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spk_0: good afternoon my name is mike and i will be your conference operator today that this time of like talking every once wanted a facebook second quarter twenty twenty or news conference call our lives have been placed on need to prevent any background noise that's the speakers are maxed of your question and answer session if you'd like to ask a question during that time please press start them the number one on your cell phone keypad his car will be recorded thanks very much he is deborah crawford face looks vice president of a desk relations in a region
spk_1: thank you good afternoon and welcome to facebook second quarter twenty twenty earnings conference call joining me today to discuss our results are mark zuckerberg ceo sheryl sandberg c l l and gave way in our cfl before we get started i would like to take this opportunity to remind you that are remarks today will include ford looking statements actual results may differ materially from those contemplated by the slide looking statements actress i could cause these results to differ materially are set forth in today's press release and in our quarterly report on form can't you filed with the fcc any forward looking statements that we make on this scholar based on assumptions as of today and we undertake no obligation and to update the statements as a result of new information or future events during this call we may present both gap and non gaap financial measures a reconciliation of captain on get measures it included in today's earnings press release the press release and an accompanying investor presentation are available on our website at investor john f b dot com and now i'd like to turn the call over to mark
spk_2: so what's going on with this is my brand new next channel
spk_3: i did you get here all the door was a
spk_2: oh but i think the bigger question is what's going on with this their when back here let's stop the line as artificial intelligence much might have a details and is that all does that
spk_4: back and forth and so far in this morning it was i was gonna go ask some
spk_5: that then i didn't
spk_2: you know artificial intelligence is supposed to be all about self learning but the only thing this thing as learning this how to ruin a caucus see opposite of artificial intelligence or think we're looking at here's a thought when it comes to customer experience
spk_3: almost is not good enough you gonna have the real thing see x one is the only true next jan see x cloud platform with of ai that actually get smarter with every interaction only see x one has real next june ai for relaxed and experience
spk_6: does it have an on off switch with our departure would have a smart they'll probably would have done
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spk_9: have you love your job right
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spk_10: stay safe and happy trading
spk_11: thanks and thanks everyone for joining us today i hope you're all doing okay and staying healthy this was a strong quarter for us especially compared to what we expected at the start there are now more than three point one billion people using our services every month to stay connected but with and more than one hundred eighty million businesses he is are tools to connect with customers but we also more than nine million active advertisers across or services as many shifted their business online well as i said yesterday
spk_12: the tech industry as an american success story products we build have changed the world for the better and improve people's lives our industry is one of the ways that america shared values with the world and one of the greatest economic and cultural exports our country
spk_11: facebook is part of the story we started with an idea to give people the power to share and connect and with built services the billions of people find useful i'm proud that we've given a platform to make a job for people to make their voices heard and given small businesses access to tools that only the largest players used to have since covert emerged people have used or services to stay in touch with friends and family who they can be within person and to keep their businesses running online even when physical stores are closed in many ways amidst the very difficult period for people around the world our services are more important now than ever before it's worth reflecting on this for a moment because there's a fundamental difference between the how the vast majority of people actually experience or services
spk_13: and the express an impression you'd get a few just read much of the commentary about facebook and going through this pandemic two decades ago when the internet was nascent facebook didn't even exist sheltering in places incredibly disruptive now but until recently would have mental was no connection with your friends and the broader
spk_11: or economy most of a small businesses restore front at the close would have gone under and there wouldn't have been another infrastructure that like the internet that they could move quickly to in order to stay afloat if people sharing their did it a experiences with friends communicating and groups with people share interests and watching entertaining content buying and selling things this is how the vast majority of people use our services they get some seem to wrongly assumed that most of the content on our services is about politics news a misinformation or heat and let me be clear it's not the views make up a small part of the content on our services although they were all things that the people generally tell us they like to see even less of would you not
spk_14: profit from misinformation or hate we do not want this content on our platforms people come to our services to connect with the people they care about that's why people are using our services at record levels now and enabling more of those meaningful social interactions is how we succeed
spk_11: good karma helps members get a piece of credit card sixty six percent more than with a confidence technology what if you purchase out with wheelbarrow cash you probably don't need and car testimony up to was your chances at a great credit card create your own karma with credit karma
spk_0: and we have a plan to further reduce the amount of harmful content our ai systems already proactively identify about ninety percent of the hate speech that we removed before anyone even report that the know their internet service does anything remotely is sophisticate
