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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 the facebook second quarter two thousand and twenty one earnings conference call oh lines have been placed on you to prevent any background noise after the speakers remarks there will be a question and answer session if you would like to ask a question during that time please press the one and then the for on your telephone keypad this call will be recorded we thank you very much mr brooke offered facebook the vice president of investor relations you may begin
spk_1: thank you good afternoon and welcome to facebook second quarter earnings conference call joining me today to discuss our results are mark zuckerberg ceo sheryl sandberg theo and they've when or fo before we get started i would like to take this opportunity to remind you that a remark today they will include forward looking statements actual results may differ materially from the contemplated by the for the statement factors that could cause these results to differ materially are set forth in today's press release and in our quarterly report on one tank you filed with the fcc any for looking statements that we make on the caller based on assumptions as of today and we undertake no obligation to update the statement as a result of new information or future events during the call we may present both got and non gaap financial measure a reconciliation of captain on gap measure is included in today's earning federally the press release and an accompanying and presentation are available on her website and investor dot f dot com and now i'd like to turn the call over to mark
spk_2: everyone likes her junior of it's with a good quarter for products and and business or there are now more than three point five billion people who actively use one or more of service services then i'm excited about our product roadmap ahead i want to start today by just looking for the theme that were saying in our in our major efforts around creators commerce and the next computing platform each of these areas is important in it can unlock a lot of value on it's own are the growth of building blocks for the future of the internet in the future vision for our company and other stuff that as well the burst book soccer creators the we want our platform to be the best place for millions of readers to earn a living and if we could do this within our services will also have the best content across many different types of media from text and photos the audio gaming and video video in particular
spk_3: is becoming the primary way that people use our products and express themselves
spk_2: no this is the is a theme that we department for a few years now but we've been executing on this for awhile and video has steadily become more important in our products video now accounts for almost half of all time spent on facebook and real is already the largest contributor to engagement growth on instagram across all forms of video short one video like real is growing especially quickly a were very focused on making it easy for anyone to create video and then for the videos to be viewed across all of our different surfaces starting with facebook and instagram first and people to watch videos recommended by our personalized algorithm so this gives creators a good way to reach new people don't follow them yet and this is also a good complement to our social period and it's an area where our progress in a i'm gonna make the experience a lot better in the coming months of years on demand video like and based watches is also growing quickly and now grown faster than than other types of video or content in news feed we're building a number of new video monitor nation tools for craters that get compensated for making great content to for example last year people send more than fifty million dollars of dark irs to dame stream creators go and live on facebook alone and networks betting stars depends can send them to any crater during on on demand video as well
spk_3: i also recall color live video for a moment
spk_2: this is a smaller percent of of or overall video on or services but it it's some of the most unique content and give creators a way to build community and engage with their followers and world so focused on developing monetization tool like live break from mid role as and live shopping as the creators can make a living and engaged their community more deeply into commerce with their content dover older there's a lot more to do here and i'm as become the majority of of engagement across our services in the coming years we're going to really continue to focus on what wrote a book some other types of craters beyond video and some of us interesting emergent behavior that we're seeing is creators using a lot of different types of content to engage their community that we we want live audio room this quarter as well podcast that will forge both and are are publishing and subscription service for writers them with features thousand fine and grow their audiences including integrations the group stage live and and live audio room to help grow the creator economy overall we're gonna we're gonna keep our creator tools free to use through twenty twenty three and we recently announced that we're investing a billion dollars and craters the crop facebook and instagram i'm optimistic that craters will get more opportunity to do the work that they want are definitely to people you're in lot of new voices a cropped are are different services the second area don't wanna talk about today of commerce or goal here is to create better experiences for people interacting with businesses and to help businesses grow even more on our platform our approach is to work our way down the staff and build world class services that every layer of commerce starting from from discovery
spk_3: ah but the top of the stock all of a down payment
spk_2: and you know just like we want to be the best place for millions the creators to make a living we also want to be the that places for businesses to grow as well we started here by by building world class as a tool to help businesses reached potential customers and how people discover new products and services that they might like
spk_4: the will be found
spk_2: is that when his dad's link offside you often land that a web page that that not personalized are not optimized or were you have to reenter your payment information and and that's not a good experience for people who doesn't lead to the best results for businesses either so our next phase here years focused on building out shop marketplace them is isn't messaging and what that the messenger and to create more need of commerce experiences across our our us there's a lot of work here to to do to support all of the business tool natively on that already exist for the web but as we bring more the online mine and enable more of this on if you to create a superior consumer experience and and going to convert better for businesses this is gonna lead to more businesses investing in building other presences across or services and that will lead to even more diversity of products for people to discover and interact with the there's a long term strategy the can take a while before meeting both actually given the scale of our our business already are but i'm confident that the right right long term or that and product direction
spk_3: as we work our way down the stack up from discovery as the native calmer storefront a world for making part of a payment for the same time the what's up payments are now available to everyone in brazil as well as india are lots of people are using this is a simple insecure secure way to send money friends and were adding new payment features and
