This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk_0: good afternoon my name is friends and i will be your conference operator today at this time i would like to welcome everyone to facebook first quarter two thousand twenty one earnings conference call oh lines have been placed on you to prevent any background noise after the speakers remarks the will be a question and answer session if you would like to ask a question during that time please press one and and the number four on your telephone keypad this call will be recorded thank you very much ms deborah crawford facebook the vice president of investor relations you may begin
spk_1: thank you good afternoon and welcome to facebook first quarter earnings conference call during me to today to the got a result or mark zuckerberg theo sheryl sandberg theo and day when or cfl before we get started i would like to take this opportunity to remind you that are remark today will include forward looking statements actual results may differ materially from the contemplated by the for looking statements factors that can cause these results to differ materially are set forth in today's press release and in our annual report on form can carry filed with the fcc and for looking statements that remake on gonna call are based on assumptions as of today and we undertake an obligation to update the statement as a result of new information or future events during the call we may present both gap and non gaap financial measure a reconciliation a captain on gap measure is included in today's earning personally the press release and an accompanying investor pigmentation are available on her website that investor dot as be dot com and now i like to turn the call of or to mark
spk_2: everyone thanks for joining us today before we get started i'd wanna take a moment to say that we are very worried about the kobe situation in india that also in brazil i'm hoping that we can get this virus under control soon and in the meantime we're focused on what we can do to help their now turning to the results this was another strong quarter more than two point seven billion people now use one or more of our up each day add more than two hundred million businesses use our tools to reach customers
spk_3: and this has been intense year
spk_2: when i am proud that we continue to deliver value for people and businesses around the world the over the past couple of quarters our business has been performing better than we expected and this is given us the confidence to increase or investments meaningfully had a few key areas that have the potential to change the trajectory of the company over the long term don't you call on to talk about the opportunities that we're pursuing an augmented and virtual reality and around commerce business messaging
spk_4: and creators
spk_2: the first let's talk about a building the next computing platform i believe that that augmented and virtual reality are going to enable a deeper sense of presence and social connection than any existing platform they're going to be an important part of how we will interact with computers in the future so we're going keep investing heavily in building out the best experience with year and this accounts for a major part of our overall are indeed budget growth quest to is doing better than we expected even after the holiday season are we continue to see good engagement and we keep shipping updates or that make quest better and better including airlines which enables wireless streaming of games and content from pcs and support for one hundred twenty hurts refresh rates now achieving quests high quality a wireless phone factor has been a major breakthrough having wires wrapped around you just really breaks the sense of presence in immersion and that the technology deliver a great experience wireless list is very advanced and most companies aren't going to be able to deliver this but we believe that it is the minimum bar for a high quality experience this quarter or we also shared more but our future investments including neural interfaces for interacting with a are and we started testing or new avatar system which will be a key part of how people express themselves and connect one interesting trend is that we're seeing the app ecosystem broaden out beyond games and other categories as well the most used apps or social which fits original theory for why we wanted to build this platform in the first place or world to sing productivity and even fitness apps as the for example we launched a tool so people can tips scribed services like fit xr or to do boxing and dancing in vr just like they would for biking on pellet on we introduced the app lab the developers can ship early versions of their asked directly to consumers without having to go through the oculus store or and between app lab and streaming from pieces were pioneering a much more open model of app store the what's currently available on phones today
spk_5: no overtime
spk_2: and i expect augmented and virtual reality to unlock a massive amount of value voting people's wives and the economy overall there's still a long way to go here and most of our investment to make this work or ahead of us are but i think that the feedback that we're getting from our product is given us more confidence that are prediction for the future you're here will happen in that we're focusing on the right areas a beyond a ar in vr about a call to the other long term opportunities that we're really focused on especially in commerce in business messaging or commerce has been growing in our services for a while but it has become a lot more important as the pandemic has accelerated a broader shift towards businesses moving on mine in the last year we've seen online store fronts stay open and even when physical stores closed and going forward online commerce will continue to offer an increasingly personalized inconvenient experience commerce add up continue to do very well and drive a meaningful amount of our overall business we got marketplace into one of the world's leading the services for people to buy and sell and i am pleased to share today that more than one billion people visit marketplace each month and now we're investing in building for future of commerce so we want shops last year and as i recently shared there are now more than one million monthly active shops and over two hundred fifty million monthly shops the visitors were also focused on building more native commerce tools across our apps are we recently updated what's app catalog so businesses to keep them updated from their computers him to include what in stock we launched carts on what's up last year and people have used them to send orders are more than five million times ah we're also building a broader infrastructure to support commerce everything from payments to to customer service and support
spk_5: in what's up payments is now live in india
spk_2: and we have gotten approval in brazil won shortly to we're starting to see a meaningful shift in the way the people communicate with businesses are a lot of people online commerce is in a less about website and shops and more than messaging to people wanted to get support and make purchases right from a chat small businesses want to show their products and take orders via messages and larger businesses want reliable insecure infrastructure to communicate with their customers businesses using the what's up a business a p i have already sending more than one hundred million messages per day over the last year during the height of coded who don't daily conversations between people and businesses on on messenger and instagram grew by more than forty percent