spk_11: it is this and we're committed to continuing to improve were having an independent audit done of our community standards enforcement report which is or transparency report on how effectively we're removing harmful content were also opening ourselves up to an audit from the media rating council to look at our content monitor they should pay alex using brand safety controls and we're going to work with a global alliance for responsible media to provide greater transparency into our measurements of hate speech numbers that's some also seem to the wrong we assume that our business is dependent on a few large advertisers and what we value every single one of the businesses that use our platforms the biggest part of our business is serving small businesses our advertising is one of the most effective tools that small businesses have to fight and customers to grow their businesses and to create jobs and that's why i am often troubled by of the calls to go after internet advertising especially during a time of such economic turmoil like we face today with coated it's true that making it more difficult to target ads would affect the revenue of companies like facebook and with much bigger cost of such a move would be to reduce the ufc active ness of the ads and opportunities for small businesses to grow this would reduce opportunities for small businesses so much that would probably be felt at a macro economic level and was that really a what policymakers want in the middle of a pandemic and recession the right path i believe is regulation that keeps people did a safe while allowing the benefits of this kind of personalized and relevant advertising looking forward i expect the rest of the here to continue to be unpredictable from a health perspective with coven growing quickly of the us and there's currently no end in sight for wouldn't our teams here i will be able to return to our offices it is incredibly disappointing because it seems like the us could have avoided this current surge i in cases if our government had handle this better for face part of we're continuing to show our covered information center to share authoritative health information to date we have directed more than two billion people to see it in order to see important health messages including interviews with doctor fouty and recently information that why wearing a mask is so important during this time we found that most facebook employees can productively work remotely that even before the covert we had a long term goal of enabling more remote work since the ability to feel present a even when your remote as a core aspect of our own product work on on video presence and workplace and virtual and augmented reality we're using this moment to accelerate these plans and i expect that up to fifty percent of our employees will be remote long term within the next five to ten years this will enable us to attract and retain broader pool of talent regardless of where they live economically ah with the initial cares that stimulus and in here in the us that it's unclear what the economic outlook for be during this next period i continue to believe that getting the virus under control is the most important step we can take towards the economic recovery a for our part of we are accelerating our work to help small businesses sell online to our services we launched facebook shops til at businesses that have a storefront and sell across our apps not a scaling quickly that were to have more to share their soon what's up business now has fifty million people using it and as growing quickly ah we've also granted approve of abu we've also created grant programs to help small businesses during this period including a one hundred million dollar programs sports small businesses globally and another one hundred million dollar programs specifically to support black owned businesses black creators and nonprofit had serve them black community here in the us politically a covert has added a heightened level of uncertainty to this year's elections because of the virus many people may not want to go to the polls and person so voting by mail will be more important than ever and since many people haven't voted by mail before the it's critical that we get official voting information in front of people and help people register to vote we've built a voting information center and our goal is to help four million americans register to vote in the selection this will be the largest voting information drive in american history and double the number of people that we helped a register and twenty sixteen and twenty eighteen we've already started attaching links to official voting information to any posted a from political candidates discussing voting our goal is to help people register to vote regardless of what are these candidates are posts are saying we're also continuing to focus on stopping election interference including removing voter suppression and we've already broadened our policies here and adopt a new policy is to partner with local election officials to remove false information on voting in the period leading up to the elections
spk_15: and we're currently considering additional steps that we might take
spk_11: with all this going on i've been impressed by how much progress our team's been able to make on are proactive product priority is an and around building a private messaging platform enabling a small businesses and commerce and building at the future computing platform is around virtual and augmented reality we know it's messenger rooms and april and people around the world can now joined a room from any of our apps or even if you don't have an account with us that all we expanded messenger kids this quarter to one hundred forty three new countries and territories helping a lot of parents if they look for ways to safely preserve their children's friendships are humbly and our a ar and vr and hardware products keep getting better or we saw an increase in portal with across the whole proper product line this quarter and quest which we launched last may already has more usage than any other device in our ecosystem as i told congress yesterday
spk_16: i am proud of the services we build and how they improve people's lives i'm thankful to everyone it's facebook who was doing this important work and to all of our partners and everyone else is on this journey with us and now i'll handed over to cheryl thanks mark on how everyone i want to start by building on that mark had about hate speech facebook stands firmly against hate being a platform where everyone can make their voice heard it's court of our mission but that does not mean it's acceptable for people to spread hate it's not we don't benefit benefit from it and we never have a users don't want to see it and our advertisers don't want to be associated with it for years we spent billions of dollars on teams and technology the find and remove hateful content and to protect the integrity of our platform generally and we become a pioneer and using artificial intelligence to remove hateful content at scale we've made real progress and in many ways we've let our industry and being more transparent and more proactive it enforcement
spk_1: a recent study from the european commission says that these investments are paying off and that facebook acts faster and mom is a greater percentage of the hate speech and our services than other major internet platforms
spk_16: we've made no progress but this work is never finished earlier this month we met with the organizers that the ads boycott and other civil rights leaders to listen listen to their concerns and we published our civil rights ah that we were the first social media company to undertake an audit of this kind and independent to your review of the civil rights impact of our products and practices it's clear we have a lot more detail and we're working every day to meet this challenge
spk_1: not because of pressure from advertisers but because it is the right thing to do