spk_2: in messenger the us like qr code and will just know that were making face pay available outside of our apps for the first time we've been able to start seeing it as a check out option on the web and especially in web views the you see within our app out after clicking on there are other bit of content the commerce experiences the are now acceptable across most or services and we have a full a road map of deeper integration that i'm excited about in the months ahead on the third area want to talk about his building the next computing platform and we're continuing to invest very heavily in building technology and products to deliver a perfect present this can be critical for unlocking the next generation of social internet services the quest to in particular continue doing well and and it keeps getting better monthly of as we release regular software updates including most recently our pastor a be eyes the developers can start building mixed reality experiences on quests via the range of contents experience with the everything keeps broadening as well at the point where there are a lot of popular virtual reality experience beyond games at the point that the most popular apps on quest are are so old which which fits our original pieces i hear that virtual reality will be a social platform that's why why we're supposed on building it the world something compelling youth kittens and other forms of entertainment as well as well as work creativity in and fitness looking ahead here
spk_3: the next product relief
spk_2: will be the launch of our first smart glasses from ray ban in partnership with that for luxottica douglass have their iconic form factor and they let you do some pretty neat things i'm excited to get these people pounds and to continue to make progress on on the journey towards for augmented reality glasses in the future and out here is that i've discussed today creators commerce in the next computing platform that the reach important priority for us in the region on like a lot of value on their own and put together these efforts are also part of a much larger goal to help build the metaverse and i'll be sharing a lot more about this and month ahead don't want to discuss of now you can you can see the future the were working toward them and our major initiative across cross the company are going about to that
spk_3: so what is the metaverse it some it was a virtual environment we can be present with people and in digital faces them you can kind of think about this is embodied internet that you're inside of rather than just looking at and we believe that this is going to be the successor to the mobile internet
spk_2: you can be able to access the metaverse from all different devices and different levels of fidelity from from apps on phones and pcs to immersive virtual and augmented reality devices are within the metaverse you can build a out or play games with friends work creed and more you're basically going to build to do everything that you can on the internet
spk_3: day
spk_2: his well as something the don't make sense on the internet today like dancing
spk_3: i'm in a defining quality of the metaverse his presence which is this feeling that you're really there with another person or in another place creation avatars them in digital object you can be central how we express ourselves going to lead to entirely new experiences and economic opportunities
spk_2: i think that the overall this is what are the most exciting projects
spk_3: that we're gonna get to work on our lifetime
spk_2: pacific a lot of work and in no one company is going to build a build this all by themselves of i've learned over the last five years is that in we can just focus on building great experiences we we also do to make sure that we're helping to build ecosystem the millions of other people can participate in the upside an opportunity of what we're all creating either gonna need to be new protocol standard you to devices to shift new software air from for rendering engine payment systems and everything in between and in order for the metaverse the filled potential and we believe that it should be built in a way that an open for everyone to participate
spk_3: i expected this is going to create a lot of value for many companies up and down the stack but it's also require a very significant investment over many years
spk_2: i see our focus here as a continuation of our work to build technology that brings people together in many ways the metaverse is the ultimate expression of social technology some of the experiences that that it that i've dreamed of building since well before it started facebook or only starting to become powerful now if you look at the end
spk_5: lessons that we've made over the years you can see this vision gradually starting to come to focus them and you can see why we're so excited about it
spk_2: so in addition to being the next generation of the internet the metaverse is also going to be the next chapter for the company and in coming years i expect people will transition from seeing us primarily as a social media company to see us to the metaverse company and there's a lot that we did you get their i'm in there can be many exciting milestones along the way including some which will share in the months ahead but in the me
spk_6: time and i just one take a moment to thank everyone in our community all of our partners and employees and everyone who has supported of so far i i continue to be grateful to be on this journey with all of you and now i hear is cheryl we won thanks mark i hope you're all faith and healthy this was a really strong quarter for our business or total revenue for cute here with twenty nine point one billion dollars which is a fifty six percent year over year increase we've seen strong growth in all regions and across most radical i found it's vertical i those that have performed well see that throughout the pandemic including ecommerce retelling cpj and we're also seeing continued recovery and others like travel that were hit hard by kevin a performance continues to be driven by the ongoing digital transformation it has accelerated during the pandemic and our long term investments and tools and products to help businesses make the shaft on mine not long ago if it's much harder and much more expensive for businesses to create a digital present take orders online and reach customers remotely our tools and products make the things easier and more accessible
spk_7: is this is creators and set up pages for thousand chap something like an instagram
spk_6: they can engage with customers directly and groups but your messenger and what hat and they can tell their stories and creative ways that real stories or by going live on facebook and instagram with personalized that they can easily reach the people most likely to be interested in their products or services for just a few dollars this has helped so many businesses especially small businesses find success and reaching people in person have been much harder a great example is the pizza cupcake a family on taking business in new york city even selling a pop up shop since twenty eight team but when tobin hat publications shut down in catering events cancelled so in march last year they became an ecommerce business in two three they tested their first spacewalk ad campaigns and in new york tri state area and by the following quarter ramps up their budget to sell across twenty eight states they've since say three new hires and plan to start shipping nationwide this year they've expanded production which has also led to jobs being created at the film and centers in maryland florida arizona and california we're constantly working to improve the effectiveness of our advantage to help businesses like a pizza cupcake rich customers and got a great return on their investment would you enough to investments in machine learning and monetization of newer surfaces like stories and real
