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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 a third quarter two thousand and twenty one earnings conference call online have been placed on mute to prevent any background noise after the speakers remarks the will be a question and answer session if you would like to ask questions during that time please press the one and then the number four on your telephone keypad just call will be recorded thank you very much is deborah crawford's facebook vice president of investor relations you may begin
spk_1: thank you good afternoon and welcome to facebook third quarter earnings conference call joining me today to discuss our results or mark zuckerberg ceo sheryl sandberg c oh and de buenos here phone before we get started i would like to take this opportunity to remind you that are much too they will include for looking statements actual results may different naturally from those contemplated by these was looking statements factors that could cause these results to differ materially are set forth in today's press release and in our quarterly report on form ten que filed with the us you see any for looking statements that we make on the call are based on assumptions as of today and we undertake no obligation to update the statement as a result of new information or future events from the call we may present both gap and non gaap financial measures a reconciliation of to nine gap measure is included in today's earnings personally a press release and an accompanying and best your presentation are available on our website and investor dot f b dot com and now that to turn the call of to mark
spk_2: their own the by surgery today we made good progress with quarter across the number product parties and or community continues to grow their now i was three point six billion people reacted to use one or more services and i'm excited about a road map to keep building where you experience with them as expected we did experience revenue had when the quarter including from apple's changes better knowing negatively affecting our business but millions of small businesses and what is always a difficult time for them make sure that it will talk about this more later or but the bottom line is we expect we'll be able to navigate you should win over time with investments that were overtaken today before detour product update i wanna discuss the recent debate around ever
spk_3: i believe large organizations should be true
spk_2: much rather live in a society where they are the one where the kids were where the camping
spk_3: good faced criticism hopes of get better but minute is that what we're seeing is a coordinated effort to selectively use leaked documents to pay a false picture of our company the reality is that we have an open culture where we encourage discussion and research but i worked for we can make progress
spk_4: on many complex issues that are not specific to just stuff we have industry meeting perverts to study the effects of our products and provide for currencies or progress because we care about getting that's right
spk_3: when we make decisions we need to balance computing social life
spk_2: like free expression with reducing harmful content or able to strong encrypted privacy with or to law enforcement or enabling research and interoperability with locking down data as much as possible
spk_3: it makes a good sound bite to say that we don't solve these impossible trade off because we're just focused on making money but the reality is these questions are not primarily about er visits but about balancing different difficult social value edit i repeatedly called for regulation to provide clarity because i don't think companies should be making so many of these decisions that our stuff
spk_2: i'm proud of our record navigating the complex trade off valve in offering services a global scale and i'm proud of the research and transparency you bring to our our progress or industry meeting we have made massive investments and safety and security but more than forty thousand people and we are on track spend more than five billion dollars on and security and twenty twenty one i believe it's more than any other tech company even adjusted for scale we set the standard for transparency with our quarterly enforcement reports and tools like we're glad darker established a new model for independence academic researchers officially access of data we played u the oversight board of a model of self regulation and as a result we believe our system are the most effective at reducing harmful content across the industry and i think that any honest account of how we handle
spk_5: this you should include
spk_3: i also think that any honest account to be clear these issues are primarily about social media that means that no matter what with does we're never going to solve them on of for example polarization started rising in the us before it was born at the same time independent research shows that many countries around the
spk_2: world have flat or calling polarization despite similar social media is there is in the us
spk_3: we see just how to repeat with other issues as well the reality is a social media is not the main driver of these issues than a probably can fix them by yourself either we should watch every other company or industry to make the investment and achieved a result of yeah
spk_2: i worry about the incentives the we're treating for other companies to be of introspective as we have been
spk_3: i am committed to continuing this work because i believe it will be better for our community and our business or belonged
spk_2: m to change the underlying media dynamic but there was a different constituencies that weaker is always been more important and then i try to keep us have enough people billions of people use our services because we build the best tool to stay connected to people you care about define communities that matter to you and to grow your small business
spk_4: and the reason we've been able to succeed form of to decade is because we keep a balding and building facebook started in the dorm room a grew into a global once we invented the news and a new kind of as possible
spk_3: we became a mobile first experience and then we do a whole family that that serve billions of people
spk_2: and there's so much more to build even with all the tools that we have today we still can feel like we're right there together with the people we care about when were physically apart we can teleport of hologram to instantly the office without if you or the conservative friends or your parents living room to catch up the
spk_4: creative economy and commerce tool are so nice in there should be opportunity for millions of more people to make a living doing the work that they love
spk_2: our three product prayers were made our focus on creators commerce and building the next computing platform a big part of our work with creators is our focus on real real is already the primary driver of engagement broke right
spk_3: it's incredibly entertaining and and i think that there is a huge amount of potential as we expect us to continue growing and i am optimistic that real will be as important for products as stories