spk_16: we are also working every day to support people and businesses through this difficult period the pandemic it's not just the public health crisis but an economic crisis that has had businesses around the world hard i want to talk about what we're seeing in our own business and how we are supporting small businesses as they transition online in order to weather the storm after seeing flat year over year revenue growth and growth in the first few weeks of april we thought a considerable recovery in may and june or total ad revenue for cute to with eighteen point three billion dollars which is a ten percent year over year increase this demonstrates not only are resilience of the company but a wider to trend that has been underway for some time people are spending more and more time online so businesses need to be online too this was true long before the pandemic but it is especially true now that people can't always get together and person and the united states before the crisis one in three companies still did not have a website now more and more businesses realize they have to be online
spk_1: this month in partnership with the world bank and always obesity we published our first global state of small business report based on a survey of more than thirty thousand small business leaders across more than fifty countries
spk_16: the data paints a sobering picture of the struggle businesses are facing but it also points to the scale of the digital transformation we are witnessing and majority of countries at least one third of smb is reported earning a minimum of twenty five percent of their sales from digital channels in the previous thirty days over the years we've invested in free and paid tools to help businesses and is increasingly digital first economy anyone can set up a digital store front on facebook or instagram for free and just minutes that is why now more than a hundred and eighty million businesses use our tools every month along with our free tools personalize advertising is a lifeline for businesses especially small businesses who can't afford brought campaigns aimed at mass audiences were just a few dollars now more than nine million advertisers use our platform to reach audiences interested in their products and we enable this in a way the pro text people's privacy and produces measurable results in today's economy when businesses are struggling and customers aren't physically walking into their stores or restaurants this is more important than ever you to social distancing restrictions italian coffee stop shop owner nicolo toronto had to get creative and reimagine what a virtual coffee experience could look like with the help of facebook instagram and what's that he promoted online sales and free home delivery to people interested in coffee within ten to twelve miles of his store and he saw a twenty times return on outspend
spk_17: and it's such a small businesses that have used personalize that to help them have it at the onset of the pandemic kirkland's home furnishing retailer in the us shifted it's focus on line and use facebook ads targeted at adults within ten to fifteen miles of their stores the drive sales with curbside pick up this is the type of customer acquisition that is only possible with personalize ads and as a result they thought twenty four times return on outspend and three times and co
spk_16: recently sales directly attributable to facebook as marked disgust regulatory and platform challenges threaten this lifeline for businesses but we remain committed to doing everything we can to help them adapt so they can survive and thrive in the online economy we recently launched the business nearby tool to help people find businesses in their neighborhoods and we continue to develop shop to make selling online quick and easy we know making tools available if not enough we also need to ensure business owners have the digital skills to use these tools effectively in march we launched our business with a pub to share free training and resources and since then over twenty million people have visited with and launched or summer of support program in june to share even more advice for businesses whether or not they use our services since launch more than fifteen million people have tuned in the her practical tips for rebuilding and strengthening their business in addition to tools and training businesses have told us any direct financial help in mid march we announced the hundred million dollar grant program to help small businesses around the world and since we opened applications for the program within a huge amount of interest from black on businesses three know they are facing enormous challenges like businesses have faith systemic barriers for generations and i have also been hit hardest by the economic impact of the pandemic last month we and out for the additional hundred million dollar investment a block on small businesses like creators a nonprofit that serve the black community and the us our grant program is on top of a goal we sat previously to spend at least one billion dollars with diverse suppliers next year and every year thereafter as part of this will spend at least one hundred million dollars annually with black on suppliers from facilities to construction to marketing agency isn't more the current crisis as lasting longer than any one hoped unexpected we are acutely aware of the responsibility we have to keep people connected during this turbulent time and to help businesses weather the storm and transition to the digital economy i want to close by saying how grateful i am to our partners around the world to continue to give us valuable feedback and hold us accountable and to are incredible team to are deeply committed to making progress on the issues that matter most and launching your products that continue to make a real difference in people's lives
spk_2: now here's days
spk_18: by cheryl and good afternoon everyone we continued operate in an uncertain and challenging environment around the world at the same time we're seeing accelerated participation in the digital economy and fifty two helping alleviate the economic challenges associated with nineteen we are pleased as or people and businesses through these very trying times
spk_11: toledo twelve goals are to teach our future great in different metrics reflected increased engagement to to be impacted the pandemic
spk_18: or as expected we're seeing signs of normalization is shelter in place measures have used around the world a provide more detail in the outlook in june we estimate that approximately two point five billion people used at least one of our services on a daily basis and that approximately three point one billion people use at least one of our sources on a monthly basis
spk_2: note the beast you to family metrics reflect new data from a recent user survey and certain methodology improvements for your details are included in the earnings slides on or i or website
spk_18: basically the feel continue to grow with daily active users reaching one point seven nine billion a twelve percent compared to last year the i use represented approximately sixty six percent of the two point seven billion monthly active users in jail and i use grew by two hundred eighty seven million four twelve percent compared to last year turning out to the financials due to total revenue was eighteen point seven billion dollars of eleven percent or twelve presents under a constant currency basis