spk_7: in all this for planning for the long term
spk_6: mark talk about some of the key elements for strategy going forward to also gets on the strategy for the axis if you think about the journey we've been on over the past decade or so we started text have desktop apps on the right hand side of people feeds then consumer shifted to mobile and we put ads in his feet and quarter after quarter year after year as we've created great new consumer products like stories a real we found the right way for advertisers to reach can zimmer said any panic
spk_8: and we're constantly working to make our adds deliver more for businesses and be more relevant for people
spk_6: to support the growth of our as says it's over the next ten years it's going to take a similar effort we need to build on our success by developing innovative new products and discovery experiences are giving everyone more control over their personal information to build the next era of personal life experiences were focus on products innovations and for areas the first his discovery we want to keep making our ass the best places to discover products and businesses your less for example for testing a new experience the news feed where you can have to bribe content from businesses and topics like beauty fitness or clothing and we're using context to make smarter recommendations about which had to show if you're watching a travel video we to chill out for hotels and flights the secondary of commerce which marks had shot a moment ago we're building a modern calmer system across as community to of messaging shops and payments it's all about creating a personalized seamless customer journey where it's easier to discover a product by it pay for it and have it delivered to your doorstep the third area of privacy enhancing technologies we know businesses are experiencing challenges because of platform changes we want to make sure they can continue getting great results to privacy safe personalized that's long into the future there were collaborating across the industry to develop new technologies to help minimize the amount of personal information we process while still allowing us to show relevant ads and measure their effectiveness the fourth building tools that help businesses the on marketing we want to help solve all kinds of businesses whether it's customer relationship management business messaging tool are hiring your faith a job for helping people run your business across her up easily with face for businesses for making it easier to message customers across our up from a single interface and we're expanding our messenger a p i for instagram as customers increasingly reliant messaging and cell phone call
spk_9: the digital transformation of a long term trend it isn't going away by focusing on innovation a nice for areas we will continue to help businesses of all sizes make the shifts online and reach customers with privacy safe personalized advertising
spk_2: as ever i'm grateful for all the businesses you work with us and i continue to be amazed by our teams all over the world
spk_10: throughout this period we've been really lucky to have so many brilliant people working hard to keep people connected and help businesses survive and thrive on line now over to days thanks cheryl and good afternoon everyone we delivered strong results in the second quarter as our services continued to help millions of businesses which customers around the world let's begin with our community metric we estimate that approximately two point eight billion people used at least one of our services on a daily basis in june and that approximately three point five billion people used at least one on a monthly basis our global community continued to grow even as we laughed elevated user growth in the second quarter of last year related to the pandemic
spk_2: paper daily active users reach one point nine one billion up seven percent or one hundred and twenty three million compared to last year
spk_10: the i use represented approximately sixty six percent of the two point nine billion monthly active users and just and i use grew by one hundred ninety four million or seven percent compared to last year
spk_2: turning to the financials all comparisons are on a year over year basis unless otherwise noted to to total revenue was twenty nine point one billion dollars or fifty six percent or fifty percent on a constant currency basis we benefited from a currency tell when and habits foreign exchange rates remain constant with you to last year total revenue
spk_10: then nine hundred and eighty two million dollars an hour on a two year it's says to to total revenue growth decelerated to seventy two percent and seventy four percent in the first quarter to to ad revenue was twenty eight point six billion dollars or fifty six percent or fifty one percent on a constant currency basis
spk_11: the macro economic environment for online advertising remains very strong as cheryl noted the growth in the advertising revenue was largely driven by verticals that it performed well during the pandemic such as online commerce and consumer packaged goods
spk_10: in addition we have a we saw improved read trend and verticals that were particularly challenge during the pandemic that is travel entertainment and media on a user geography basis ad revenue growth accelerated in all regions as we laughed the strongest quarter of last year is the second quarter of last year which was the period hardest hit by the pandemic growth with strongest in the rest of world at eighty six percent europe asia pacific and the us and canada three sixty three percent fifty six percent and forty eight percent respectively
spk_2: europe asia pacific and rest of world all benefited from currency taleban
spk_10: in queue to the total number of ad impressions served across our services increase six percent and the average price for add increase forty seven percent impression growth was primarily driven by developing markets especially in asia pacific bell pricing read benefited from broadway strength an advertiser demand recall that in the second quarter of twenty twenty effects of the pandemic contributed to elevated impressions and depressed prices which we are now laughing other revenue was four hundred ninety seven million dollars of thirty six percent other revenue growth continues to be driven by quest to sales the the rate of growth slowed in the second quarter as we entered a seasonally lower sales period we also recorded a revenue adjustment for returns related to the quest to foundational interface recall turning now too expensive to to total expenses were sixteen point seven billion dollars up thirty one percent compared to last year in terms of the specific line items to revenue increased forty one percent driven by consumer hardware cost payments partners and core infrastructure investments already increased thirty seven present driven primarily by hiring to support our court products and consumer hardware effort marketing and sales increased fifteen percent mainly driven by hiring and marketing spend lafley dna expenses increased twenty three percent driven mostly by employee related costs and legal expenses we added over twenty seven hundred net new hires he to to primarily in technical function we ended the quarter with over sixty three thousand four hundred full time employees up twenty one percent compared to last year