spk_2: we also expect to make significant changes instagram and facebook in the next year to further lean into video and make real a more central part of the excerpt
spk_3: one aspect of this is given all wrapped the goal of being the best services for young adults which we defined as ages eighteen to twenty know
spk_2: historically young adults have been a strong base and that's important because they are the future but over the last decade as the audiences uses or apps has expanded so much and we focused on during everyone our services gotten dial to be the best for the most people who use them rather than specifically for younger and during this period competition is also gotten a lot more and especially with apple's i message growing and
spk_3: popularity and more recently the rise of tick tock which is what the most effective competitors the be have ever the we're retooling our team is can be serving young adult their north rather than optimizing said a larger number older people
spk_2: like everything before not for snore norcross and will likely mean that the rest of our community a will grow more slowly than they otherwise wouldn't
spk_3: but it should also mean that are services become stronger for general this ship will take years not months boy execute and i think it's the right approach to building our community and company blocked
spk_2: our next product priority is commerce that helping people discover new products that are interested and and which customers interact with going to unlock a lot of opportunity
spk_3: as apple's changes made ecommerce and customer acquisition less effective on the web solutions that allowed the business of the set up shop right inside our apps will become increasingly attractive and important
spk_2: we built solutions like advection dynamically week you or business as website or their shop on our platform depending on what will perform better for them and that will help more businesses navigate this challenging dynamic environment building a full fledged commerce platform is a multi urgent marketplace is already scale and lots of people rely on it as without now fighting issues that make it harder to get your product shops are getting more developed and we have an exciting program planned for this holiday season or working closely with a number of the businesses that have invested the most and shots to identify what works to find new customers and brother businesses even our planet for them scale that a solution is more broadly and twenty twenty two
spk_3: the only real than commerce i also share some thoughts on are longer term efforts to build the next computing platform and help bring the metaverse for lunch
spk_2: this is a major area of investment for us an important part of our strategy going and i do this work is critical to our mission because delivering a sense of presence but you're right there with another person that the holy grail of online social experience over the next decade give new platforms are to started to unlock the kinds of experiences the i wanted to build before even started along with those social experiences i expect a massive increase in the creator economy and amount of digital good and comics if you're in the metaverse everyday then you'll need digital close that visual tool as different experiences
spk_3: our goal is to help the members reach a billion people and hundreds of billions of dollars of digital congress was dead and strategically helping to shape the next platform should also reduce our dependence on deliver our services compelling
spk_2: building the foundational platform for the metaverse will be a long road we just released the hundred twenty eight gigabyte quest to replace them fifty four gigabyte model for to ninety nine with as the warlock the article we released our earth mark losses and their offer strong start as well
spk_6: but bringing this vision for life
spk_4: isn't just about building one glass of
spk_3: there's a whole ecosystem we're building multiple generations our pr your product same time evolve new operating system and an older model digital commerce platform content studio the end of course social platform what what's the significance of this for our business today we're announcing it change to our financial records
spk_2: starting next quarter we will begin to school financial metrics for facebook reality lab separately from our family that a little provided investors with additional visibility into the investment were making it on meant and virtual reality twenty twenty one we expect these investments to reduce our overall operating profit by approximately ten billion dollars and i expect this investment to grow even further for each of the next several years
spk_3: you share more about of later but i encourage you all to tune into connect on thursday to hear more about our vision and or work here and mortar
spk_2: i recognize the magnitude of his back on the future and i am grateful for the support of our investors be creative community in the thousands of talented people working on a separate inside our company to bring this inspiring future all and with that your show
spk_0: thanks smart and hi everyone
spk_7: this quarter a total revenue was twenty nine billion up thirty five percent year over year we a solid revenues as across all region and we continue to car is your me we felt the impact of some big external factors in que three i one explain some of the revenue softness the seen and what we're doing can mitigate the headwind and help businesses over the crucial holiday period and beyond the start let's take a step back over the past decade we've seen more and more businesses just timeline when a pandemic head it's digital transformation accelerated we've invested in talking products over many years to help businesses make the chest this it's acceleration of very congress for us throughout the last few quarters we've been open about the fact that there were has been coming and we've experienced that in three the biggest is the impact of apple's i was fourteen changes which has created headwinds for others in the industry as well major challenges for small businesses and advantaged apple's i'm advertising business we started to see that i'm taking you to but adoption on the consumer side ramps up by late june seven hit critical mass in history as a result we've encountered to challenges one is that the accuracy of our ads targeting decreased which increase the cost of driving our hands for advertisers and the other is that measuring is that and became more difficult
spk_8: i'm targeting
spk_7: we focus on improving campion performance even with the increased limitations facing our industry for building commerce tools to help businesses reach more new customers and get more incremental cells
spk_1: and over the longer term were developing privacy enhancing technologies in collaboration with others across the industry to help minimize the amount of personal information we proper while still allowing us to show relevant and
spk_7: progress nice area will take time and will be a focus for us throughout twenty twenty two and beyond i'm measurements as he wrote in a recent blog post we believe we are under reporting iowa sled conversion this means real world inversions like sales and app south are hire them as being reported from any advertiser especially fire hazard for making good progress fixing we think will be able to attract more than half of the under reporting by the end of this year and will continue to work on this into twenty twenty two another external factor is slowing ecommerce friends