spk_6: more than three million advertisers
spk_2: already using click to message adds to direct people to messenger and since we introduced click to what's up ads nearly one million advertisers have already started using them to and your now the next up here is we're going to make it possible to create those cooked what's up bad from directly within the what that business the next step is to make it easier for businesses to adopt albeit services and to give them the tools that that can can handle messages and customer relationships our acquisition of customer is going to regulatory approvals and were looking for to offering businesses a native way to manage their customer relationships on our platform don't want to be clear that and we have a long way to go to build a full featured commerce platform across our services and and this is a multiyear journey but i am very committed to getting there this modern commerce system of can bring together in number of areas where we either already have strong offering like it adds community tool than messaging with areas like in business messaging and payments that we're focused on ramping up now as part of this we're also investing more in building out better customer support for a product for the last several years or we focused a lot on content moderation privacy work and i view customer support has the next pillar of the trust and safety work for our services
spk_7: the last area
spk_2: that i want to discuss today is is around creators i think that a positive vision for the future of the economy is one where more people get to do creative work that they enjoy a rather than jobs that they don't and to get there we need to build out the creative and monetization tools to support this crater economy people create an incredibly diverse set of content across our services from a long form writing to live conversation to a documentary than and augmented reality filters and our goal is to support the full range of human expression and to be the best platform for millions of creators to make a living a part of this is gonna be delivering a suite of tools and products that span all the ways that people want to cretin consume content i believe that the intersection of every media type in every audience size there is a compelling experience to build and for for example i recently discussed our audio road map and and we already support audio calls for private or audio communication but now we're also building out live audio room with which we think will be especially useful for groups and communities we're building sound bites for sharing and consumers short form audio clips broadly and we are supporting podcasts for sharing and listening to long form audio the world to partnering with spot a fight or to watch a music player in the facebook app do we also need to connect these experiences with easy options for modernization or whether that subscription tipping or enabling creators to get product recommendations and enable commerce and instagram and facebook we have a unique ability to bring creators and commerce together and we will share more on that later this year now together these efforts around creators commerce and the next computing platform are a few of the big area that we're doubling down on going forward and in each of these there is a unique opportunity to help people connect in deeper ways and to support a stronger economy for everyone i'm optimistic that are working all of these areas will help accelerate in the positive emerging trends that we're seeing in the world and and now and handed over to cheryl
spk_8: mark and hi everyone i have your all faith and healthy
spk_1: this is a really strong quarter for our business or total revenue for key one with twenty six point two billion which is a forty eight percent year over year increase we seen good growth in all regions we continue to see strong results in vertical and have performed well during a pandemic like ecommerce retelling cpg
spk_8: i performance have been driven in large part by the continue digital transformation as more and more degree shift from mine for years we've invested in products and tool to support the chest and these investments have helped many businesses reinvent themselves during a pandemic what are the best parts of my job is i get to meet smb honors in here with on their minds many of them tell me how they view states for to adapt and ground at a virtual round table with us and be it's from detroit this corner especially easy chance him runs an all natural skin care company called our j essential when covered head and she had to close or store she started a facebook group called the garden which now has more than a thousand members they give her products ideas and when she makes the project they suggested she says it's a cell thicker than she can keep them on the south by pivoting our minds she's been able to replace all of the income she lost from her store i office that the iraqis who runs a yoga studio a nearby and arbor she started doing after classic during a pandemic a needed to get the word out she can't afford to advertise everyone in a city not everyone in the city wants to do yoga the she is his personal items of of her to advertise to people in the area to are interested in yoga or meditation it's all done and a privacy protected way we show her at people and we don't share their information with her and then they sign up for her classes like everyone else the business owners i talk to you wanna know what will happen next many are all an online even when things fully reopen they want to be able to do more in line and he did before the understandably they're asking us what we can do to help them not now that over the long run part of the answer is continuing to improve our tools and products in creating new ones to suit their needs and part of it is helping them navigate the headwinds that are coming down the line weather at the iowa fourteen changes are potential regulation on the first part towards and products we're all into from day one of kobe we fast tracked our work to help people buy and sell online initially we started getting the experience right for sellers as marx said we launch shops nearly a year ago we continue to develop new features to help personalized the shopping experience and worked with partners to make transactions a seamless as possible and we've created new format like live shopping which brings to life the unique commerce experiences are platforms can offer now we're equally focus on getting experience rate for consumers were rolling out the shop having more countries and exploring new immersive format like product tags and drop drop stickers that enable more people to shop with traders and brands they last where else are constantly developing uprooting or products to help businesses reach people were they are and get the best possible return on investment we continue to see stronger than story thousand video ads which we've invested in heavily we've also seen strong growth across have been paid