spk_12: second quarter operating income with twelve point four billion dollars representing a forty three percent operating margin or tax rate with seventeen percent net income of ten point four billion dollars or three dollars and sixty one cents per share
spk_2: capital expenditures including capital he says were four point seven billion dollars driven by investments and data centers servers network infrastructure and officer so it is free cash flow with a point five billion dollars we repurchase seven point one billion dollars per class a common stock and second quarter and we ended a quarter with sixty four point one billion dollars in cash and marketable securities
spk_10: in terms of our sustainability efforts we remain focused on achieving our goal to reach net zero emissions for entire value chain and twenty thirty in june we released our second annual sustainability report which details or work towards achieving our objective turning out to the outlook similar to the second quarter we expected advertising revenue growth will be primarily driven by year over year advertising price increases during the wrapped of twenty twenty one
spk_5: in the third and fourth quarters of twenty twenty one we expect your your total revenue growth rates to decelerate significantly on a sequential basis as we lap periods of increasingly strong grip when viewing growth on a two year basis to exclude the impacts from lapping the covered recovery we expect year over to your total revenue growth rates to decelerate modestly
spk_10: in the second half compared to the second quarter rate we continue to expect increasing ad targeting had went and twenty twenty one from regulatory and platform changes notably the reason i was updates which we expect to have a more significant impact in the third quarter compared to the second quarter as noted in return earnings calls we continue to monitor developments related regarding the viability of transatlantic data transfers and their potential impact on our european operations turning now to expenses we expect twenty twenty one total expenses to be in the range of seventy to seventy three billion dollars unchanged from our prior outlook the europe year growth and expenses is driven primarily by investments and technical and product talent infrastructure and consumer hardware related costs
spk_3: our expenses are expense outlook reflects our commitment to and that the head of the a compelling long term growth opportunities we see across our product portfolio
spk_13: we expect twenty twenty one capital expenditures to be in the range of nineteen to twenty one billion dollars unchanged from a prior estimate
spk_0: our capital expenditures are driven primarily by our investments and data centers servers network infrastructure and office facilities we expect our full year twenty twenty one tax rate to be in my team in closing we're pleased with a strong performance of our business remain committed to innovating on behalf of the people and businesses or use or services around the world with that france let's open up the corporate last
spk_14: thank you he will now open the line for a question and answer session to ask a question press one followed by the for on your touched on phone please take up your handset before asking your question to ensure clarity if you are streaming today's call to meet your computer speakers our first question is from the line of brian novak with morgan stanley please go ahead sir
spk_2: thanks and i questioned a to the first one on and shopping as are all the the it's around a bit of shopping average even even sir about this for over a year now and a market that you're too much about got take a while board meeting for tonight we're we're summit meeting and
spk_3: talk to us about sort of what are one or two at the key execution areas you really need to overcome to make the shopping opportunity really be larger for the company over the next few years and then secondly on the crater economy is it a lot different platforms with with reach an algorithm sort of attacking the trader economy
spk_2: maybe to help us better understand a little bit the way you intend to really compete for creators to bring more exclusive content to your platform thanks
spk_15: your i think i can probably take both of those
spk_2: or and commerce i think the main thing to keep in mind it's just the as business the so large that it can take a long time before anything that we do it commerce is going to be particularly meaningful at at scale but i think overall the strategy is is really to work our way down the funnel from
spk_3: you're from
spk_2: discovery and and all the things that were already world class that would add to making it so that those as increasingly point two shops across are different services in order to do that each each layer of the final that we're working on week we want to be world class that on a cellphone which means that basically there's this whole long tail of functionality that
spk_3: that businesses to come to expect on the web and from other tools than we need to make sure that that's available or shops and business messaging and all the toll on whether we do that through partnerships with others commerce companies or building it up ourselves so a some you were seeing meaningful improvements every quarter and us in terms of how effective the these are there are already a a pretty meaningful number of bad merchants and and people who are evening shots
spk_2: and we expect us to compound over over the coming years by but i just think in terms of scale of the as business that were starting out
spk_3: i just think realistically we shouldn't expect that this is going to be a meaningful driver obama of our business or profitability on his in the near term it's just gonna take a while for that confounding to and to to become meaningful numbers but i think the strategy of the right is the right one it's creating a better product experience for people in when you
spk_16: on an ad or when you engage with the business
spk_2: he just can be much better to do that natively mulder and instagram or facebook or what dapper wear whatever you're using the good of a website that your doesn't have your payment information and new that personalized out
spk_3: that were on the right path here a and and we're focused on compounding just as quickly as we can
spk_2: i just for the second question on the crater economy
spk_17: i mean yeah that dirt there are there are a number of different companies that are that are focused on that i'd say there are
spk_2: that there are a couple of things here that are ah that that are interesting properties of this one is that if you're creator and you're trying to get your content out there and you're trying to make a living you want to be an all these different platform so i think a lot of what we what we're trying to do it is it's not necessarily the case that
spk_3: you know that
spk_2: people are gonna be on one platform versus another week we just want to make it so that the creators have their best content here and that we can help them make a living better than other platforms when we can get we do will have an advantage on content over the long term but but knowledge we fundamentally to win creators over from another place
spk_3: it or manipulation tool that think are a pretty big advantage that we bring to the table
spk_2: our our advertising is is world class the the ability to to be we help creators make more money from the work a dirty doing i think it's something that we should really be able to bring those that are tools to the table we also have a lot of distribution of that that and in ability to for people to find their communities of them and in you to help personal recommendation help that people