spk_1: the strong economic growth and recent quarters of driven in part by the acceleration of the digital transformation that is now tape around
spk_7: i think most people see this in an online there was a period of time when many people who are able to stay home and order things on our your things online much more but now in many places things that opened up and people are increasingly making purchases in person that doesn't mean he commerce to stop growing does this is is still making the shift on line but he commerce is no longer growing up the pace it was at the height of the pandemic these factors have been compounded for many advertisers by major global supply chain issues and labor shortages which have left many consumer businesses have less inventory it's has reduced their appetite to generate command from consumers which has impacted advertising sense businesses in every region and across a range of vertical to been affected at the same time we've also seen some impact from coded churches around the world to places like south east asia overall if it wasn't for apple's ios fourteen changes we would have seen positive quarter over quarter revenue growth i'm are we and our advertisers will continue to feel the effect of these changes and future quarters we will continue working hard to mitigate them despite the had when we remain confident about our future
spk_1: we believe facebook and instagram or the best place for people to connect with their friends and family build community and starting their businesses and we leave we believe they're still the best platform for advertisers to reach people were they are you get measurable outcome
spk_7: a focus remains where it has always been building products that how people can act and businesses crap mark talks about video a moment ago not only is this a growing area for a silver out the were also continuing to get better monetizing more than sixty percent of video revenue now comes from noble third video mean videos that are shot vertically or are under fifteen seconds
spk_1: over two billion people per month now watch videos that are eligible for entry man which are as shown before during or after videos and work fancy access to real pads on instagram to more advertisers with automatic season and you create a format
spk_7: another area we're seeing that progress as a me generation our products help businesses generate quality me that scale and meet customers were they are and their preferred channel of communication whether it's messaging forms or call in april we started rolling out a new conversion leads optimization goal for higher quality meat
spk_9: and advertisers
spk_7: can also integrator crm with says but there are conversions a p i for show that on average you see a twenty percent increase in lead to sell conversion rate when they use both the optimization ball and the integration you for the most important quarter of a year for many businesses large and small as always or focused on making the holiday season a success for them we're working to six the measurement issues they're experiencing and deliver the tools and products they need to grow
spk_1: and we're rolling out a range of holiday shopping experiences to help people find great deal the port small businesses and kit carson and shop with local on black owned businesses
spk_7: for bringing exclusive gift shop that will be available when people check out on facebook or instagram like twenty percent off your first purchase and for shop shipping starting next week will has daily life shopping experience as the company's large and small brands like walmart macy's benefit cosmetics and box now to educate shoppers and share exclusive deal and we're bringing back on of my favorite campaigns ever by black friday to showcase black on small businesses during the holidays it includes things like buyback collections or facebook and instagram shop tab and a weekly by that friday's show with live shopping segment from up and coming back and small businesses i want to close by saying how great i am to our partners around the world
spk_1: and you are incredible seem to are working so hard to help people and businesses throughout this period
spk_10: now here's dave
spk_11: thanks cheryl and good afternoon everyone we delivered solid results in the third quarter in the face of a challenging mobile platform landscape and an evolving macro economic environment let's begin with our community metrics or global community continued to grow even if we laugh elevated user growth in the third quarter of last year related to the pandemic we estimate the we two point eight billion people used at least one of our services on a daily business basis in september and that approximately three point six billion people used at least one on a monthly basis facebook daily active users reached one point nine three billion up six percent or one hundred and ten million compared to last year the i use represented approximately sixty six percent the two point nine one billion monthly active users in september and they use grew by hundred and seventy million or six percent compared to last year earning to the financials all comparisons are on a year every year basis unless otherwise noted to three total revenue was twenty nine billion dollars of thirty five percent were thirty four percent on a constant currency basis we benefited from a currency tell when and had current borne current foreign exchange rates remain constant with you three of last year total revenue would have been two hundred and fifty nine million dollars lower two three ad revenue was twenty eight point three billion dollars up thirty three percent or thirty two percent on a constant currency basis on a user geography basis year over your ad revenue growth was strongest and rest of world a fifty percent europe north america and asia pacific read thirty five percent thirty one percent and twenty eight percent respectively europe asia pacific and rest of world benefited from currency tailwind though to a lesser degree than in the prior quarter in que three the total number of ad impressions served across our services increase nine percent the average price for at increased twenty two percent impression growth was driven primarily by developing markets especially in asia pacific i think growth benefited from advertiser demand and and covered related pricing witness during the third quarter of last year though is cheryl netted growth with hindered by three primary headwinds first advertising spend with negatively impacted by performance and measurement headwinds related to apple's a tp changes second we are seeing some macro when it's growth and online commerce is moderated from the elevated levels experience earlier in the pandemic and businesses pay supply chain disruption third covered resurgence is in southeast asia have led to additional locked down for the curtailment of economic activity other revenue with seven hundred and thirty four million dollars of hundred ninety five percent driven by