for plots which now has more than one point two five billion people visiting every month as a number of people watching video crows were developing more opportunities for businesses and creators to reach them word defending paid online events to more countries where enabling more people to run in three mass including and live video and about will be has in short form videos where were testing the ability for content creators to monetize their facebook stories with ads that look like stickers on the second part had one yes there are challenges honey to personalize advertising and we've been pretty open about that would you a huge amount of work to prepare working with our customers to implement apple's a p i and our own aggregated events measurement a p i can mitigate the impact of the i fourteen changes rebuilding meaningful elements of our attacks that that our system continues to perform a we have access to less data in the future i'm a part of long term collaboration with industry body like to w three see uninitiated like privacy enhancing technologies that provide personalize experiences while limiting access to people's information it's also enough to keep making the case a personalized advertising is good for people and businesses and to better explain how it works the that people realize that perseids as your privacy protective now this is as don't have to understand the alphabet soup with acronyms only to comply with but they do need to have confidence that they can still use our tools to reach the people who want to buy what they're selling and a privacy safeway we're confident they can and that they can continue to get great results of digital advertising about but there are a lot of vaccines there's reason to be hopeful that the pandemic is still causing real heartbreak and hardship for people in many countries and in particular like mark my thoughts are with our friends and colleagues in india and brazil right now if the last year has taught us anything it's not make assumptions and to not expect things to get better for everyone to same time whatever happens we'll continue to keep people connected the port the public health response and investing ways to support businesses now and in a long term i want to close by saying how great siam to all the desert since you work with a big and small do we learn from everyday and you are incredible team said supported millions of businesses to the turbulent time and set them up for success now in in the future now over two days
spk_9: cheryl and good afternoon everyone she one was a strong quarter for business driven by sustained growth in the digital economy and our continued success in helping businesses and days with consumers across or services let's begin with our community metrics we estimate that approximately two point seven billion people used at least one of our services on a daily basis in march and that approximately three point four billion people used at least one on a monthly basis note that these que one family metrics reflect new data from recent user surveys further details on our family metrics are included in the earning slides on our i or website a global community continue to grow even as we laughed elevated user growth in the first quarter of last year related to the pandemic facebook for daily active users reached one point eight eight billion up a percent or one hundred and forty four million compared to last year the i use represented approximately sixty six percent of the two point eight five billion monthly active users in march and they use grew by two hundred and fifty million or ten percent compared to last year thirty two the financials all comparisons are on a year over year basis unless otherwise noted be one total revenue was twenty six point two billion dollars of forty eight percent or forty four percent on a constant currency basis we benefited from a currency tailwind and had foreign exchange rates remain constant with you want of last year total revenue would have been seven hundred and six million dollars lower you one ad revenue was twenty five point four billion dollars up forty six percent were forty two percent on a constant currency basis the growth in advertising revenue was largely driven by continued strength and product vertical such as online commerce growth was broad based across all advertiser sizes with particular strength from small and medium sized advertisers are your your ad revenue growth also benefited from laughing pandemic related demand headwinds experienced during march of the year on a user geography basis ad revenue growth accelerated in all regions both with strongest in europe at fifty three percent rest of world asia pacific and the us and canada grew forty seven percent forty six percent and forty two percent respectively
spk_3: europe and asia pacific benefited from currency tailwind while rest of world continue to face currency headwinds
spk_9: into one the total number of ad impressions served across our services increase twelve percent and the average price for at increased thirty percent impression growth was driven by but instagram facebook
spk_3: the increase in average price for ad was driven primarily by laughing depressed pricing levels and one year ago as well as strong advertiser demand
spk_9: other revenue with seven hundred and thirty two million dollars up one hundred and forty six percent driven by continued strong quest to sales we've been encouraged by the sustained strength we were seeing the sales of question since it's october launch
spk_3: starting now too expensive to one total expenses were fourteen point eight billion dollars up twenty five percent compared to last year
spk_9: in terms of the specific line items cost of revenue increased forty eight percent for the mostly by core infrastructure investments hardware costs related to quest to sales and payments to partners or envy increased twenty nine percent given mostly by hiring to support or core products and consumer hardware efforts marketing and sales increase two percent with growth in hiring partially offset by lower marketing bad lastly dna expenses increase two percent with growth an employee related costs partially offset by lapping higher bad that expenses related to covered in the first quarter of last year we added over two thousand that new hires in que one primarily in technical functions we ended the quarter with over sixty thousand six hundred full time employees up twenty six percent compared to last year
spk_4: first quarter operating income was eleven point four billion dollars representing a forty three percent operating margin or tax rate was seventeen percent net income nine point five billion dollars or three dollars and thirty cents per share capital expenditures including capital he says were four point four billion dollars given by investments and data center servers
spk_9: network infrastructure in office facilities
spk_2: free cash flow with seven point eight billion dollars we repurchased four point one billion dollars of our class a common stock in the first quarter and we ended the quarter with sixty four point two billion dollars in cash and marketable securities in terms of sustainability i'm pleased to report the taste buds global operations have now reached net zero emissions and or one hundred percent supported by renewable energy this is an important milestone for a business but we also recognize there's more work to do in the years ahead and we remain committed to our next goal of decarbonizing our entire value chain and twenty thirty