spk_11: people are in their content so i read that is dumb that's some of what we're seeing and and why a lot of creators are excited about the work that were doing
spk_0: the end over the long term i think if we're if we're able to make it so that million the of of craters are able to make a living or across our platform that that that's just gonna mean there's going to be a long term breath
spk_18: and and healthy set of content across the system i think is going to be increasingly important especially of video becomes more important on on our our platform like what we're saying both with with watch and real now and france we can go ahead and take the next question our next question is from a justin post with bank of america please go ahead
spk_10: great thanks for taking my question or maybe one for david and once or mark first first on a day i use your side of back where you were in que one last year for us in europe on how do you feel about how reopening to affecting activity and and penetration levels today what where do they go from here and then mark really appreciate all a commentary and met a universe i think some companies would build in private i appreciate that that that's around that maybe first what kind of that business model on a very high level and second and disclosures could we see on expenses are out a are vr it's like many up to twenty percent of job openings or okcular so that's like the investments are he started as wondering if you might be a big you think about giving us updates around that thank you yeah thanks just justin on the hear you fine you know we are seeing those trends being impacted by to the that's especially notice not noticeable in some of the you know them to the larger markets where we have high levels of penetration like north america and europe
spk_2: in in in a it's a in in north america given our high level of penetration we do expect them a you india you levels did to sort of bad rap and quarter to quarter given kind of how how significantly penetrated we are in that market and then you know in europe we're seeing you know combination of seasonal slowness as well as covert related stop nets when we saw restriction ease restrictions these obviously you know with delta we might see other trans it's hard to predict how that's gonna play out in this cycle but that that's and of the best read on it i can give you at this point turn it on the metaverse point it will work primarily focused on here
spk_3: it before you to the the business model the our basic playbook as a company is built products that get to scale especially social product it's important of the people he want interact with her their ill
spk_2: we're going to focus on having hundreds of millions of people use the metaverse than in the new platforms that we're building or we we really turn this into an to what what i expect to be a very important and in and big part of a business or but but overall i think that there's as we embark on the next chapter ads are going to continue being an important part of a strategy across the social media part of what we do and and and it'll probably be meaningful part of the metaverse to i and commerce that going to be increasingly important of which is why we're one of the reasons why we're focused on the ah the across our current apps and and that the current economy
spk_3: but i think digital goods and creators are gonna be huge friend in terms of people expressing themselves to their avatars digital clothing through digital goods the app that they found that they bring with them from place to place a lot of the metaverse experience of going to be around being able to teleport from one experience to another that be able to when you're basically have your your digital goods in your inventory and bring them from place to place the not can be a big investment the people that that people make and are focused for now is really on
spk_2: in helping to develop the community helping to develop a number of people who who are i didn't grow the number of people can be in the metaverse experiences and can experience in the next computing platform like virtual and augmented reality of enough i think we should expect us to focus on for the next period but over the long term i think that this can be a very big digital economy around that some
spk_3: that to work primarily going to be shooting or on in our business model isn't going to primarily be around trying to get his cell devices the large premium or anything like that because our mission is around serving as many people as possible so we want to make everything that we do with a portable as possible with many people have possible can get into it and then compounds besides
spk_2: the digital economy inside it so that that that kind of at a high level out how how and thinking about that said i'm i'm happy to talk about more as as we continue to about the investments them and they can can speak about the expensive than and disclosures them and all that but i will note that on that i i appreciate the ingenuity and cleverness
spk_3: of looking to our job description sera just to see we're investing this is a big epic focus as i called out him in my comments at the beginning
spk_10: yeah justin i mean obviously from a capital allocation perspective our overall focuses on growth and you know we've repeatedly called out that as it relates to our investments in innovation f r l is a big focus area for us and a major investment driver and our expense outlook i'm so you know we have mentioned that we're investing billions
spk_0: dollars annually and we expect to invest in this area for the foreseeable future as we make progress towards building this next computing platform there's a lot of hard work that needs to be done
spk_14: but it it takes out get we haven't provided any any more granularity on it okay france than a you can go ahead and go to the next question place
spk_3: i next question is from dog and met with the jp morgan seats for with your question
spk_10: thanks for the questions may go to for days just first on the next a slower impression growth and the prices the driver here for the year and is there anything else that we should be thinking about beyond that comes from last year and anything about expanding surfaces to create more ad inventory going forward and then secondly just curious if your view on eighty ti has changed over the past three months at all and if you could common it all just really on on some your mitigation efforts in what you're seeing their thanks
spk_3: yeah sure dog in terms of impression growth you know we had called out last quarter that we would expect for the remainder of twenty twenty one for pricing to be a bigger driver of ground so and and mentioned at that time there were there are a few factors driving at the biggest factor is you know laughing the kobe didn't gauge
spk_11: meant that we saw that was particularly pronounced in north america where we thought more engagement related to the lockdowns and and a higher impression grab last year so that is one of the big factors the other factor that we're seeing as his shift towards video good for our products and and other products
spk_3: and that's is generally a big trend in the market and that tend to have lower impressions
