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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 metal first quarter earnings conference call online 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 number four on your telephone keypad the call will also be recorded thank you very much mister deborah crawford's met as vice president of investor relations you may begin
spk_1: thank you good afternoon and welcome to matter platforms first quarter twenty twenty two earnings conference call joining me today to discuss our results are mark zuckerberg ceo sheryl sandberg zero and dave when are fearful before we get started i would like to take this opportunity to remind you that are remark today will include forward looking same an actual results may differ materially from those contemplated by these forward looking statements factors that could cause these results to differ materially are set forth in today's press release and in our annual report on form ten k filed with your cc any forward looking statements that we make on the color based on assumptions as of today and we undertake know obligation to update these statements as a result of new information or future events during this call we may present both gap and non gaap financial measures reconciliation of captain on get measures is included in today's earnings press release the press release and an accompanying investor presentation are available on our website and investor dot fb dot com and now i like to turn the call over to mark
spk_2: iran and thanks for joining us today and we make progress this quarter across a number of our priorities and our community continues to grow more people use or services today than ever before and i'm proud of our products are certain people across the world during would have been a difficult period for a lot of people why i talked last quarter about some the near term challenges facing our business some are specific to matter like or transition to shorts and video which doesn't monetize as well for now but which were quite optimistic about over the long term some summer specific to our industries like signal loss resulting from apple's ios changes which is a meaningful headwind but we also expect that with the right technology investments will navigate okay overtime other challenges our broader macro trends like the softness city commerce after the acceleration we saw during the pandemic of the war in ukraine which is a real tragedy on a humanitarian level it also had an impact on our business we've been blocked in russia and we decided to stop accepting ads from russian advertisers globally and we've also seen effects on business globally following the start of the war
spk_3: take a step back
spk_2: i want to share some thoughts on our business trajectory an operating philosophy first i think it's useful to level set on our business trajectory over the last few years after the start of coated the acceleration of commerce let you outsized revenue growth but we're now seeing that trend back off however are based on the strong revenue growth we saw in twenty twenty one or we kicked off a number of multi your projects to accelerate some of our longer term investments especially in our a i infrastructure business platform and reality labs these investments are to be important for our success and growth over time so i continue to believe that we should see them through but with our current business growth levels we are now planning to slow the pace of some of our investments they will get more detail in his commentary i also share how i'm thinking about investments and margins last year we began looking at our businesses two segments family that and reality laps on a family that side i'm confident that we can return to better revenue growth rates overtime or and sustained hi operating margins are in reality labs we're making large investments to deliver the next platform that i believe will be incredibly important both for our mission and business comparable and value to be reading mobile platforms today i recognize it's expensive to build this it's it's something that's never been built before and it's a new paradigm for computing and social connection over the next several years our goal from a financial perspective is to generate sufficient operating income growth from family that to fund the growth of investment in reality labs or will still growing our overall profitability no unfortunately that's that's not gonna happen and twenty twenty two given the the revenue headwinds or but longer term that is our goal and or expectation of course our priority remains building for the long term so while we're currently building our plans to achieve this it is possible that prolonged macro economic or business uncertainty could force us to trade off against shorter term financial goals but we remain confident in our long term opportunities and growth that with that i want to dive deeper on know what we're seeing in in three of our main investment priorities that expect to drive the growth reels as and die and the metaverse let's start with reels there are two key trends that we're seeing here first of the increasing popularity of short form video and second the advancement of ai recommendations driving more of our fears rather than just social contact on the first point since i started facebook eighteen years ago we've seen multiple shifts in the media type that people use and we started as a website primarily with text than people got phones with cameras and and the main format became images on mobile apps the last several years mobile networks have gotten faster now video is the main way to people experience content on mine short form video is the latest iteration of this and it's growing very quickly rio's already makes up more than twenty percent of the time that people spend on instagram video overall mix up fifty percent of the time that people spend on facebook and real has grown quickly there as well the second point is that what we're experiencing an increase in short form video a were also sing a major shift in feeds from being almost exclusively curated by your social graph or follow graph to now having more of your feed recommended by a i even if the content wasn't posted by a friend or someone you follow social content from friends and people and businesses you follow a will continue being a lot of most valuable engaging and differentiated counted for services but now also being able to accurately recommend