesses leverage the power of mobile. More businesses around the world are shifting to marketing on mobile. Over 70 million businesses are now using Facebook Pages around the world on a monthly basis, and more and more of them are becoming advertisers. We also recently announced that over 5 million businesses are actively advertising on Facebook, including more than 1 million in emerging markets….People are increasingly recognizing that the small screen is big.  ”

The big question: Can people do without mobile? 

“we are definitely seeing people continue to advertise on TV and use us as a complement. So over time, we believe that the dollar shifts with eyeballs and we want to earn it from our clients and be the best dollar and the best minute they spend and help them measure across channels. I think increasingly, the question is not if you can do without TV, but it’s if you can do without mobile. And we’re working hard to help advertisers develop the video creative that really works for mobile because that really makes a really big difference.”

Leveraging internet to create sales

“We are pretty excited to have 1 million advertisers and 8 million Instagram business profiles on the platform. To share one example, an online store in Brazil called Loja Nama, they sell decorative items and accessories. Their business owner, Joanna [Cariello], took photos of her products on her phone and then created ads with our Shop Now button. She targeted young audiences in Brazil who are interested in fashion, decoration, movies, and architecture. And during the period of her campaign, Instagram accounted for 79% of her sales.”

 

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.”

Facebook 1Q16 Earnings Call Notes

Mark Elliot Zuckerberg – Founder, Chairman & Chief Executive Officer

A “foundry light?” company

“Facebook has always been a foundry-light company, so we can focus on our mission and build long-term value. This structure has served our shareholders well. Early on, we received some generous offers for companies trying to buy Facebook, and our structure helped us resist that pressure. More recently, we navigated a challenging transition to mobile. But because we were a controlled company, we were able to focus on improving the user and product experience of our apps first and then build a strong mobile business over time rather than being forced to do something shortsighted. And over the years, our structure has helped us make big bets on acquisitions like Instagram that were very controversial initially but were good decisions for our community and our business.”

Facebook was built by a series of bold moves

“Facebook has been built by a series of bold moves. And when I look out into the future, I see more bold moves ahead of us than behind us. We’re focused not on what Facebook is, but on what it can be and on what it needs to be, and that means doing bold things. A lot of what we’re building today in areas like connectivity, artificial intelligence, and virtual and augmented reality may not pay off for years, but they’re important to our mission of connecting the world. And I’m committed to seeing this mission through and to leading Facebook there over the long term.”

There are more things I want to do that connecting the world

“While helping to connect the world will always be the most important thing that I do, there are more global challenges that I also feel a responsibility to help solve to create a better world for my daughter and all future generations, things like: helping to cure all disease by the end of the century; upgrading our education system so it’s personalized for each student; and protecting our environment from climate change.”

Shareclass split allows me to fund the Chan Zuckerberg initiative

“Today’s board proposal will allow us to maintain and improve the voting structure that has served us well and allow me to fund the Chan Zuckerberg Initiative. In December, I also announced that I won’t sell more than $1 billion worth of stock – Facebook shares per year over the next three years. That’s still my commitment, and I’ll update our shareholders on future plans beyond that”

Bots allow people to interact with businesses with lower latency

“one of the good things about bots that we’ve seen is that it can decrease the amount of time that you have to wait before you get a reply back from interacting with a message. So what we’ve seen – we’ve done some research on this. A lot of people every day in Facebook today are already messaging pages and businesses directly, and the businesses respond. But what we’ve actually also found is that through some of our AI research, we can look at the responses that businesses give to common questions and can confidently provide the right reply a lot of the time. And when we can do that, then that decreases the latency. And predictably, people want to do more of that activity.”

Acquisition strategy is to find things that will be ubiquitous tools and who are the most talented people in the world to build it

“” think that people come up from time to time and suggest, should we buy this company or that. And what we look at are what are the things that we think are going to be ubiquitous tools, and who are the most talented people in the world to build this. And so when you think about something like virtual and augmented reality, that’s how we thought about that.”

We’re focused on building AI that is better than people at things like seeing, hearing, language

“So the biggest thing that we’re focused on with artificial intelligence is building computer services that have better perception than people, so the basic human senses like seeing, hearing, language, core things that we do. I think it’s possible to get to the point in the next five to 10 years where we have computer systems that are better than people at each of those things. That doesn’t mean that the computers will be thinking or be generally better, but that is useful for a number of things.”

Sheryl K. Sandberg – Chief Operating Officer & Director

Consumers have shifted to mobile and businesses know they need to catch up

“First, capitalizing on the shift to mobile. Consumers have shifted to mobile, and businesses know they need to catch up. We hear from marketers that figuring out mobile today is like figuring out TV in its early days. But given where consumers spend their time, the question now is not if they should market on mobile, but how.”

David M. Wehner – Chief Financial Officer

The new voting structure is to allow Mark to fund the Chan Zuckerberg initiative while maintaining an active leadership role at FB

“As Mark mentioned, this structure will allow for the preservation of the voting structure that has served the company well to date while allowing for Mark to fund the Chan Zuckerberg Initiative over the course of his lifetime. Importantly, as part of this proposal, the preservation of the multi-class capital structure would be generally predicated on Mark continuing to maintain an active leadership role at Facebook.’