strong quest to sales starting now to expenses to three total expenses were eighteen point six billion dollars up thirty eight percent compared to last year in terms of the specific line items cost of revenue increased thirty eight percent driven mostly by consumer hardware cost core infrastructure investments and payments to partners in the increased thirty three percent driven primarily by hiring to support our core products and consumer hardware efforts marketing and sales increased thirty two percent thirty two percent mainly driven by marketing spend in hiring lafley dna expenses increase sixty five percent driven primarily by higher legal related costs and employee related costs we added over forty seven hundred net new hires and que three primarily in technical functions we ended the quarter with over sixty eight thousand one hundred full time employees up twenty percent of up twenty percent compared to last year third quarter operating income with ten point four billion dollars representing a thirty six percent operating margin our tax rate with thirteen percent net income of nine point two billion dollars or three dollars and twenty two cents per share capital expenditures including finance fleeces with four point five billion dollars driven by investments and data centers servers network infrastructure and office facilities free cash flow is nine point five billion dollars and we ended the quarter with fifty eight point one billion dollars in cash and marketable securities we repurchased fourteen point four billion dollars of our class a common stock in the third quarter and had a billion remaining on our prior authorization as of september thirtieth today we announced the fifty billion dollar increase in our stock repurchase authorization turning out the outlook starting with our results for the fourth quarter of twenty twenty one we plan to break out facebook reality labs or fr l as a separate reporting segment as we've discussed we are dedicating significant resources towards our augmented and virtual reality products and services which are an important part of our work to develop the next generation of online social experiences the new segment disclosures will provide additional information on the performance of f r l and the investments we're making under this reporting structure will provide revenue an operating profit produced like the first segment family of apps will include facebook instagram messenger what's app and other service the second segment facebook reality labs will include augmented and virtual reality related hardware software and concept as marked added we expect our investment in frf to reduce our overall operating profit and twenty twenty one by approximately ten billion dollars we are committed to bringing this long term vision to life and we expect to increase our investment for the next several years
spk_6: ahead of the fourth quarter earnings call we will share additional details about the recording reporting format of our segmented financials
spk_11: turning out to the revenue outlook we expect fourth quarter twenty twenty one total revenue to be in the range of thirty one point five billion to thirty four billion dollars or outlook reflects the significant uncertainty we face in the fourth quarter in light of continued had wins from apple's i was fourteen changes and macroeconomic and covered related factors in addition we expect non ads revenue to be down year over year in the fourth quarter as we lap the strong launch of best to during last year's holiday shopping season as previously noted we also continue to monitor developments regarding the viability of transatlantic data transfers and their potential impact on our european operations turning out the expense outlook we expect twenty twenty one total expenses to be in the range of seventy to seventy one billion dollars updated from our prior outlook of seventy to seventy three billion dollars we anticipate or four year twenty twenty two total expenses will be in the range of ninety one ninety seven billion dollars driven by in that sense and technical and product talent and infrastructure related costs we expect twenty twenty one capital expenditures be approximately nineteen billion dollars updated from our prior us mint of making to twenty one billion dollars for twenty twenty two weeks the capital expenditures to be in the range of twenty nine to thirty four billion dollars driven by our investments in data centers servers network infrastructure and office facilities a large factor driving the increase in cap expand is an investment in our ai and machine learning capabilities which we expect to benefit our efforts and ranking and recommendations for experiences across our products including and feet and video as well as improving as performance and relevance we expect are you for twenty twenty one tax rate to be in the high teams absent any changes to us tax law we would expect their full year tax rate and twenty twenty two to be similar to the full year twenty twenty one rate please note that are out looking for twenty twenty two expenses capital expenditures and tax rate a preliminary estimates as we have not yet finalized her twenty twenty two budget in closing this was another solid quarter for business despite facing some had pets and we believe the investments were making in our current services as well as new products and experiences will enable us to remain the best place for people to connect and for businesses to advertise but now and in the years ahead with that france let's open up the call for questions
spk_0: thank you we will now have an alliance for question and answer session to ask a question press one followed by the number four on your touched on phones please pick up your handset before asking a question to answer clarity if you are streaming today's call nature computer speakers and your first question comes from the life of brian know with morgan stanley pleas for help
spk_12: thanks to my question that i'd to the first one an unreal it it sounds you get the pretty important part of long term adoption cures hear about anything or share about current user adoption for an engagement or more call on the demographics of people who are using real now then the second on just a little more question that apple on the eighty ti changes appreciate the collar on accuracy and measurement improvements any more specific you can share about where he made the most progress from investment today and source some of the areas we're seeing are challenges you need to continue and best to really improve to navigate to this more challenging environment thanks
spk_11: yes sir brian on on real that's been a bright spot for for instagram and ah you're currently we're seeing good growth globally young strengthen a number of different markets but we've been we've been making you know a lot of progress on rails and had been and been happy happy with it you know on instagram a in terms of launch on facebook that saw that's earlier stage on the monetization front were just starting to roll out ads in instagram so i it's earlier on that front and we really haven't gotten to a monetization point where with real on a but child as you want it take the up take the i was working question tag