spk_10: per the amount of engagement or than things like news feed so kind of both those things are factors but the covered factor is the one that i would call out on and when you think about how we're expanding services to create more ad inventory you know i would say that we've got a number of impression growth opportunities you know we seem growing impression contributions from new services like a instagram explore and broadly within video marketplace and then when we look forward i think reels is a really significant future opportunity with only just really begun to make out to the elbow globally on rails the we kind of look at all of these different services we think there are a lot of good growth opportunities they're still you know small and absolute size compared to things like beat and stories of but but but big opportunities for growth in terms of your question on a t t so the you know
spk_11: the impact from the a p p changes as really generally been in line with our expectation you know we're obviously benefiting or as others are from a very strong macro environment for advertising but look this has been very challenging for advertisers to to navigate and we're working with them to help them navigate these changes and with entrance
spk_0: you solutions to help them do that to approach approaches like are aggregated event management a p i which is aggregate data for targeting and measurement obviously we're doing a lot of work on you know and machine learning and ai to help rank and and and and make them more valuable you know but overall we do think there are opera
spk_19: you need is to continue to improve you know our capabilities you know through investments in areas like machine learning and ai to to to make as more effective and if we can you know get advertisers to get the same number conversions from fewer at that's great that that works for them and it at create more value for the ads for us okay france we can go to the next question our next question is fun market mahaney with evercore i say please go ahead
spk_20: okay to questions please
spk_10: back on metaphors investments out of the table used take a swing at that question about how much of the how much expense associated with building out the met met averse that investors should expect know we came up their own crude numbers of maybe five billion a year we anywhere ballpark close on that and it's given the rise in them in pricing just address the issue and you done it in the past the extent to which are that had a material impact on our alive for for marketers and notes auction based system but snows prices rise is there is should the journey reason to be concerned about whether there will be some workers that would be priced out because that great less optimal outcomes for
spk_3: for your platform thanks a lot
spk_10: yeah sure mark and enacted certain hit us with some with justin's earlier question your we haven't given a specific break out on what we're investing in or out obviously a significant investment with you know categorized that has billions into your numbers billions so it's consistent with our saying billions but beyond that we don't have any more special
spk_21: the i'd get but it is a enough certainly a significant in investment
spk_6: and you know i would say that is inclusive obviously of all of the efforts were making across our our not just that the metaverse and then on pricing and our ally you know cheryl you might be able to get some color on that as well your muted cheryl i got a second sorry i'm i'm typing in our ally you know the beauty of an option is that people can see the prices they're paying their able to measure the result and then date appropriately had people get more specific more personalized more targeted in what they're doing even if prices are rising are rising they can find the
spk_22: die within the system that work for them and a good news is that good pressure in the system because it makes the as more relevant for the people who are seeing him
spk_11: once you are once you are really you know incentivized within an option to find the same that is returning for you that's actually almost always the same that is the most relevant for people who are seeing the
spk_0: and i think that's been a good system and good pressure within the system going forward or certainly seeing are large brain advertisers continue to spend and get better at using personalisation and are ad formats and we're seeing small advertisers be able to compete very effectively doesn't mean that rising prices on an issue some time but i think
spk_23: overall this is where the auction system third aswell and most importantly search consumers well okay thank you great friends we can go to the next question our next question is from my use of squali with truest please go ahead
spk_16: agreed think you are two questions please first with more for mark may be going back to the metaverse vision how much of the building blocks that you need to basically build is the future is within your control vs maybe pieces the other years need to build up think particularly around the hardware side
spk_2: just listening to him like this is more of a communal thing that many many many people many parties in may pamela gardens would need to gonna open up to embrace this just wondering how are you gonna look at that then maybe
spk_24: they were may be here all was wouldn't want to go back to the impact of i was fourteen that five on target in general that maybe pr in particular we heard from several marketers throughout the quarter that they had pulled back not just on facebook that really across the board on the some ad formats like up and salt as
spk_2: because of a details on on she can maybe you speak to the are vs brand thank you i can start off with the metaverse question
spk_25: i do think of this is going to be a macro where you go over all that a lot of companies are going to be able to ride and and benefit from though you know whether that companies like and videos that are building a lot of the graphics chips that are can be really important or i'm a lot of the content that i think it's going to be increasingly graphic
spk_2: clinton
spk_3: and i added that certainly in a building those kind of of of graphics chips is not a thing that were were intending to get into were certain accounting on on on companies like that in the industry to to to kind of continue improving compounding overall from the hardware side i would say that we have a pretty big program on on building virtual and augmented reality devices and
spk_2: and
spk_26: ensure a lot of people are are still going to be using phones and and i'm in computers for a long time but but i think when it gets to what are the devices that are going to deliver the cheapest sense of presence and that are going to be increasingly important over the next decade i'm more certainly investing in that because we want to make sure that those develop
spk_2: i'm in a way that in line with i'm with division of of the platform helping people to
spk_10: interact with each other and and and socialize them
spk_3: that means prioritizing certain the feature development or are certain sensors in the devices that the we want to make sure that we can help push that in a direction that will that will help me be a to become
spk_10: a
spk_3: a very social platform so so overall i didn't with the can be a big faith point i was making is that i've got they're going to be a lot of winners and and there's in this is going to be not that one company built alone but i think it is going to be in a or ecosystem that needs to develop the were certainly making a lot of the key investments that we need to make in the foundational technology
spk_6: to be able to deliver the part that we want to what am i use of one on i start off on it and manage wants that any colors you can jump in and ad that so in terms of you know facebook ads performing well in both you know direct response and brandis quarter we we continue to see solid growth across both