content from the whole universe that you don't follow directly unlocks a large amount of interesting and useful videos and posts that you might have otherwise missed overall i think about the ai that we're building not just as a recommendation system for short form video but as a discovery engine that can show you all of the most interesting content that people have shared across our systems and facebook that includes not just video but also text posts links group posts three shares and more on instagram includes photo is as well as video in the future i think the people will increasingly turn to a eyepiece discovery engines to entertain them teach them things and connect them with people who share their interests and i believe that our interests or investments in a i i'm all the different types of content we support and our work to build the best platforms for creators to make a living a will increasingly set or services apart from the rest of the industry and drive our success and world the finding that having an ambitious vision around building the world's discovery engine is attracting a lot of the most talented ai folks to work on this program next let's talk about ads cheryl will discuss this in more detail but i would if i like that this is also a large ai investment for us out there are three main trends to highlight and are ads business right now first we're managing headwinds from the shift a short form video that i just mentioned and the near term as a drag on revenue because real monetization is less than feet or stories but i expect that will improve over time we see this type of media format transition a multiple times before that in two thousand and twelve when we transition from desktop feet mobile feed we saw mobile feed grown massively but not monetizing while yet and we read into it i went through some tough quarters and that it became the foundation of our business today similarly and twenty eighty and when people started using stories more instead of feed but stories and mantises well as feed yet we still doubled down on stories had a another tough period but came out stronger than ever so we've run this play before and were running it again now we're focused on growing rules as a major part of the discovery engine vision and we expect that this expansion and engagement to shift from a short term headwind to a tailwind at some point and while this is playing out we're also managing the headwinds from signal loss that we've discussed a lot recently this means growing first party understanding of what people are interested in by make it easier for for people to engage with businesses in our apps at whether that's computing purchases on facebook or instagram our messaging businesses on what's up or messenger it also means making sure that we build the best privacy enhancing technology used to provide accurate targeting and measurement advertisers even when purchases aren't happening within our apps we're making major ai investments to build the most advanced models infrastructure in the industry over the next year or two are we hope that this drivers better recommendations for people higher returns for advertisers and increases our revenue growth even in the face of signal loss over the longer term i think that these large technology investments can provide a sustainable competitive advantage over others in the industry the last party that i want to discuss today as the metaverse as well we're focusing on the biggest opportunities and challenges of today i think it's important to build a foundation for the next era of social technology as well the centerpiece of our strategy is the social platform that we're starting to build with horizon it's still early but as we build out the experience of the next focus will be on growing the community we plan to launch a web version of horizon later the fear that will make it easy for people to step into the metaverse experiences from a lot more platforms even without needing a headset i think the best experience will be on virtual on and eventually augmented reality platforms and especially on our platform like quest were in an upcoming release from the moment you put on your headset you gonna be embodied i would your metre avatar and ready to interact in horizon with your for friends right from your your quest home but making this available everywhere will mean that you can interact with anyone on whatever device or platform that they want to use our other focus for horizon he is our building at the metaverse economy and helping creators make a living working in the metaverse we expect to be meaningfully better at monetization than others and the space and we think that that should become a sustainable advantage for our platforms as they develop on the hardware side met a quest to continues to be the have a meeting virtual reality headset a later this year will release a higher end headset code named project cambria which will be more focused on work use cases and eventually replacing your laptop or works that up this premium device will i have improved ergonomics and full color pass through mixed reality to seamlessly blend virtual reality with the physical world were also building an eye tracking and face tracking so that your avatar can make eye contact and facial expressions which dramatically improves your sense of expire and a presence it's also as a good example of why we're developing hardware in addition to the social platforms or bring horizon two more platforms but if you want to build make eye contact or have your physical facial expressions are just automatically get translated your avatar in real time or than or hardware will provide the best metaverse experience you're playing a game or meeting with coworkers and horizon work rooms or share more details about product cambria in the months ahead as we get ready to launch it