spk_7: i can take that i mean when you start of the top of that you really have to think about what personalized that are and we think they're better for people and businesses and there especially important a small businesses they also can be delivered can be done in a very privacy a plane and there are two big challenges coming from iowa check changing the one is targeting and one is measurement i'm taking a second on first on measurement we think we can interact more than half of that under reporting by the end of the year and make more progress in the years ahead we estimate were under reporting i was web conversions we believe that real world conversions like calvin app installed or higher and so we have to do the work to help clients measure the it properly in order for them to really understand the options are getting and improving performance and again we think we can get you know a good chunk of that i'm and more and the next year targeting it a longer term challenge
spk_1: our direct response products are bill can use your level conversion and at as a result of the i was changes and don't see the same level of conversion data coming through the we have to rebuild are targeting and optimization system to work with less data to this is a multiyear efforts were developing privacy enhancing technology to minimize the amount of personal information
spk_7: we learn and using more aggregator anonymous data while still allowing us to show those relevant personalized ads and measure as the fact that in order for this to really work and benefit our businesses can require some cross industry collaboration and more commerce talk and those are going to be longer term offer
spk_11: operator with the to the next question
spk_0: our next question is from eric shared in with goldman sachs please go ahead
spk_13: thanks so much and maybe to if i can maybe show thought when appear in terms of thinking in terms of quarters or years on both the targeting of a measure of peace could you want to just go one level lower terms of what you're building in terms of what in your control to put on to the advertising ecosystem versus what might just take time for advertisers to a doll and get comfortable with and and better understand the data on the drive the a business outcomes are now they allocate advertising budget that would be up for you and a day maybe if i could follow up on our picks and topics just how should we be thinking about the elements all the horse thief both vs some of the things you're trying to build up against marks vision for the long term with reality labs and how that might be a driver prominence vs transient nature of our picks the cutbacks in the years ahead thanks so much
spk_7: the some of the technology we can build ourselves rebels a i when they continued investment in ai that help us maintain or improvement from performance data were building some of around commerce twelve and those are tools we can build that we need other people to adopt and then some of the target
spk_1: being opportunities we see have set take you know tools weekend bells or tools we can build in industry collaboration were really working as part of several industry collaborative groups on what those tools will look like and how they had adopted the does obviously take more partnership and are laughing are direct control
spk_11: hey eric on the outlook on expenses in twenty twenty two you know it's obviously early the we wanted to given and you know an initial outlook of are expected expense range it's we typically do that and you free you know mark outlined mean a lot of priorities that were are investing against across the business and that includes you know a lot of areas in the the core sort of family of apps but also in up rl you've got a lot of priorities in your advertising ai commerce privacy so when you can have all these things together we've got you know pretty pretty robust spending plan next year on the primary driver is gonna be accelerating headcount growth and twenty twenty two so that's gonna be something you'll see headcount coming in above above twenty percent obviously that we have this quarter and we also have expect to have higher expenses from know office operations and travel once larger parts of the workforce or returning to the office and twenty twenty two or not providing a specific a breakdown down this point for for segment expense
spk_14: our next question and she got an a of
spk_0: i next question from dog i met with the jp morgan please for him
spk_15: great thank you for mark and and one per day marcus given the significant significant investments in both bnl expenses and cutbacks include your title of the heavy focus on met a burst over the long term it's just hoping you could help us recap kind of the one one year three year and and five your asked recent from a product perspective as you thought in the past and then dave just on twenty twenty two expenses which is about twenty nine to thirty percent growth giovanni commentary on revenue growth in twenty two to go along with that thanks
spk_2: i can talk on the metaverse and and reality was less so for the next the one three years especially i think we'll see you are putting more of the foundational pieces into place this is not an investment that is going to be profitable for us any time in the near future
spk_16: but you don't we basically believe that
spk_3: the the metaverse was going to be the successor to the mobile internet
spk_2: that if you're to enable social experiences that are is the ultimate expression of what we try to build which is allowing people to feel really present with the people they care about no matter where they actually are we think it's going to unlock a massively larger creative economy of both digital and physical good on that would exist today and and allow millions of peace able to go to do work doing what they love and and enabling a whole different economy around that but i think you're going to be another wouldn't believe our business over there the next decade so on the next one to three years on you know i mean i i i almost i will focus on the be sort of business outcomes they're quite as much as i would just know that products and infrastructure that we're putting in place so there's thirty five for to the hardware components there's there's the whole virtual reality product line is transmitted reality butterflies on it would work clustering for those pieces in place there's the operating system in development model for all these you create a tool on there's the commerce part of what we're doing around this is and how they find of broader commerce efforts and laid off on and then there's all the be social platform work that were doing with our horizon effort that on such as a bunch of different areas of of of what we're doing on i think you'll see all of those pieces started on it it goes out and start with sure that over the next few years on an advantage of we do the job on the i was that later in the decade is when we when we will sort of expect to be more by a real business sore i think what we will be kind of think about root for the news from is delivering the product experiences that are completely groundbreaking a magical try to fledged think this is amazing and computer going to wear this is going on the not a paved the way or that the future on the business northstar diet i mentioned in the my opening remarks are now