spk_10: additional information on our ongoing efforts across environmental social and governance areas can be found in our recently filed proxy statement
spk_2: turning out to the outlook
spk_9: we are pleased with the strength of our advertising revenue growth in the first quarter of twenty twenty one which was driven by a thirty percent year over year increase in the average price brad and a twelve percent increase in the number that delivered
spk_3: we expect that advertising revenue growth will continue to be primarily driven by price during the rest of twenty twenty one we expect second quarter twenty twenty one year over year total revenue growth to remain stable or modestly accelerate relative to the growth rate in the first quarter of twenty twenty one as we lap slower growth related to the pandemic during the second quarter of twenty twenty
spk_9: in the third and fourth quarters of twenty twenty one weeks that year over year total revenue growth rates to significantly decelerate sequentially as we laughed periods of increasingly strong breath we continue to expect increased ad targeting headwinds in twenty twenty one from regulatory and platform changes notably the recently launched i was fourteen dot five update which we expect to begin having an impact in the second quarter this is factored into our outlook there is also continuing uncertainty around the viability of transatlantic data transfers in light of recent european regulatory developments and like companies across a wide wide range of industries were closely monitoring the potential impact on our european operations as these developments progress
spk_3: starting now too expensive
spk_2: we expected twenty twenty one total expenses to be in the range of seventy to seventy three billion dollars updated from our prior outlook of sixty eight seventy three billion dollars
spk_9: the european growth and expenses is driven by investments and technical and product allen infrastructure and consumer related costs we remain committed to investing for long term growth and our expense outlook reflects the underlying strength of our business and the compelling investment opportunities we see across our products including consumer hardware we expect twenty twenty one capital expenditures to be in the range of nineteen to twenty one billion dollars down from our prior estimate estimate of twenty one to twenty three billion dollars are capital expenditures are driven primarily by our investments and data centers servers network infrastructure and office facilities
spk_3: turning out attacks we continue to expect our full year twenty twenty one tax rate to be in the high teens
spk_9: in closing the pandemic during the past year has presented some incredible challenges to our global community during this time we have work to help both businesses and consumers stay connected we remain focused on helping people and businesses navigate the transition out of the pandemic is more reasons reopen
spk_0: with that france let's open up the call for questions
spk_11: thank you we will now open the lines for a question and answer session to ask the question please press
spk_0: one followed by the for on your touchdown phone pick up your handset before entering your request to ensure clarity if you are streaming today's call his nature computer speakers
spk_12: i first question will be from the line of brian no lack with morgan stanley peterhead thanks to my question i've i've to the first one cares for little self report car if you all around around commerce a male our progress around the million shop to our fifty million i shop visitors where would you say you've made the most progress for advertisers a merchant so far in a sort of look into that the back half and a toy to what are the biggest areas of of innovation that you really focus on to contain to grow that number maybe talk about non advertising holiday snaps salary
spk_13: and the second one to has around as we as we entered early in the reopening but the be curious to hear about what you're seeing from an engagement or time span perspective of your user base and there in the areas in the world are little more reopen and i are thinking about that in the back half
spk_8: i can start on the first so there's a lot of commerce like heavily on our platform already you know people really discover lots of products to our feed and have stories your are and story that and extent our largest that vertical coffee really accelerated it but it's been one of the fastest growing verticals we've had over the last five years and we believe that paid for dr hundreds of billions of dollars of site ecommerce gmp today to our add that now and we certainly made a time of progress air and are called going forward are we want to continue to be the very best place advertise are you have to do work to do that as i mentioned in my remarks that we can still use data in a privacy south way get the right at the right person at the right hand but we think we are we are market leaders here the other work were doing and about it in his much can i did as well it can make it easier to sell on our platform now the shopping experience is really well defined in other places and we are later to that and we were to add that we now we have a lot of work to do are working with partners to build some of the park for the experience that we're not in fact for him and were integrating am or integrating products like shops we have more than a million active shops and more than two hundred and fifty million people interacting with merchandise per month so we've made some good progress but we recognize that getting to really seem less it seem like transaction experience is getting take more and our side and we're going to continue to invest their i think another area where we do have to do more if we have to improve the consumer experience to how people can act on the platform and yeah we've done i think more work on that dignified on the integration five and now we are focused and continuing to tell that and continuing to balance out the consumer experience you know for the foreseeable future ads are going to be the vast majority of our revenue in this area and commerce vertical it's so important to us
spk_9: we don't need commerce itself or fees that one hundred take part of what happens in order to make the investment worthwhile what we really have to focus on helping more businesses move on mine and have a great experience on our platform and that along with that makes this a very worthwhile investment from i have a brian is dave i'll take the second question so you know i think you don't broadly what we're seeing is just to engagement trends that are going back to more normalized level so if you if you think about the past year it's been it's been pretty noisy because of because of coated in the first quarter twenty twenty beside a significant increase in engagement as a result of the pandemic and we seen some those trends subside as a as the your progressed and we saw you know gradual face down of of of of lockdowns i don't think anything is a hugely dramatic