spk_4: i believe the areas that we've discussed today are the right places for us to be doubling down on our work or the questions we face are not going to be resolved overnight but we we've also faced a number of these challenges before i'm confident we can navigate this period while continuing to invest in our future i'm grateful for everyone in our team through is executing on this important work for partners and for or investors you believe in us and the future that we're building together and now here is cheryl thanks mark be and hi everyone a total of revenue and she one was twenty seven billion which is up six percent year over year with a solid growth in a pack and rest of world but a more challenging environment in north america and europe despite the headwinds mark described a moment ago with a meaningful growth in areas like video ads and click to messaging apps the changes to the ads landscape over the last year have caused significant disruption to the way many businesses advertise on line our teams are working closely with our partners to help them navigate this new environment so they can continue to get great return on investment and we're focused on building products and tools to grow their businesses and ours over the long term i want to pick up and what marx said about our add strategy
spk_5: as he described it's focus on three main areas one growing video monitors asian especially short form video like feels to have all the are add systems to do more with less data and three
spk_4: investing in a i machine learning to support our ads infrastructure
spk_0: first video
spk_4: half of the time spent on facebook his videos and videos surfaces on facebook or a significant source of revenue growth in the first quarter people already watch a lot of longer form video content that's eligible for instruments which we monetize well stories monetization continues to grow across facebook and instagram and with real growing quickly there's also a big opportunity as we get better at monetizing short from video over time we've accelerated our efforts to improve the real that format or experience monetizing stories is directly applicable here do sorry
spk_6: me
spk_4: we're leveraging what we like better we're leveraging what we learned that story that to create ads for real that have a new format perform well and are easy for advertisers to create working closely with our partners to help them make the most of the opportunity with video like experimenting with new formats him at campaigns that utilize multiple types of video ads
spk_0: a great example is the us restaurant chain wendy's they used a range of video formats across feed story israel's and in stream to promote their march madness campaign
spk_4: driving consumers to the first virtual wendy's restaurant in her eyes and worlds we also work for them to promote the campaign and horizon world itself with a virtual welcome screen directing people to what they called the when diverse the campaign was a big success reaching fifty two million people and improving wendy's brand and message aware this across a number of metrics second of all around system focus is on paving the way for the next era of personalize advertising and there's work we're doing over the near medium and long term in the near term were working closely with advertisers to help them navigate the new landscape while we evolve and improve our add solutions for example are encouraging partners to integrate with our conversions a p i to create a direct reliable and privacy safe connection between a marketing data and manner and we recently introduced a faster and easier way for smbs to integrate with it called the conversions a p i gateway one we were helping advertisers get better insights had less data is with conversion modeling this can help them understand measurement and campaign performance even when we're not able to see or aggregate certain conversions or also helping businesses connect directly with customers and grow more on site data conversions their products like click to message ads this is where you click on an out and your facebook or instagram feed and it opens a chat with the business and messenger instagram direct or whatever it's already a multi billion dollar business with healthy double digit year over year growth in she one a great example is teichmann europe's largest footwear retailer they built a fully automated virtual she was system to give customers personalized that were recommendations and promoted at their click the messenger add some face like they had an eighty five percent click through rate and south thirty percent more incremental purchases and with their usual link ads in the medium term we see an opportunity to grow other on conversion products like lead ads which make it easier for businesses to generate leads and shop ads which directs you to a brands digital storefront on facebook or instagram it's still very early for shop ads but we think driving people to shop can be a compelling objective for commerce advertisers as we continue to improve our on calmer stores over the longer run or also developing privacy enhancing technologies which will help us minimize the amount of personal information we process while still allowing us to show people relevant ads and measure performance for advertisers and we're collaborating across our industry on these another standards that will support this next era of personalized advertising
spk_7: third ai and machine learning which are crucial components of these privacy enhancing technologies and will drive improvements over time to our ads ranking and measurement capabilities
spk_4: more significantly increasing our investment in a i sure and that machine learning across the company this year and a large portion of this is going towards us we continue to innovate in order to deliver better performing as in general and these investments will help us do that lol processing last individual level data we also have a range of the automated tools to make it easier for advertisers to create manage and improve the performance of their ad campaigns
spk_2: are constantly working to improve these tools and make them simpler for advertisers to use
spk_8: taken together we think are range of solutions can help advertisers get better results now and over the longer term for confident or apps will continue to be the best places for advertisers to reach people were they get measurable outcomes long into the future as ever