spk_17: we we hope that by the end of a decade the weekend
spk_2: in a half a billion people use the metaverse and are hundreds of billions of dollars of digital comics and i think we can do that and a phobia a good investment over there from the long term
spk_11: at the hey doug if they were not at this point providing a specific revenue outlook for twenty twenty two year we continue to see opportunities to grow both impressions and price next year the war obviously coming off an incredibly strong year of revenue growth and twenty twenty one we do expect deceleration in growth and twenty two any to from the full year twenty twenty one rate and innocent yeah there's there's sort of uncertainty implied in our arranged for to for revenue and i think that holds true for the twenty twenty two outlook as well
spk_3: there's a lot of factors that play including advertisers working their way through the impact of the apple platform changes
spk_11: we're obviously navigating a challenging macro economic environment will have it in a better sense of how these things up work together as we get through the holiday season but yet given the expense growth that we outlined you know which it you know is an implied in the thirty you know the north and thirty percent we don't we don't expect revenue growth at that level to we would expect twenty twenty two margins to be lower than twenty twenty one
spk_0: our next question you got an address and post the with bank of america merrill lynch priests were head
spk_18: great thank you maybe one for mark and and one for day i'm getting eighteen to twenty nine year old users is not easy i wonder if you give me the outlines on of your strategies to kind of get some progress there are no it's not a quarter and then dave it in your guidance for queue for cleanup us on the idea say impact in a is it contemplated to be about the same as three que a bit better as you work on your measurement or or is a little bit more of a had went into for thank you
spk_11: yeah just and i can take yeah i can take the i can actually take both of those questions
spk_3: you know a in terms of the young younger demographics of our our products are obviously widely used by young adults and and we remain focused on
spk_11: building out building out those particular abilities and continuing to focus on making our products relevant for that audience i think real is a big part of that strategy and you know we've now got that
spk_3: we've got that rolled out in over one hundred countries is launching in august of last year and will continue to invest in that experience and make ongoing products enhancements
spk_11: and so that's probably one of our one of our big focus points that i would point to an in terms of the idea say if enough people out of that again on real
spk_3: yeah i'm not i think that this is going to be a very meaning all qualitative change how people use it on a lot of different products across the prosecution i'm a big every once in awhile if format
spk_19: come along
spk_3: that allows new types of content or to sort of it you see as a result of stories as i think real is is
spk_2: the i mean i've been central to be on something of that scale where your different flavors of it and different but i think as a formality can be very fundamental and i think we're still closer to the beginning of that journey on the damned and we are to it's maturity on june from just having rolled out get some initial tests and experiences that and ruled out of it in baseball and
spk_3: you mentioned all the countries that have an instagram but ah but but it's it's just continue to grow very quickly so i think of that that's the be a big part of focus year on and fashionable will
spk_20: i'm excited over the next ah
spk_2: yeah you're here to see how that growth and some the i was that will be wife stories in our products today
spk_11: go for it yeah justin i'm i'm v i o s question as it relates to queue for vs que three you know the bulk of i was fourteen updates were completed you know as we entered que three which contributed to step up and the impact from you to que three since i was fourteen now widely adopted we don't expect a similar step up and queue for let you know importantly we haven't gone through a holiday season with these changes and prices are higher during the holidays given strong demand and so there's uncertainty how that will intersect with the challenges i'm a try
spk_21: getting and measurement coming from the i was changes so you know i think that brings some uncertainty into the queue for outlook it's reflected in our guys it's ranch
spk_0: i mean go to the next question
spk_22: thank you i next question some you said squali with a tool is securities please go ahead great thank you very much to questions for me mark is the week of facebook and that for was hoping you can provide us an update on the horizon this is the that social apps where people can create games and experience to share together when will that finally come out after cosby i think it's been in for the last two years i think to us that to more facebook and that the metaverse successfully you really need to have a vr vr social app that obviously cool and and successful and up the other question is around the again this focus on eighteen to twenty nine can you may be just speak to the current true
spk_2: and in engagement at both ends of facebook and instagram among millennials and younger audiences i know you're speaking about focus on going forward but how has it been trending only thank you gothic the first in addition to talk about what i would ever numbers do you want to share on the first let me say i think we have done on thursday at a knack for don't care
spk_4: going into quite a bit of the shell about our vision for that for the metaverse and and how we think we have contributed building this guy i encourage all judah the sudan
spk_3: part of that we are in talks about his horizons other into this and i'm we've been steadily working on us and on boarding more readers and more people to it and we're adding more world though i am
spk_23: and i think you're right this is that a a critical part of our our platform and the worked were doing here are we really work rooms recently i'm i'm really excited about how that experience with come together and i think if you're point you mention is important have a br socialist for i actually think it's important to have experience because
spk_2: across all of the point
spk_24: where did i don't think we're gonna end up with his is just a ah
spk_3: some mythic of your social network
spk_2: do you wanna be able to have these experiences where you use you can you can feel present with people have the summers for the first can be best if you're and and in vr or or in a are and and your your hologram but a nice build work ever really good work across our whole family of off and it's just work on the web and on own not computers for there's a lot to do and you know whether we call it beta or or not