spk_14: but it's certainly something that we're seeing in the engagement trans and that's that's one of the factors that are playing into price being a a bigger driver a growth on the revenue side because of the impression grab being being lower and a psycho it's certainly a certainly a factor in that on the revenue front i think there were seeing you know continued
spk_9: the a demand
spk_0: with products and even and then we're seeing services spend come back so you know i think that's a that's that's kind of blood a quick landscape of what we're seeing with the with the covered impacts
spk_15: i next question is found the line of just and post but bank of america please go ahead great thank you maybe one from mark and one for dave
spk_16: i'm
spk_9: i think there's been some questions on engagement just because you see the strong growth of things like tech talker or maybe snap but you've built from super platforms within facebook with the watch usage and marketplaces could you comment on what what you're saying that overall engagement and and as people use is over new platforms is is a growing i spend are other factors and then the second question or maybe the date any surprises with the iowa as fourteen dash five update and and any comments on what use what you've seen with with users who have party opted out of tracking or before this update thank you and he just is dave he i can say i can take both it is so yeah on the impression growth front and i think we're seeing a couple factors we talked about the you know the kobe the impact in and the return to more normal levels and and and that's affecting some of the impression great the second factor that we're seeing and kind of gets it some of your question which is we're seeing really strong engagement on video particularly internationally and that's you know we're pleased with that i'd i point pointed couple examples there i'd say facebook watch and we talked about the one point two to five billion users also you know really starting to get traction on in in doing well on instagram no video currently have in a relatively few or impressions on a time spent basis to that playing into the engagement friends as well the and then you know finally i would say you know we are seeing competition and newspaper good their own video products and also others products as well so that's factoring into it
spk_3: and then your second question was regarding any surprises with i was fourteen five and look i think it's it's really early they just began rolling out the update so it's it's it's it's sort of very very low kind of penetration rate of the of of the of the new a at this point
spk_9: but you know a couple things i'd say you know we get we continue to be concerned about the impact it is updates gonna have on the ability of small businesses to use their advertising budgets effectively you know that said the impact on our own this is we think will be manageable a know we continue to expect it will be a headwind for the remainder of the year but we're making encouraging progress as cheryl mentioned on our own solutions help advertisers navigate these changes and that includes a helping advertises work with the apple a p i as well as our own approached using aggregate data for targeting a measurement that we call aggregated events management so the go there is really to maintain in in the long run even improve performance with less left the data so it and then i'd also add it just in addition to these medications were also just seeing you know very strong overall add demand which is contributing to a more positive outlook for for twenty twenty one and you know i would say just overall you know the the the impact of of these you know the the specific i us fourteen changes
spk_17: you know or one elements of of of have some of the challenges with apple but we think the begin with the impact of the apple approaches really much bigger than this particular update around third party data data usage you know apple has a number of private a p eyes on hardware and software that advantage there on products and services in ways that are challenging and in a week
spk_0: taste that issue with in places like are messaging products and even with hardware products were launching so we generally don't think that this close to practice the best one for the industry from an innovation perspective
spk_18: go ahead france and a connoisseur i next question from that and mess with jp morgan to have
spk_2: thanks hurting the question i want from mark and rq highlighted the three areas where your doubling down across a aren't the are commerce and and a crater economy so you could talk about whether you're you these efforts this helping facebook control it's destiny more as a platform perhaps giving you more first rd data whether they insulate you from other ecosystems overtime thanks sure i can i can talk about that i think we mostly think about these things from the perspective of improving their experiences that we can build top
spk_19: augmented and virtual reality i have thought about for a long time because i think that it's sort of that the holy grail of delivering a sense of presence and the type of social experiences that you would want to build so and right now
spk_2: or and i guess for the whole history of the company we've been constrained to a web browser it now in some cases is increasingly restrictive in a mobile mobile app all but i think that this future environment where you're going to be able to feel like you're really present with someone else that can be really powerful and it's going to unlock a bunch of experience is that we wanted to build for a long time and that's what i'm really excited about similarly on the commerce tied in part of this is is motivated by wanting to help out the small businesses and and and a different business to sell more across our platform in a lot of it is also just about making the consumer experience better or it's right now and a lot of times you'll you'll click on an agile seen interesting ad and you'll take you to a website and it'll the web have a nursery have full context and rewired payment experience will be clunky and in doing that and ah there's just an opportunity i think to make that all lot more seamless and when it is seamless it both as a better experience for the people you're using it for the loss of converts better for the businesses and performs better so i think the way we're going to approach this is largely from starting with haven't built out this very robust add system and then just obviously we're working our way down the experience from their self magneto it's of businesses and craters have shops and that the ads can then link into into shops and have a native shopping experience that over time will also increasingly in other payment systems get better and better and more people are credentials on file on in i would imagine that that gone all the way through the funnel will become an increase a part of what people do and that was both be a better experience for consumers and convert better for businesses are similar story on the creator side your your our main goal it is not necessarily that the that the creator economy is a major business by itself by did you know if we become the best place for creators to make a living that that's going to mean that there's better content across the services and and better opportunities for community building and engaging people and that's what we care about ah but of course you know if there's more engagement and if if ah if if craters are finding that there a good opportunities to to monetize the melon get more with our business products to and throw be some opportunity there but i kind of think about all the stuff from the perspective