spk_2: at one exchange rates remain constant with you to of last year total revenue would have been two hundred ninety seven million dollars higher due to ad revenue was eighteen point three billion dollars up ten percent or twelve presents on a constant currency basis
spk_18: as your mentioned ad revenue growth in the quarter was stronger in may and june road today role in terms of verticals we saw particular strength from the new and existing online commerce and service advertisers who primarily leverage are direct response ad formats facebook is their lifeline of economic activity during a time when offline activity has been for tail or great was primarily driven by small and medium sized businesses around the world to leverage that are advertising platform to connect with customers
spk_2: as a result we continue to see increase diversification among or advertiser base in to or top one hundred advertisers represented sixteen percent of our ad revenue which is a lower percentage than a year ago on a user regional basis ad revenue growth was strongest and us and canada asia pacific and europe which grew fourteen percent eleven percent and nine percent respectively
spk_11: rest of world the climb six percent and was impacted by challenging macro economic conditions as well as foreign currency headlamps
spk_18: turning out our present volume metrics into to the total number that impression served across our services increase forty percent and the average price for add decrease twenty one percent daimler to last quarter the growth in impressions was primarily getting by facebook melt local news feed good product changes and increased engagement compared to last year
spk_0: the decline in average price brad was largely attributable to the economic impact of the pandemic although we saw you ever your pricing trans improve in a latter half of the corner
spk_2: other revenue was three hundred and sixty six million dollars at forty percent driven primarily by sales of atilla and portal products turning out of expenses you to total expenses were twelve point seven billion dollars up for present on a reporter basis excluding the two billion dollar expense that we recorded and cute your last year related to our settlement with the ftc total expenses were up twenty four percent year over year and a lot of percentage point deceleration compared to keep one the biggest
spk_11: factor in the deceleration of expense grant from the first quarter was a decline in people related costs like travel advance and amenities as our employees worked almost entirely from home
spk_18: by line item the trends were as follows posse revenue increased sixteen percent driven primarily by depreciation related to our data centers band or indeed with thirty five percent driven primarily by investment in court products as well as our innovation efforts notably in a r our marketing and sales grew eighteen percent driven primarily by consumer a great marketing and finally excluding the ftc expense from two to twenty nine team dna expenses group thirty percent driven primarily by higher higher legal expenses it's mark then should we continue to invest throughout the economic downturn in order to build products and services for the future we had our strongest hiring quarter ever and you to adding over forty two hundred net new hires primarily and technical functions we ended the quarter with over fifty two thousand five hundred full time employees up thirty two percent year over year
spk_2: we are pleased with our ability to recruit onboard and retain talent in this environment
spk_0: operating income the six billion dollars representing a thirty two percent operating margin our tax rate was sixteen percent net income was five point two billion dollars or a dollar eighty per share
spk_19: capital expenditures with three point four billion dollars driven by investments in data centers servers office buildings network infrastructure note that this is a declined eleven percent compared to last year primarily due to a pause in the data center construction for roughly half a quarter due to the shelter in place measures have since resume their data center construction efforts with proper safety precaution
spk_18: in place in queue to we announced a new data center in illinois which will be supported by hundred percent renewable energy we remain committed to minimizing our environmental impact in earlier this month we published our inaugural sustainability report which is available on facebook sustainability website free cash flow was five hundred and forty million dollars and as a reminder this is net of the five billion dollar ftc settlement that was paid and you to but as previously it was expecting twenty nineteen we purchased one point four billion dollars of our class a common stock and ended the quarter with fifty eight point two billion dollars in cash in investments in july we closed or investment your platform limited and paid approximately five point eight billion dollars in cash
spk_11: turning out to the outlet
spk_18: as i mentioned earlier we're seeing signs of normalization and user growth and engagement a shelter in place measures have used around the world particularly and developed markets where face books penetration entire looking forward to a shelter in place restrictions continue to ease we expect a number of face but via years and any years to be flat were slightly down in most regions and que three can air to keep him in the first three weeks of july or year for your ad revenue growth rate was approximately in line with our cue to ad revenue growth rate of ten percent we expect our full quarter que three year by your ad revenue growth rate to be roughly similar to this july performance there are several factors contributing to this first continued macroeconomic and uncertainty including the pace of recovery and the prospects for additional economic stimulus second the expectation that some of the recent surge in community engagement will normalize reach regions reopen third the impact from certain advertise
spk_2: responding spend on our platform related to the current boycott which is reflected in our july friends and lastly headwinds related to ad targeting and measurement including the impact of regulation such as the california consumer privacy act as well as headwinds from expected changes mobile operating platforms which we anticipate will be increasingly significant as the are rare
spk_11: isis
spk_18: putting out expensive we expect total expenses and twenty twenty to be in the range of fifty to fifty five billion dollars narrowed slightly from our prior range of attitude of fifty six billion we expect capital expenditures to be approximately sixteen billion dollars at the high end of our prior previous fifteen to sixteen billion dollar range as we have resume data center construction efforts earlier than expected however a great deal of uncertainty remains in our outlook and are for your capital expenditures will depend on how the pandemic impacts our ability to construct data centers in refresh equipment