spk_3: united the reality is we're going to be this is kind of similar to the question before about where we're going to be a year three years there's a lot of foundational infrastructure that just need to get built up here and done in of particle we're trying to reflect and in the segment reporting all that is what we're committed to doing this work with can be taken back by we want to be transparent about it
spk_4: ah but we think it's very exciting a huge opportunity for the future i heard today that unit on thursdays bigger more
spk_11: and that you of just on the you know overall been the engagement friends know our our products are are are widely used by teams but we are facing tough competition from like of you not particularly and snapshot and you know we're focused on obviously you know continuing to innovate and and rollout products like real
spk_0: old and you know attracts the younger demographics and retain the are younger demographic star products or minutes while continuing to to build in investing in those areas
spk_25: our next question is from marked mahaney with evercore i say it's head
spk_26: mr mahaney your life health benefits proceed paul just two questions on the iowa's changes is it fair to say that at the majority that accounts for the majority of the headwinds said you saw two three and expect the same que for and in secondly the question for mark just on the application of artificial intelligence to of help moderate contents the wrong word but deal to try to spam
spk_11: make sure that inappropriate content is removed from facebook instagram excedrin where do you think you are in terms of getting it to be where you want it to be a know it's been a multiyear investment journey experience start young a we are several years later sister sisyphean task of you you think you the been able to show success using a i constructively thank you hey hey market save on the first question yes the apple platform changes were the largest factor in terms of to three had when i'm a was really the first full quarter impact of those you a t v policy changes following just the you know increase consumer adoption ramp of the i o s updates
spk_27: you know end if it if it really weren't for that we would have expected sequential growth you to the que three so that was the largest had been in the quarter
spk_4: turn i can i can speak of that you to a i
spk_2: do i met my answer's yes have you made a big impact on you know we're shooting quarterly transparency report which i had i should add
spk_3: you know where industry leading on as and and both in terms of define as and and in terms that his death of of what we are we our minds that people can can hold us accountable
spk_2: and and and and kind of cvd breakdown our actually doing but what will will we measured in those reports on his in disclose is what percent of the concept of act on is our a i are infertile systems finding rather than people reported i've been busy don't we were lucky
spk_3: people buy a product that they find something that that's problematic and they report stuff than it used to be before the last several years that your most of what we did it for or community integrity with was just respond to incoming report for we decided hey we we is really funded in front of them son and build really sophisticated systems that we're not relying on my telephone or
spk_4: or issues but weekend proactively go and rough that and in most of these categories and we'd be beyond the point now where your ninety five percent of the content on where we're basically been that the react on were in identifying a largely through the i system that very good at by category
spk_3: the report for further categories like nudity where are your relatively give your to train a a computer to identify that on you know the numbers are very high on the categories by his speech said the been harder because the first of all were operating in and gets around one hundred fifty languages around the world
spk_2: i also think it's some you know there's a lot of cultural norms and us were
spk_3: yeah if you want to don't make sure you understand his new hundred dollars languages and and that on you wanna you want to make sure that people can say in the now it's racism right of from obtain something racist to encourage someone had to do something people that bad but if you want that i'm basically say hey i thought of person doing nothing and and and and people shouldn't be doing not the new you don't want to censor people do that on end the being a very challenging problem and for the first couple of years of working on this
spk_2: it was still a relatively low recalibrate where you know they are are are our system had
spk_3: and fifteen percent of the content the we were rough and we were we were dealing with rapidly but there was recent years the
spk_28: congress has been very impressive we're now about ninety percent of the of the on the me it were taken action on their on his as is also crafted you with it
spk_2: i'm so wrong
spk_3: but let me just put it into question a slightly different direction which is i know that there's there's a lot of scrutiny of our effort and i just i just want to say to the team in the people work on the i'm really proud of the progress that they meant i think we have the best people in the world and we're doing the best job i believe across any company in the industry and eleven
spk_0: as i think this is an important areas are there should be screwed me on it i also think that any honest account of what actually going on here should take into account that a huge amount of progress has been made on and will continue to be made by a lot of how people were work
spk_29: our next question it's from broth center with barclays please go ahead
spk_30: oh thanks they wanted fucking question on the guy that mm one big picture from cheryl maybe i'm too since one are focusing on the two year kangaroos army for the guidance for the high end of the fourth quarter revenue are actually have an acceleration on the to your carragher so i
spk_29: no we're talking about headwinds an idea of a and in a supply chains and everything like up with the sequential go to normal and then the to your is accelerating so i guess where the strength coming from and what would you call that a strong for your environment and cheryl i'm you thought about overhauling targeting long return to have let's focus on users power user base targeting and and more contextual and kind of other things i guess i level are you think that will impact the overall return on as span ah compared to pre idea of a level they are you look at fate competitive position in the digital ad market for the summer
spk_31: the other large platforms like any impact on the long term you know as you kind of retool the yeah the targeting thanks a lot
spk_3: he rots instead of need a what we're getting started
spk_11: pacific quantitative revenue guidance on i'm keyboard and yeah i think if you look at the range it's from a sequential grant basis on a seasonal basis que three to queue for and it's lower lower sequential breath and we've been historically so i i do think that reflect some of the on uncertainty that we're seeing out there as it relates to how idea say i'm sorry you the i was fourteen and a an idea pay impacts play and to