spk_10: direct response and brand in director stop response continues to be the both of our business in the primary driver of growth
spk_0: but you know we did see a nice rebound in a consistent with others in the market a brand them to fall back on platform and brandeis up the obviously took a big hit on a year ago basis
spk_27: really thought a bigger pull back and brand and for brand came back you know more strongly than vr but the are you know the are still doing quite well we're seeing a lot of the categories that led during the pandemic continue to do well in those are all highly you know the are centric a cat verticals like like commerce so i'm continuing to see good performance there the only thing i'll add is that increasingly the brand the are distinction is less and less you know traditional large brand advertisers that have done brand advertising for a very long time are increasingly learning to do direct response as and youth are different format and you are different measurements all hell even a categories that people are used to think of thinking about i think it's more the by any advertiser as our largest brand advertisers i think many of them are becoming increasingly professions and effective in what would traditionally be considered the or advertising
spk_28: france you can go ahead and go to the next question please
spk_11: our next question is from rasa center with barclays please go ahead
spk_10: hey i just one question for a marker dave guess follow up on the creator economy topic so you tube page fifty cents on every dollar to create creator about fifteen billion or so this year so i guess they would view on the financial model and how that might change and you guys we named in this area i know that influencers are getting paid maybe not directly my face for today but by other folks to things on facebook i'm sorry as in a new world are we looking at lower margins and other thing that might offset they're like higher engagement i'm and then issue in creator content going to beyond just the new services like wheels or is it likely to proliferate everywhere including like the news feed on
spk_11: instagram thanks lot
spk_10: yeah
spk_3: last i can i can take that young i think it's it's a question of definition as well i mean we already like you to pay a lot out to
spk_29: you know the creative industry more broadly as opposed to a specific individual creators so
spk_30: you know princes is we paid to you on the music licensing front you know we do a fair amount of that there's a significant payments we make their above and beyond what we're talking about with the billion dollar commitment to creators that mark outlined
spk_6: you know this is obviously something that is i you know part of the cost structure of but it's something that we've long had a in our outlook so i don't think it's a you know meaningful change in the business model or outlook but it is something that you know we're committed to helping people continue to build you know vibrant by vibrant day you know communities and businesses on our platform just like we have with advertising
spk_31: oh france you can go had to go to next question place like or next question is from march will like with alliancebernstein since the head
spk_3: yeah things are taken my questions that a couple for cheryl or day at the first on unreal that you know that lot of flak grand gonna the the upgrade cycle of video and there any color you can share alley engagement traction or effectiveness of of that video ads on that type of the platform and secondly you know what one point two million store years now and shop specifically about selling on paper you're a are there any learnings are notable differences in the effectiveness of the the at of their advertising your conversion rates thank you
spk_10: i can start by talking about we all that you know or process is seen as i talked about we roll out consumer products and then we find the right ad formats it at businesses can take that those opportunities as well
spk_3: and i think you know that's what we're seeing we now have real had available of advertisers and almost on markets where we his eyes it's a pretty similar formats a stories it's thought screen and in between males city as up to thirty seconds
spk_10: we think it's a pretty natural fit in real it's a really great i discovery surface and we're seeing engagement and effectiveness parallel hanover other products them were really really pleased with that it's still early but we think that has a lot of potential
spk_0: to me to take the second question
spk_32: either either way shall i didn't had a review yes yes so the mark on on the second question you know we're obviously very focused on you know making sure that our ads are effective and we've got good conversion rates for our advertising partners a part of what we're doing their mark talked about this in the queue one call is you know making sure that the ads units are
spk_10: optimized for whichever experiences is converting the bat so if you've got a store
spk_3: a sharp on on facebook or instagram at that converting better as your own web store converting better and and then that that allows us to also just get better at making our shops and much more effective and so you know we want to do what's best for the advertiser and and also you know continue to to make are you know on and or our own shop
spk_10: more effective so you know note no specific numbers to share their but we're continuing to work to make our shop convert better
spk_11: and france we can go hadn't go to next question place
spk_0: and next question is from brent cell with a jeffries please go ahead
spk_33: thanks they just that the mamas deceleration the to your to your stack and the lot of investor questions in a deep demi more two or three points out the salaries that more five to seven it anymore granularity you can add to what that months the sell out looks like would be extremely helpful thank you
spk_10: oh thanks brent we didn't we didn't provide specific guidance on it you know we obviously saw deceleration from from from to want to queue to
spk_34: i'm from seventy four to seventy two percent and you know expect modesty celebration
spk_10: you know in the second half of the air but we haven't put a specific number on that
spk_3: and france you can go next question and next question is from john blackledge with cowan please go ahead it's a great thanks or two questions on the iowa's changes or any color on our the option or rates for facebook and instagram are they die in lines are better or worse than your expectations at this point and then on attacks at the midpoint of the guide place thirty nine percent or growth and second half hours twenty percent first
spk_10: after study caller i d drivers of the exhilarating up extra find back after the thank yeah yeah thanks john on the on the i have iowa changes
spk_0: really
spk_35: i very much in line with expectations on things like often rates so i would say overall the impact has been you know in line with her expectations
spk_19: so did not not a huge surprise there either were you know where did not fully rolled out with those changes but
spk_35: two three will have you know had the impact more or less does being fully rolled out and then in terms of the attacks guide
spk_19: yeah we're you do we do expect accelerating spence growth in the back half the twenty twenty one and you know we're we're going to see that in areas like consumer marketing a system of the non headcount related spend weeks back to accelerate in the back half of the air
spk_35: the to that that's the that's the expectation on that front