spk_0: turning out attacks we expect our full year twenty twenty tax rate be imminent teams other we need these fluctuations in our quarterly rate depending on our financial results we are proud that the role facebook is played in keeping people connected during the current crisis and the role that we have played in helping businesses reach consumers online during these challenging times without my laptop not the call for questions open the lines were question and answer session to ask the question press the are followed by the number one on your touched on phone you to pick up your up before asking a question to ensure clarity if you are streaming today's conference meet your computer speakers
spk_20: your first question comes from the line of eric certain from the bs
spk_0: thank you so much for taking the question and thanks for all the the color in the commentaries movie to if i can in terms of what you want to accomplish on ecommerce to the platform broadly over the medium to long term would have the key investments answer the launch initiatives we should be looking for from the outside in that are still part of the building blocks to accomplish or the announcement around
spk_11: facebook shops all the excitement about bringing in one one merchants and sellers on the platform or globally just woman stands for the pathway forward both spago in terms of either he initiatives or maybe even the numbers and then maybe one quick on on the advertising side how much the headwind these the current brand advertising environment you we continue your a direct response advertising trends approving quickly and maybe even some other articles back for existing pre covered levels humble should we think about the recovery and brand advertising what head with that might be a platform to look out to the second half thanks so much
spk_0: yeah i can take the second the first part of and cheryl can can protect the second one in terms of the the big
spk_11: milestones for small businesses and commerce and were mostly focused on on two types of products the first his shots which we started rolling out a lot more broadly ah this year
spk_21: and it would that basically allows any small business
spk_11: to put in a catalogue and then have a stop across instagram and facebook to start and eventually across all of the apps your all to bring up shop and you'll be able to transact across all of them and ah we're going up this pay to make it so that he by coming in one place your credit card to start easier to do fall on transactions and any the ass it will be a better consumer experience and and sales will will convert better and they're also be a natural
spk_2: value for small businesses are being able to connect the advertising that they're getting across their services with their shots to together to go from an aspiring someone at the top of on all the way down through through driving sales
spk_22: so that's going to continue scaling and lot more to share their on on metrics him and and i that sang the other area that i'm quite excited about his messaging commerce and what we're seeing the air and is it's particularly important especially in developing countries
spk_11: but we're seeing a lot of small businesses just conduct a significant portion of their business over messenger or of her what's up and in the medium term i think the way that were probably going to build a business around that ah and what we already offered the business eight the i and i will be meaningful but they're also these click to messaging ads which have been ah more successful i think we'd even hoped with that basically allow people that too get customers attention in especially facebook instagram and direct them to a thread where they can do commerce and and messaging or messenger to start and were really working out wrapping up and what that as well but as payments grow across messenger and what's up and as wherever role that out in more places i think that only in the trans have those the two areas that were really focused on commerce it's worth noting like a sudden my opening remarks this really is primarily focused on small businesses individual entrepreneurs and small businesses are the biggest part of our business
spk_17: not the large businesses of course we want to be using our platform to our we want we want to serve everyone ah but if if if you on as investors or as analysts are anyone or thinking about our business
spk_16: really the accurate way to think about what we do is that we are the business of serving small businesses and all these different things that were doing are going to be geared towards an enabling those folks to grow rich customers and create jobs around the world
spk_9: i can talk about the trends in brand advertising i think what we've seen notches this quarter but for many years is that advertisers large and small are really interested in measurable results i think that's the best thing we offer a nasa people come to us i think sometimes think of brand advertiser
spk_16: as a large advertisers and certainly large advertisers often do brand campaigns but both large and small advertisers we see on our platform are increasingly interested in measurable results results we also believe that we provide a better advertising experience for both the market or in terms of our ally and the and user and terms of seeing something that they're more interested in when the ads are more personalized and the more they're driving to a measurable results
spk_0: the more they tend to be targeted to a specific audience and i think the better they work and so we're definitely seeing a trend towards where you said in his question has direct response but it's not just direct response anymore it's any kind of measurable result and we offer a lot of different actions you might want someone to take and that is definitely on
spk_23: much more important than brands and driving our business has been for a while and that ten continued trend continues your next question comes from the line of run away from morgan stanley thanks to my question i've i've to one for one for mark on for dave mark the first went on india he may have the series of investments last couple years there if we talk to us about serve your your vision for the the product offering and their the consumer in the smb pain points you focused on solving and the investments you need
spk_24: head really make their create that into a real business for facebook men secondly dave your it seemed like a you're you're talking about more than fifty percent of the employee base social worker mode next five to ten years it say you're are going to give us of mass or quantify babies talked with about some of the put some takes the areas where you could see long term
spk_11: efficiency internally for more to work them out as well as federal higher costs from are larger remote work force base dragons it your question
spk_21: it's very kept it's what i was talking about around message and commerce
spk_11: a lot of people use what's up especially in india there's a huge opportunity to enable small businesses and individuals and in india to buy and sell things through what's up we want to enable that that starts with an avon payments that a big part of the partnership that we have with geo will be ah wire up
spk_21: get
