Facebook’s (FB) CEO Mark Zuckerberg on Q2 2014 Results – Earnings Call Transcript

Source: Seeking Alpha

 

Facebook Inc. (NASDAQ:FB)

Q2 2014 Earnings Conference Call

July 23, 2014 05:00 PM ET

Executives

Deborah Crawford – Director, IR

Mark Zuckerberg – CEO

Sheryl Sandberg – COO

Dave Wehner – CFO

Analysts

Eric Sheridan – UBS

Heather Bellini – Goldman Sachs

Douglas Anmuth – JPMorgan

Ross Sandler – Deutsche Bank

Justin Post – Merrill Lynch

Mark Mahaney – RBC Capital Markets

Arvind Bhatia – Sterne Agee

Neil Doshi – CRT Capital

Ken Sena – Evercore

Brian Nowak – SIG

Brian Pitz – Jefferies

Colin Sebastian – Robert Baird

Ben Schachter – Macquarie

Operator

Good afternoon. My name is Jay and I will be your conference operator today. At this time, I would like to welcome everyone to the Facebook Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions). Thank you very much.

Ms. Deborah Crawford, Facebook’s Director of Investor Relations, you may begin.

Deborah Crawford

Thank you. Good afternoon and welcome to Facebook’s second quarter earnings conference call. Joining me today to talk about our results are Mark Zuckerberg, CEO, Sheryl Sandberg, COO and Dave Wehner, CFO. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements, and actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in today’s press release and our Quarterly Report on Form 10-K filed with the SEC. Any forward-looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events.

During this call we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today’s earnings press release. The press release and an accompanying investor presentation are available on our Web site at investor.fb.com.

And now, I’d like to turn the call over to Mark.

Mark Zuckerberg

Thanks Deborah, and thanks everyone for joining today. This was a good quarter for us and a good end to the first half of the year. We’ve continued to grow our community in size and engagement with 1.32 billion people now connecting on Facebook each month, and 63% of them visiting daily. Our momentum remains especially strong on mobile to now 829 million people using Facebook everyday with more than 650 million people using our services on mobile every day.

One thing that’s exciting is that there is still so much room to grow. On average, people on the Facebook in the U.S. spend around 40 minutes each day using our service, including about one in five minutes on mobile. This is more than any other app by are, but overall people in the U.S. spend about nine hours per day engaging with digital media on TVs, phones and computers. So there is a big opportunity to improve the way that people connect and share across — how we all engage with the rest of media as well.

Now when it comes to our business, we continue to be pleased with our growth. This quarter, our total revenue grew to over 2.9 billion and advertising revenue grew by 67% from a year ago. Mobile now accounts for 62% of our advertising revenue, which is a good sign of how the growth of our community mobile is also producing better business results for our partners. The results this quarter show our continued focus on improving our core products and business. We’re going to continue investing aggressively in areas that are important for our mission and long term strategy, but we’re also going to stay focused on our core products and business. This is the best way for us to continue creating value for our community.

Now let’s talk about how we’re making progress and our three big company goals; connecting everyone; understanding the world; and building the knowledge economy. Our strategy for connecting everyone has two basic approaches. Our first approach is Internet.org; our effort to bring affordable Internet access to every person in the world. Our second approach is by giving everyone more tools for connecting, so they can share all the different kinds of content they want with the right people. Instagram, Messenger and creative laptops are a part of the second approach.

So with Internet.org this quarter we’ve continued to deepen our partnerships with global operators and laid a foundation for running tests in more countries. Already, our initial partnerships in the Philippine, Paraguay and Tanzania have helped around 3 million people connect to the Internet who had no access before. We’re really proud of these early results. In June we acquired Pryte, which has a lot of expertise bringing affordable Internet access to communities by partnering with mobile operators, app developers and content providers. Later this year, we expect to launch a broader set of free basic Internet services in a number of other countries as well.

In our app efforts, we’re continuing to build momentum with messaging. People now send than 12 billion messages a day on Facebook, and in April we reached 200 million monthly actives on messenger. Last month we announced that David Marcus will be joining us from PayPal to lead our messaging efforts. We expect David to continue growing Messenger, building out new experiences to serve our community and ultimately to build Messenger into an important business.

Instagram continues to make great progress in giving people new ways to share their stories through photos and videos. Last month we made one of the biggest updates ever to Instagram by adding new creative tools that allow people to refine exactly how their photos look and feel. This is an important part of building out Instagram’s capability as a platform and serving the creativity of the Instagram community.

Next, let’s talk about understanding the world. As of last month, on average, more than 1 billion search queries are made every day on Facebook. This is a great milestone and it shows we’re in a unique position to answer a lot of questions for people. But this is just a start. And over the next few years as we make progress on building out search and our broader efforts in artificial intelligence, I expect us to deliver even greater utility for people.

Our progress on public content is also very promising. As part of helping people to better understand the world, we want to help you connect around important public moments and personalities. And now nearly 800 million people on Facebook are connected to public figures. These connections are driving conversations at a huge scale. During the World Cup over 350 million people made over 3 billion interactions on Facebook. To enable even more of these conversations, we’ve improved the ranking of videos and newsfeed and launched new APIs to help TV and media organizations use Facebook content in their productions. Public content will continue to be a growing focus for us over the coming months and we plan to invest in building more great products and partnerships in this area.

Now building great social experiences to serve our community isn’t something we do alone. Supporting developers is a key part of our strategy, and in our F8 conference in April we announced new ways to help mobile developers build, grow and monetize their apps. Over 1 billion people use Facebook on their phones every month and more than 80% of the top apps on iOS and Android now use Facebook logins. So we think we’re in a great position to be the cross platform-platform that lets developers build great apps across every platform.

So far we’re very encouraged by the reaction from developers. App Links, our new method of deep linking to specific content in any app is now being used by 100s of apps across iOS, Android and Windows phone, with links to more than 1 billion individual destinations in these apps. We also launched our Audience Network, our first big effort to help developers monetize on mobile and we’ve received a lot of interest from developers. We’re rolling out the Audience Network gradually. We’re going to continue to ramp this app over the coming months and are excited by the opportunities ahead.