spk_36: and france we can go next best in place
spk_2: our next question is from and sebastian with bayard it's glad
spk_3: great thanks so good afternoon everyone maybe i couple higher level questions are really coming out of a fate refresh
spk_2: first off key talk about the integration of messaging across the valley about than how the opening of messaging a p eyes is adding functionality to obstinate this is contributing incrementally to to more business activity through messaging and then with advanced ai machine learning now seemingly table stakes are most platform companies mark can just kind of curious if this is still a significant come as advantage for you in your view and basically heard it of a and i wonder how important a product like pie torches in terms of moving faster and
spk_3: new product development things like that thank you dear i can take both of those so in terms of messaging in we're working on and cross that communication between them business messaging a guys and a lot of this is very much this is a business that the zinc i think it's going to be an important part of commerce and and helping people interact with businesses in a way that is it is natural to them the cross of communication in terms of helping people reach people wherever they are it kind of fits into this the division that we have for the future of people being able to easily
spk_2: teleport between experiences that i think it's going to be increasingly important
spk_3: as as we move towards the metaverse people going to need messaging services there that's gonna continue to be a core way that people communicate people can want to reach that the people they care about no matter what service their on be upset move between the it's when i talk about interoperability
spk_2: in in moving more their the future what we're trying to get our poor
spk_16: experience today aligned with that as well i'm getting a tan messaging is damn near the connects the to the business today is that
spk_3: click to messaging add
spk_2: are are are one of the parts of the the the advertisements that is that is growing quickly enduring and doing quite well and part of that is because even if we're not charging a lot directly for for the messaging a p eyes on for businesses that that he is if the interactions between people and businesses and up helping business with convert better and and and drive more self and the businesses naturally don't wanna
spk_3: in a paid other ads point toward that rather than other surfaces
spk_2: that we may not controller that may be a worst experience of the that's that's on the messaging side on the ice died
spk_3: i'm with the really good question it's probably something that doesn't come up
spk_2: as much on these earnings call is it probably should for how important of a driver of the progress in ai is for over a result in one of the things that i've observed in in just running the business over the last couple of years that it is a lot of focus on on on kind of different headwinds that we make bates whether it's from other platforms or regulation or different things but i'm one of the area that i think is routinely outperformed our expectations in progress on a i am in your we don't have a single product which is bike in ai product
spk_11: is that sort of the embodiment of all the i work on does not mean that we've done yet but we basically
spk_0: we have a very large investment in an ai and we we build up with platform that than all of our products you to we make foundational improvement the makes ranking better a new speed and and real that an ads and it makes our them detection or integrity on systems more effective at identifying stuff everything just get better and this is really been one of the big
spk_37: tell windsor way of is that that we've been riding and he just from what i can see technologically on the arise than it really doesn't seem like this is going to be slowing down anytime soon and i don't think of as facebook specific thing i think that this is probably across the whole industry or maybe even across the whole economy more broadly but i do think that the progress that being made at the bottom fundamental level with ai is on his driving a lot of progress and is one of the important matter of fact that we're staying for pie toward specifically you know i mean it certainly helps that the framework that we use you to develop our a i work on is is is one that embrace by the community so in a lot of times when we go to spin up a new project
spk_6: you know it is a girl already have been some team that that contributed an open source library to it and and that makes it easy though i think that there certainly are dividend that we get from having developed our helped at all pie towards to become an increasing standard especially among researchers and it's certainly an area that we're going to focus on on investing more and i can get the core ai platform is just an important part of the progress that were thing overall and france i think we have time for one last question very good dinner last question will be front line of michael natanson with moffat neat and some please go ahead great thanks one for charlotte one for dave your cheryl on the path of ask this question but when our same self post pandemic they've been a real weakness in tv impressions and as tv dollars ago it would like to avon and you to to keep talking about your vision for video and how they sig with our country they grab some a few dollars i would you expand the definition of creators include feeling video content or sports and for day following up on drugs question he talked a bit annoyed earlier that the learning from your agree to that know your measurement what has been a impact on things like signal loss or ally are spending those who use it
spk_3: in the early days the thanks that video so we're seeing very strong growth and video monitors station across watch feed real and we think we're continually getting better at monetizing video but they still monetizing at lower rates first feed stories but we have you know we have a lot here we have
spk_10: two billion people watching industry and are eligible videos for months
spk_3: mobile first video is increasing meaning even brand advertisers are getting better at doing mobile first video and certainly we think advertisers are looking for the best place to reach audiences and we compare very favorably across the board or share really i think cool recent example walmart you know there
spk_10: a large large advertiser engaged redrawn and who's the pioneer woman cooking show has to host their first alive shopping event and the event was to launch for walmart exclusive line of home and fashion products and they use the mix of our personalized to drive awareness to alive shopping event and then reengage viewers after the purchase and they had really great results across the board they ran part of our lives as video ads and resulted in thousands of engagement a lot of of approach a lot of engagement with people and sales and how i think that's a good example of our products like live combined with the use of video on our platform combined with people taking an opportunity for video ad and putting it all together and way the i think will compete very favorably with older formats like tv
spk_0: and my take the second question don't have specific data to disturb i mean it just contextually the work that were doing with the aggregated events management a p i a parent the broader work there were doing to rebuild meaningful elements of our ad tech so that our system can continue to perform while having access to
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