spk_11: thousands of of toronto's small businesses across india i'm onboard it onto ah onto what's up
spk_21: to do commerce there
spk_11: and we're really excited about the opportunity there and once we prove that out with geo in india we're planning on expanding uttered more folks in india and to other countries as well but there's there's no doubt that india's a huge opportunity is the largest country by the size of our community that were serving already it should be one of the faster growing business opportunities
spk_18: his well to to help businesses grow their and and we're we're very excited about that before handed over to said dave to talk about it i'm at work i'll just add that are on principle with that the reason why we're shifting to more room work and that we think that culturally of will allow us to attract more talented people what we're not doing this primarily in the cost saving measure answers or gave to talk a bit about his analysis there but i don't think we really have a clear picture of how that might play out but i can tell you that's not the primary goal of how are approaching this
spk_0: yeah more that's consistent with what i was going to would i was gonna say to brian you know if the main thing we're we're trying to do with access a greater talent pool which ultimately might give us more opportunity grow and town so so i think it it there's there's there's an effect their that's i think of you know in addition the cost in the sense that we would
spk_25: have a greater fool of people that we could recruit from and i data that that's that's one thing to think about of and then yes there might be some savings on office and amenities and the like the deaths you know potentially offset by more travel to do to be able to bring people in the offices and for our sites and other things to be able to collaborate effectively so we don't we don't exactly where the person takes you to come out on that
spk_18: your next question comes from just and posts from thanks america crazy the guess when short term in one longer term i'm appear you guy that can present in july and for the quarter about the shame for ad revenues i'm could you talk about some of them because your head wins in the second half a little more detail especially any any apple idea of a changes or how that could impact your busy yes and then on the longer term mark and brief for five years ago you you talked about messaging and you're where the asia can't do you feel like a businesses is really starting to jail and and materialize ya bish and some positive comments and can cannot be me to church contribute and in two or three years think it okay i'll take the first one there just and so i mean there's gonna be a few factors that are you know obviously important in the second half i'm one of the things to be called out with the macro side of things which you know we don't know precisely
spk_26: you know how the the overall economic climate is going to develop that we we do know that some you know stimulus is probably playing to some extent three to our business and you know the current care that for instance an expiring at the end of july and we don't know what the subsequent economic stimulus will look like and
spk_18: to the extent that stimulus decreases in the future and recession lingers that could impact ya consumer purchasing power for advertisers in areas like ecommerce answer that you know we'll have to see how that plays out you know in addition we we didn't specifically call out he does on mobile operating platforms and and not as you correctly identified we specifically with the apple latest announcement regarding was fourteen in mind
spk_27: the to and you know this is one of the factors that has that has included in our outlook for t three but it really will have more than pronounced impact and que for and beyond given the given the rollout begins late in two three and you know we're still trying to understand what these changes will look like and how the on impact
spk_0: dustin the rest of the industry but the very least it's going to make it harder for app developers and others to grow using as on facebook and elsewhere
spk_21: you know so advertising clients are happy and hadn't you know how how to maintain their performance and we're working on it like you know our our view is that he's looking targeted as or a lifeline for small businesses especially at hand coded and we are concerned and aggressive platform policies will cut it that lifeline at a time when it is so essential for small business growth
spk_11: recovery your next question comes from raw sailing from barclays
spk_28: okay i guess i can talk about the messaging business had some
spk_11: you know overall here it's it's basically the levers that i've talked about so far on this call i think it's it's taken us a little longer than i would have hoped for a payments to to get released on on on what south that a number of countries that certainly a building block or the what's up business app is growing incredibly quickly though and terms of number of businesses who are signed up for that of that part of the ecosystem
spk_29: i'm i think is going quite well
spk_11: a p i adoption is is growing reasonably well as well for businesses the click to messaging ads are the valuable for businesses but we're seeing them more use that shows up more and kind of the revenue and the ads that were sitting on the facebook and instagram side
spk_21: dan
spk_0: the then register has direct commerce that's happening inside the the messaging apps but it's it's useful nonetheless that i think what we're pretty open said
spk_30: to to where the the revenue comes to us but we were pretty focus just on making sure that we can help small businesses grow in by customers and can act and helping people ah interact with with all of their individual that the all the friends that they want him and all the businesses that they interact with increasing that think that there's that that's that's becoming part of one broader platform i certainly think that's happening and messaging continue to be very excited about that
spk_16: your next question comes from raw sailing from by police a great a just a follow up on the sm be a commentary the dave you mention that that was the primary driver of growth in a and we appreciate the the top one hundred max are down and sixteen vs i think twenty percent for years ago seems i got from coming down steadily am i guess the the smb cited a little counterintuitive was so many business the failures going on with covered so can you got to talk about the is it the penetration of the sixty million as be is already on facebook or in terms of the the buyer had or penetration it's going up or or what's driving that that resurgence in growth from smbs than the current environment or any color their behalf yeah oh yeah it's when you think about smb is your certainly right that a lot of businesses are struggling but at the same time businesses have to pivot online and so on this call we updated our overall numbers we now have over one hundred and eighty million businesses using our free tools and we now have over nine million advertiser