spk_9: of of improving the product and it i think that that's gonna lead to a lot of benefits for all of the stakeholders over that the next you know
spk_0: several years
spk_20: thanks for france the we go hadn't gotten the next question i next question is handling of around sandler by queen is the head three questions or of march so the strutting recently the sweeter congressional hearings on this concept of algorithmic amplification or how algorithms on place for brunstrom surface content to kind of maximize engagement and sometimes i mean some of the more controversial content to it is what
spk_21: give surface so first off his at a fair characterization and if you guys were forced to maybe change up the way all these algorithms work what might have power issues will kind of impact will don't actually have on engagement and in ten years ago the news feed was kind of the whole story but now we're talking about many
spk_20: different areas within the app so how much is from this you know algorithmic driven content and vs utility style hegemon like you know going into and
spk_22: messenger or going into
spk_2: the marketplace or something that's just kind of an everyday behavior think a lot your i can start taking that salmon and then winter you can jump in if you if you if you on anything overall i think that the narrative that you are pointing to his dramatically overstated by critics are we do not optimize our systems to increase the amount of time spent in news feed i explicitly do not give our news feed team or the instagram feed team goes around time spent our belief is that if we build a product that is more valuable than people will engage more but you should start by trying to build some that's more valuable not by trying to increase time that people are spending so we've done that for years i think it's it's yielded good result
spk_19: so from that perspective yeah i know that what you're saying is something that
spk_2: and folks like to throw around and say but but i actually think that the more that in a different regulators are other folks dig into this i actually think our our practices you are are are quite robust and we don't want you know extreme extremist content or idea that set up on our services so you have anything to the contrary of trying to promote that we go out of our way to try to reduce that and i think that you know contrary to what a lot of each other folks say is it is actually in our business interests to reduce it because people like it running a consumers don't like it advertisers don't want to be near it so i'm sorry i don't actually think that this kind of narrative about the company is accurate and in we've tried to a hard to dispel it i don't think we've been super successful that i and we will continue trying to work on that but but just to cannot be clear about how i see things that's that's the basic download on you know i think new through the still a huge part of the of the of the products i'm and and and i'm dead home feet and and instagram but increasingly if stories is a big deal and instagram a lot of people are using explore and and i g t v video and watch on facebook are quite big and as you say a lot of people spend
spk_9: the unit know a lot of their their time in attention is in isn't isn't messaging apps and private interfaces like that as well so i know there are a lot of different things that that people are doing across the services but when or can can jump in with anymore anymore color on that that you want dad and in the only thing i am years a markets that you know i think more than anyone else in the industry we invest on the safety and security side to sort of keep that content you know off the site before it gets ranked and put into what people see so you know we got thirty five thousand and over thirty five thousand people on the safety and security died know we've got the room most robust set of content policies out there with you a quarterly call you know public call around our content with you
spk_0: the process and procedures and so i think that you know on on the front the forty to gets into the algorithm i think it would mean a we really do more than anyone one else in the industry on the on the safety and security front to prevent things like you know misinformation and and you know
spk_23: you know a bad content going into the system in the first place our next question is from the line of says scully with to us securities he's the head
spk_24: great thank you very much i have a two part question are on the are for mark
spk_23: machiavelli talking about the are for a long time now every basically every quarter i was just wondering what happened this this particular quarter and as compelling you to one above i wanna double down on that virtual reality what was the realization this quarter that may be met meet you want to do that and i guess more
spk_19: fortunately
spk_2: and related is there a need for facebook to perhaps want to own the studio or maybe a series of studio so accelerator all that content which should help drive adoption because the other friction point is price and you've already lowered the unit to to ninety nine which is very compelling price thanks i can start with this and then and in winter can jump in the second point if if if you're anything up in terms of what changed i think the the the big piece here or that quest to is is is doing quite well i i don't want to overstate it because i think compared to you know platforms that are that are and a large massive success is today it's still
spk_25: in obviously on the on a small and but there's been a very real inflection in terms of adoption and and engagement that we're seeing with quest to it feels like there's there's something about the quality bar that we hit and the price that we hit and in fact that we're able to do that in a wireless form factor thirty
spk_2: it's just his his first all can be really hard for for anyone else i think test to meet those different attributes are i'm your some some other folks might try to your ship something that they claim it's higher quality but has a wire and i just don't think that consumers are going to want to go for that to what's we'll see how how all of that plays out but i also just look at have a team is executing in the product so we have in the pipeline and and i want to make sure that we that we can can really go all in and and and delivered us but but i do for their quest to it's been a meaningful step up from from quest one in in terms of the the progress that were sitting and contenders definitely a part of the sun and and i'm in a we we have a a team internally that that's focused on in both first party
spk_9: i guess it's all first party second party and third party content and making partnerships with studios and
spk_26: and that that certainly is a big part of this that think
spk_27: in a quest has a i think you know by far the best lineup of of vr content and and i did and i think the road map of what the head is even more exciting some the stuff that's coming over the next few years