spk_32: pricing during the holidays and also the it out that the macro economic factors like the supply chain issues so i do think that kind of the that the seasonal sequential growth is is lower than we seen in the past and you know with the range i think that reflects that uncertainty
spk_7: in terms of
spk_1: ah the overall our overall targeting i think it's hard to see here and decide exactly where we're gonna end up at the all of this it is gonna be a multiyear effort with guess we seen had already and were different focus on tools to help advertisers we think we have opportunities to strengthen targeting ourselves
spk_7: both by the work with you are sound and it's part of industry consortium you're right your question in that advertisers have to make a choice of where they advertise that a question for ask is how good can are targeting the compared to other i think are targeting can offer compared to others like apple who have to direct a that themselves
spk_0: but i think are targeting still remains i think in very very on many ways very good for advertisers when you compare us on our ally we've always performed wow we still do even though we've taken a hit and we're focused on continuing to do that for businesses
spk_33: our next question is from john blackledge with callen please go ahead agree or text or two questions on for some on the macro are you already seen supply chain issues impacting afford you have revenue or your do expect them to the issues to be more impact folks a later in the quarter and then second question on instagram i'm given that the rise of reels is it
spk_11: cannibalizing and engagement on the other or instagram services thank you
spk_4: yeah jaune i mean it's you don't look we're not we're not be a macro economic authority on all things i would tell you that what we're hearing from advertisers is they they are are they are seeing you know supply chain issues that was true in que three and him and you know at
spk_11: an impact there as well as we expect that cheated carry over into cute or they're also obviously that intersects with the challenges with them with the targeting a measurement headwinds from i was fourteen so you know it's it's harder or departs exactly how the that the platform issues and the macroeconomic factors will play in the queue for it but i think those are the two biggest factors driving the range of potential outcome that we've outlined in our in our guidance in terms of real and other i g services and i can take a crack at that than you know party cheryl want to add anything you know whenever we launched new experiences this was true with stories it was true with you know facebook watch it you know it's it's the you're always going to see some amount of shifting of people's time and attention to the new areas of and you know we we do think that that benefits the experience overall and we think that makes the overall experience more engaging over time
spk_14: the and and we do think that isn't were were able to israel's driving mental a incremental engagement with with with instagram and facebook so that's why we're investing to do that
spk_0: our next class and got an unexpected
spk_33: from the line of march more like with alliancebernstein is the head
spk_15: yes i i one or cheryl you know specifically around kind of on platform commerce they end up a bit and i know previously have shared kind of merchant the news or adoption metrics but and any progress you could share and that brought as it relates to activity or or users are bracing it i'm and then the second question could have more broadly around recruiting in i know that the
spk_1: ethan post the great a ten thousand jobs i didn't metaverse it in europe any particular kind of rationale for how you're thinking about recruiting globally they
spk_34: so on commerce we have a lot of commerce activity on our platform already people are discovering lots of products to our she'd and story is had this is our largest that vertical encoded really accelerated it but it's also been one of the fastest growing for
spk_7: articles over a five year period we believe we drive hundreds of billions of dollars of offside ecommerce curse merchandise volume today's your as business and we think commerce tools will be filled in late layer on top of that to help businesses reach more new customers and drive more incremental sales in a hundred separate for focus on three areas continuing to be the best place to add retired making it easier to sell on the platform and improving the customer experience and i think we're in different places on earth in the first in terms of continuing to be the best place to advertise we are a great place to find customers me think the our ally is very strong and continues to be competitive
spk_11: in terms of making it easier the second to tell on a platform here we're catching up to other mobile and web shopping experiences and i think we have ah some work to do their and in the third improving the consumer experience to encourage people to shop i think we're also making progress there but with that some room to run and mark on on the recruiting front you know obviously we've got a big investments a year planned and in twenty twenty two that's going to be largely driven by recruiting we're going to have to do that globally we're looking to build technical talent we're we're going to be you know hiring people to do more remote work and focusing on that we're going to be a you know investing in headcount you know outside of the bay area
spk_1: and you know continuing to to focus on on building are you know technical and potter capabilities across the globe europe's an important part of that that's why it was outlined in in that announcement
spk_0: operator we have time for one last question
spk_35: three get our last question then will be from the line of brent still with jeffries please go ahead takes a day just under the cap except for i admit fine over seventy percent or other lot of questions just as it relates to of
spk_11: what the surges related see there is is is there any more detail you can help us up understand that that investment yes your brand of enough you know i mentioned in my prepared remarks you know or twenty twenty two outlook really reflect the you know a significant increase in our clan investment in areas like a i am machine learning and know a lot of that will be you know dedicated to you investing in areas where we can use machine learning to improve you know ranting and recommendations to power experiences across our products in areas like feed and you know in emerging areas like real you will also be dedicating that the ads as we work to improve ads relevant the and leveraging you know that machine learning and an an ai to help balance out the loss of signal the that we've experienced through some of the platform changes so we think that we can ya as part of as as part of sort of making our ads or even more effective you make up for that moss with with that with those without a large investment on machine learning and a i sighed and i think our position of your gives us a good
spk_1: it need to do that so that's really part of the part of the logic behind the big increase in the topics budget next year
spk_0: right thank you again for joining us today we appreciate your time and we look forward to speaking with you again
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