spk_17: or the what we're seeing is that increasingly businesses of all sizes but including small businesses after find their customers online people aren't walking into stores as much after find new ways to deliver products like curbside pick up like shipping you know so they are increasingly moving on line and you see a lot of businesses around the world but even
spk_0: and very developed markets like the united states
spk_20: before this not even having a website of any kind of we become a place you can set up a website set up a digital storefront it's free it just takes minutes you know how to do it because you've already used facebook or instagram as a consumer so we're to see more and more businesses migrate online and we're seeing more and more businesses become advert kaiser's you know this acceleration of ecommerce seeing it notches with us and but if you look at all the verticals out there are things that can be done online or obviously doing better and less time than things that rely completely and on things that are offline and put it really is just an acceleration of a trend we've all seen for a very long time the current a virus crisis is making this you know happen more quickly but the migration online the migration to using very personalized sad to find people who are interested in your products is something that you know we've i think help drive and are continuing to help drive and and we're proud of the role the role we play on as it's really important
spk_16: for job growth around the world and for the help of small businesses and your next question comes from the lines of like any from jp morgan thanks for doing the questions response is the only deeper i'm from the ecommerce topics cheryl or know it's as thorough as the with face bookshops those who else could be good go help us understand feedback and traction you're seeing their and then just when you think about martha zeeshan overtime you expect more of that drew incremental advertising dollars or through commission fees of sellers use to check out and then second mark common on your efforts with what's up a india and brazil and and met some resistance they're out of get result in those markets thanks
spk_0: that we launched shop in may as you know and shops gives a really immersive full screen store front so enables businesses to build their brand and drive product discovery if you think about what we've done for really long time we exist in many ways at the top of the funnel
spk_31: and we helped drive people down but we are a great place on facebook and instagram for discovery and then increasingly were able to drive people down the funnel all the way through to purchase the shops help to do that on the advertisers tight but they also help small businesses with free online tools were very committed to this but in terms of
spk_11: the house filling it's very early we are seeing nice results from businesses and the people who are using these shots our focus is getting the it's products experience right and as we do we're going to make it available to more and more businesses if you look into that foreseeable future that you know several years future advertising it's huh
spk_32: your high margin business that obviously it contributes much more to the bottom line than any other years we might charge and i think we see this as really focused on increasing the experienced people can have going all the way through the final purchase on facebook and the experience businesses can have an you know
spk_0: closing that loop and selling online and migrating online
spk_33: that's more important than the actual incremental bottle or she would get from any fees charged by the services your next question long similar doctors of squalor or for interest not a second part of quest and
spk_11: yeah another wasn't much of an update here and i just i were working with regulators in those countries and are optimistic there will be able to move forward although it's taking longer than than we would i do it like
spk_28: okay we get an expression you legs your next question comes from use of scrum from suntrust
spk_11: great thank you are switching topics little bit mark one area we were worsen just incredible growth engagement is online game in and trimming in particular you were you guys recently got mixer for microsoft looks like facebook is no firmly in third place in that market what is your value proposition to gamers relative to the be competitors basically twitch and and you to how do dual monitor the over time is it a cheryl just talked about on a different topic mostly advertising and is it conceivable that game in may become kind of the third leg of that stool your third largest revenue source over time after faces vulcan instagram thanks the value proposition is community and that's true for all kinds of creators who are posting content and video like what we're doing and watch as well our channels or are ones where you're not just distributing content for your building up a community and able to communicate with people in a number of ways which something that is just a lot harder to do on a you tube or it's wet sure other products like that you know those are also great products for for streaming arms we're seeing not on on gaming a lot of people appreciate that were able to distribute the video and get to a lot of people said
spk_18: that part is working well to i agree with you have are all the gaming of going to be increasingly important in the future the other area of course where we have a very large investment in gaming is the area around virtual and augmented reality
spk_0: with after a big part of use their
spk_34: we're staying exciting work both from from it and a developers and large aaa developers and increasingly some the and have studios that we've ah
spk_18: that we've acquired as well so what we're going to continue focusing on gaming i agree to that that a big area
spk_11: yeah and i would she said you sit there you know gaming continues to be a top five vertical for us and for in terms of advertising and on was as we saw strong right in the second quarter especially in the beginning of the quarter when when prices were lower in the option we saw a lot of them and from law or gaming advertisers and done so without adding a good again
spk_18: what were the option is very effective it and a filling in so on yeah we continue to be important top of the funnel discovery for game developers around the world and your next question comes from the line of had a billion from goldman sachs
spk_0: great thank you so much for taking the question the are most of them as been answered the just a couple quick ones on tape i was wondering if you could just you gave us some great commentary to think about cute tree so thank you for that i'm just wondering if you can show or the kind of pricing trends at the end of the quarter and into july and also you know just
spk_18: given the the uncertainty on the second half the year for all the reasons you mentioned any comments you want to share with us on you know kind of how to think about even qualitatively seasonality and que for hey heather on yeah i think it's easy to forget the second part of your question i think it's going to be really hard and in in it to look into to do for with any certainty here given we just don't know what the macro economic situation is going to look like i it's hard to predict you know august and september are much less looking at far into the future and i think that's gonna be on you know a big that the be thing to think about i think clearly your ecommerce will continue to be really important as we go into queue for given that some you know be you know macro been for us in the whole industry has been the strength of e commerce for the second quarter so i would expect that when you don't plan to the fourth quarter as well to some extent as as a with the holiday season in terms of pricing trends