spk_0: yeah my i wouldn't have much else to add other than to just say that we've repeatedly called out investments in in frf face reality lab is one of the major investment drivers in our expense outlook so it's not the first time to be sort of you put put a spotlight on that we're it's and it's been an ongoing investment area and and studios is mark said and
spk_28: content is an important part of that france we can go to the next question
spk_29: i next question is from john that blackledge with callen the have
spk_2: agreed or thanks or two questions out one on on the air vr i'm your market as you're building in investing in the platform ah you know kind of what do you expect day or be archer to be more widely adopted know what what what kind of ultimately drives so fast paced accelerating consumer adoption and then the second question for for dave cost growth was a lower than expected and one q e slightly raised a full year at the midpoint any anything there that you get up call up thank you like lucky with the first yeah and then and in the day maybe you can you can take the second piece in terms of when these platforms will be more adopted i think a lot of it as about your form factor and use cases and quest to i think is it we kind of hit a a key points but they're still further that we want to go in the form factor of that like the wireless part is key to say that again i think that there's a lot that you can do in terms of getting your product said that might have better graphics or something but with a wired really it really hurts a sense of immersion in one like of a wire wrapped around your neck lawyer were doing all this stuff but the other big pieces the use cases which is why i called out in my remarks as the beginning the one of the promising signs that we're seeing is that it is expanding out beyond games now it's it's it's i'm still your primarily games but you know when we started on this journey in a lot of the reason why i said that i thought it made sense for us to invest in this is because i expect him virtual and augmented reality be
spk_30: some of the most social platforms that that get built in the fact that you know number of the the most engaging experiences on the platform today our social on a lot of the top games are so i think is really promising but in also same things in terms of productivity
spk_31: and in
spk_2: like i mentioned on is just really promising that the you're seeing the early signs of is becoming a broader platforms for there's a again i don't overstate any that's because
spk_32: you know it's it's all quite early still and and all these things need to develop out but those are very promising signs from my perspective and and as those keep on developing out than that think the the platforms will be broadly applicable to more people
spk_2: and then the arm the other thing i'd say that we haven't really even gotten their on a are yet but i think virtual reality the form factor constraints i think our
spk_9: you know a little less than what you're gonna have an augmented reality where in and virtual reality i think you need to get to a high quality wireless experience on in augmented reality you're going to really need a pair of glasses that look like normal looking glasses in order for that to hit mainstream acceptance and that i think is going to be one of the hardest technical challenges of the decade is basically fitting a supercomputer in the frame of glasses the so i'm in i i i buy not a very exciting problem to work on an arm and i i think that once that's achievable and potential on that okay to be quite big and then john dave just on the cuban total expenses you know what i call that some that some of the items in in my comments but i think you've got a couple factors one was you know marketing spend was it a relatively lower compared to keep one of of of last year where your growth was lower and then also
spk_33: so you you we had a bad and expensive i think with not unique for facebook ain't easy this in some other companies as well that we took him up to one of last year related to our expectations on a collectability around kobe so i that's factoring into some of the it compares on the growth rates as well i'm and then you know
spk_0: as you look at the remainder of the year and a couple couple things one is you know the strength of the business in general is giving us
spk_18: competence and and we're looking for areas to invest more so we're continuing to invest in you know research and development of across the priorities that mark outlined in his comments and in that as well we'll we'll see a pick up and things like marketing add in in the remainder of the year so that's what's driving the acceleration of expense grab as you as if you if you look forward and then the covert compares or are you know are are a little bit there's just different expense lines that that get covered impacts answer to little it's a little noisy from that as well i think a nice touch it
spk_28: thank you my next question from the lawyer that one plane with settling back please go ahead
spk_18: ah thanks ask you questions first your cheryl in the past you've talked about advertising been kind of a relative our ally game so young when you think about the shift from iowa as changes per apps going from like an operational short term headway when to potentially a tailwind as other outlets for advertising lose our ally on
spk_8: a relative basis like is that something that happens in in months and quarters and any year like talk about how you see that part it's actually evolving and then second one cheryl you also talked about starting to invest more in building out the consumer experience on shopping side so maybe you can just walk us through some of the things you think facebook is uniquely bring in the ecommerce that might make for a new a better user experience he oh is that a are vr is that yet what are some things that could could really make great book stand out for consumers on e commerce on the first thing you know relative our ally you're exactly right you know people like an advertising advertised on tv and radio on billboards and different online platforms and you're looking for relative that violates that means a signal go down and he goes down everywhere working today you know differently and you know our goal is to make sure that we can still do so my that we with you think that are relative competitive advantage as been and are as are more personalized really important because you know as and some of that examples i shared my small businesses you know the yoga studio in detroit can afford to advertise to everyone in detroit much less everyone in michigan much whatever and in the us
spk_34: and how advertising using you know who lives there and who's likely to be interested in yoga meditation is really important and we believe we will still be relatively better positioned the you know virtual you know faith to not all players right because we're not running the platform but based based on many we're still gonna do better at that and a lot of digital players were still images that are up and t v or radio and but when signal goes down we're gonna have to rebuild that capability and that's i talked about