spk_0: we did see pricing improved three the quarter so early in the quarter of the man was much weaker to be surprising a depressed throughout the throughout the world and and and we saw the as i mentioned just that before you set we saw your backfill with some advertisers coming into taking advantage of low prices
spk_35: for like games than ecommerce providers as well and then you know it's prices improve throughout the quarter of if you don't know we saw some some of those advertisers are the a pullback as others came into the auction and and and bit began winning more that that you know continues to be a as as noted from that price by metrics in the script it continues to be a depressed environment i'm anti in and so were you know we're we're we're obviously you know just for a macro economic perspective concerned about that as we get further into the year as well i would you know as you want to point out you know we've got you know with got targeting advertising targeting a measurement headwinds that will affect pricing as well i'm that will be in we believe you're more pronounced in in for you know given some of the enough rest of the apple idea hey changes which you know i think i'm you know could could prove to be you know a challenging had one your next question comes from the line out mcelhinney from rbc
spk_17: thanks want to ask about the up
spk_16: addressing the boycott issues in market degree when asked whether you think there's out a reasonable a lot of vision solution and here i know how you come out again we've been pretty clear about am your thoughts on try not to my moderate too much content try not to be in that role but are there a the solutions that you talked about than introduce things like labeling is that not a dressing the issues the concerns of some of that out some of the boycott participants how hard you think it will be to address
spk_1: their concerns and and i get sick on this with them
spk_16: political advertising i know you've said the passage into use that material but the numbers are relatively sizable we're talking about a couple of billion it should be online and i think as far as i can tell face book offers of just about the best way to do political ad targeting in a different dad different damn job districts eg cetera why wouldn't you see reasonable boost due to ad revenue and know in the back part of the year from our political ad campaigns thanks a lot
spk_18: i can talk about the ads boycott so with an interesting situation we find or something because i think often times when companies are boycotted it's because they don't agree with what the boy cutters want and that's actually all here we completely agree that we don't want hate on our platforms and we stand firmly against it you know we don't benefit from hate speech we never have users don't want to see it advertisers don't want to be associated with it and we've been working for a really long time to get better at this to finding it and as i said my marks i think in many ways we lead our industry and transparency and execution we're can to keep working really hard at this
spk_1: not for financial reasons or advertiser pressure because it's the right thing to do in terms of how we resolve it we work across the board we have worked with and continue to talk to the civil rights organizations that are boycotting us we had a meeting with them and mark a few weeks ago we continue to work really closely with other civil rights organizations
spk_0: as well as our civil rights auditor on the many improvements for trying to make but we're also working with industry and groups that i think can be really helpful gone from and mrc particularly garden is working with us to partner on brands safety standards to help us comes had definitions and independent oversight for the industry and were
spk_36: optimistic that will be able to work with them to address advertise their concerns were also working with the media rating council the mrc an undertaking an independent brand safety on it and will be able to share the scope it out by the end of que three and and marches the if it's dave on on on political ads and have you think that the fact is we just have such a large and diverse fight advertising business and political an hour just a small part of the overall advertising landscape even in electioneers and to be factored in you know the twenty twenty political advertising stand is part of our been a key three commentary
spk_18: and again i would just point to the backdrop factors that i outline in my comments in terms of you know things out there including macro economic headwinds a nationalization of engagement friends without restriction these you know the boycott and then been on targeting a measurement operator we have time for one last question your last question comes from the line of marksman on bernstein hi fighting for taking the question
spk_19: the first i know we talked about this a little bit but that you know what's the what's that business growing the fifty million users and i think latin america was five million that that you're pretty astounding growth any color you can share on what drove that growth and and secondly as you know we to think about the their growth kind of quarter today than
spk_11: july in and are you called out the rest of the world with the one that decline structural had when an incremental color you can share of them of that's been resolved or what that looks like thank you ah i can take back the second part i guess first on the rest of world so i think you know what you've got going on in terms of rest of world with missed you to your ears price but as a a few factors on first you just got a foreign currency headwinds particularly i am in places like brazil and so that that plato a role in not the of year decline and rest of world secondly you know rest of world have the lower exposure lie and concert of online vertical things like e commerce and games and it's more exposed to ah you know things like you know traditional retail and brand and with covert the online verticals perform well in those dependent ultimately like on in person in and versions and interactions left says i think that impacted rest of world as well and then you to finally it's not clear whether you know stimulus in the developed world also played into a in gave more strengthen in those markets in the post rest world that that could also be part of their the relative strength in more the developed world rather in the developing world and i'm what's driving the growth in and what's up business
spk_1: i mean i really just think it's a it's a good simple product execution
spk_0: and there's a ton of organic demand for people to interact with businesses and i could for
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