spk_8: and in terms of the time mean you are specifically really we really don't know i was fourteen changes are really new regulatory changes that might happen at a state level or a global or regional level or a national level haven't happened yet i'm the will have to see and i don't i don't have a real sense of what she changes will be what their impact will be right now and the we are very focused on competing for those ads dollars and doing it and doing it as well as time any consumer experience on shopping side where we are right now if we launched the shop a lot of the shopping swirls and we've had brought to do sit ups and staff been good he knew we don't offer the full suite of tools that a lot of other places to buy more and more we have shops and functionality that people are adopting we re
spk_35: really need to work on a consumer side of the it varies
spk_27: am i do think we have a unique opportunity there you know you asked again like what is arm
spk_0: i think it is my language that years by did you were asking like what is our sustainable competitive advantage here we have a lot of people doing a lot of activity we increasingly have people looking for products we increasingly have people finding products and her we've always been found at the top of the funnel can we move people found the final we think we can
spk_36: but that's can hate that's gonna take work in a also going gonna take some time for people to get used to that but in terms of the long run competitive advantage we have a lot of people looking for a lot of things sharing a lot of things and continuing on to find things they really like and so i'm very optimistic about our opportunity hairpins take real work graduate i have no the next question
spk_2: i next question is from call and sebastian with bayern please go ahead i think so good afternoon for smart or maybe as another follow up on the aren't a r m the connection or synergies you see between reality labs and the other priorities you mentioned around commerce communications and creation i'm curious if those are collaborative and they should have since early or had a silver much i load as far as product plans and development is concerned and then and then secondly an area of connective tissue as well i think is unified payments i'm just curious how important that will be to enable the shopping and and transactions on a platform and what role that the oh man that other digital currencies may play that effort thank you yeah they're good questions i think right now
spk_37: i think the trajectory of this is that when you're very early on in the platform
spk_2: it's helpful to centralize a bunch of that development i'm close together and the organization but then as things started to build out and anything you want to
spk_37: you know get the full energy of the different have teams involved in building for this then you want to decentralized that more so on so i know it's still more of a centralized side
spk_19: but i'd say that over the next
spk_3: i'm in a year to year we're certainly going up
spk_2: that it more that work out across the company and and and have more the work that we do be building towards these different platforms and to a point on your the other kinds of services and and in that are important for commerce payments is it about things like facebook pay
spk_1: and you eventually hopefully
spk_0: hope will be launching know v and and and i'm sorry dm certain that that i think is is is is is going to be a pretty
spk_38: in big thing to and and that's very important for other reasons that your they are saying commerce across all these platforms that can be very important and certainly in a platform that we're building like this we want to were unable payments very easily to make it to that the economics are all work out for developers operator i think we have time for one last question they get our last question will be on the line of michael nathan since with the moffett nice and simple for head
spk_2: thanks so much i want to mark one per day to mark on a comments about the creator or economy i'm i'm instead still giving him a people are focusing on different parts of the creative economy where you see the opportunity and and what do you think you can be you can add is the biggest failure ad for traders has not been done today and then dave on pricing a auction i know that it's up because of the easy comparison last year we look at price going to your stack is it actually up nicely and over the years have been telling us pricing is going down to the next year deprived product and geography some he the update a what actually drug pricing going to to you're basically that many better than you do not on trend to thanks i can start by talking with the crater economy peace over there are a few important components your that creators need one are their creative tools to be able to share of the full range of of expression rights are from from any kind of writing to audio to videotape yeah all these different mediums than the second is connecting that work with a large audience people and helping people find the audience and community and then the third is monitors station and i'd say that you know what we're probably strongest on the second to of those today and i think we we have great of tools and we will invest more in building those but in when it comes to helping people reach the largest audience are finding their specific audience i think we are world class that i think were the best of that and then in terms of modernization i also think that as our business results show
spk_9: we are very efficient a that if we can put that to work for creators to to help them make money from their work than than that can help achieve this goal with as a bomb in are unable millions of people to make a living through this kind of creative works of i think on those two pieces especially on the motivation side and on the helping people connect with their specific community and getting as much distribution of as possible i think that we're going to do some really great and unique work ted to help a lot of creators out and and then we'll build a broader suite of tools to but i think that those two places are a really where we enter the throne and and michael i'll take the second question about about pricing you don't i think that the really simple story on pricing is that you don't demand is just been higher than we expected friends in a think you know if you had to pick one vertical it would be it would be commerce that outperformed but it's a brand that dovetails nicely obviously with our commerce efforts but it's really been a broader story than that really almost every vertical was very strong i think we're still kind of you know we're still seeing recovery and some of the
spk_1: verticals that were weaker i'm from kobe like i'm like travel but but we're starting to see you know i think some some signs of life there and in in some other verticals that were even negatively impacted by covered but this but but really just strong across the board demand for ads has been what's what's what's driven it for us
spk_0: i think the two year compare that you talked about you know is a helpful compare because there's a lot of noise in our year over year revenue growth rates when you look just twenty twenty compared to twenty twenty one and if you do sort of a two year compare i think
Disclaimer