spk_2: i want to say thank you to our partners large and small and to our teams who are working so hard to deliver great results for businesses everywhere now here's dave thanks cheryl had good afternoon everyone let's begin with are consolidated results all comparisons are on a year over year basis unless otherwise noted to one total revenue was twenty seven point nine billion dollars up seven percent or ten percent on a constant currency basis had foreign exchange rates remain constant with key one of last year total revenue would have been about eight hundred three million dollars higher to one total expenses were nineteen point four billion dollars up thirty one percent compared to last year in terms of specific line items cost of revenue increased seventeen percent driven primarily by core infrastructure investments payments to partners and content related costs or in increased forty eight percent mainly driven by hiring to support family of apps and reality labs marketing and sales increased sixteen percent mainly driven by hiring and marketing spend and lastly dna increased forty five percent driven mainly by legal related costs and employee related cos we added over fifty eight hundred net new hires and que one the majority and technical functions we ended the quarter with over seventy seven thousand eight hundred full time employees up twenty eight percent compared to last year the first quarter operating income was a point five billion dollars representing a thirty one percent operating margin our tax rate was sixteen percent net income with seven point five billion dollars or two dollars and seventy two cents per share capital expenditures including payments principal payments on finance leases or five point five billion dollars driven by investments and data center servers network infrastructure an officer so it is free cash flow with a point five billion dollars we repurchase nine point four billion dollars of our class a common stock in the first quarter and we ended the quarter with forty three point nine billion dollars in cash and marketable securities now moving to our segment results are begin with the family about segment to one total family that's revenue was twenty seven point two billion dollars up six percent human family of apps ad revenue was twenty seven billion dollars up six percent or ten percent on a constant currency basis
spk_8: growth decelerated from the fourth quarter due to a variety of factors prior to the war in ukraine weeks we faced expected headwinds related to the continue slow down in our online ecommerce vertical which had grown quickly grown quickly during the coated nineteen pandemic as well as ongoing targeting and measurement challenges impacting advertising spend
spk_2: we experienced a further deceleration and growth following the start of the ukraine war two to the loss of revenue and brush up as well as a reduction in advertising demand both within europe and outside the region
spk_8: we believe the were introduced further volatility into an already uncertain macro economic landscape for advertisers
spk_2: foreign exchange rates were also a headwind growth in the quarter
spk_8: on a user geography basis year over year ad revenue growth was strongest and rest of world in asia pacific at twenty one percent and twenty percent respectively north america grew one percent in europe was flat year over year europe advertising revenue was disproportionately challenge by the factors related to the war in ukraine
spk_2: into one the total number of ad impressions served across our services increased fifteen percent and the average price per add decreased eight percent impression growth was driven primarily by asia pacific and rest of world the year over year decline in pricing was driven primarily by the ongoing mix shift an ad in in in ad impressions towards regions and
spk_8: services that monetize at lower rates
spk_2: family of apps other revenue with two hundred and fifteen million dollars of nine percent as revenue growth from the what's that business a p i are set a decline in payments related revenue or from games
spk_8: family that's expenses were fifteen point seven billion dollars up twenty seven percent driven mainly by employee related expenses infrastructure costs and legal costs family of apps operating income was eleven point five billion dollars representing a forty two percent operating margin
spk_2: we estimate that approximately two point nine billion people used at least one of our family of apps on a daily basis in march and that approximately three point six billion people used at least one on a monthly basis
spk_8: facebook daily active users were one point nine six billion up for percent or eighty two million compared to last year the i use wrecked presented approximately sixty seven percent of the two point nine four billion monthly active users in march and they use grew by eighty three million or three percent compared to last year europe via use and am use decline sequentially and were negatively impacted by the loss of users and russia following the government's block of facebook and the country we expect this trend to continue in the second quarter and this will likely cause of global and you to be flat to down sequentially
spk_2: within our reality lab segment to one revenue with six hundred ninety five million dollars up thirty percent driven by quest to sales reality labs expenses for three point seven billion dollars up thirty five percent driven by employee related costs are in the operating expenses and cost of goods sold reality labs operating loss was three billion dollars in the first
spk_8: quarter turning out to the outlook
spk_2: we expect second quarter twenty twenty two total revenue to be in the range of twenty eight to thirty billion dollars this outlook reflects a continuation of the trans impacting revenue growth in the first quarter including softness in the back half of the first quarter that coincided with the war in ukraine or guidance assumes foreign currency will be approximately a three percent had when he over year growth in the second quarter based on current exchange rates
spk_8: in addition as noticed noted on previous calls we continue to monitor developments regarding the viability of transatlantic data transfer and their potential impact on our european operations and we are pleased with the progress on a political agreement
spk_0: turning out to the expense outlook we expect twenty twenty two total expenses to be in the range of eighty seven to ninety two billion dollars lowered from our prior outlook of ninety to ninety five billion dollars we expect twenty twenty two expense credit to be driven primarily by the family of apps segment followed by reality laps
spk_9: we expect twenty twenty two capital expenditures including principal payments on finance leases to be in the range of twenty nine to thirty four billion dollars unchanged from our prior estimate absent any changes to us tax law we expect our four year twenty twenty two tax rates to be above the que one rate and in the high teens in closing our advertisers are adjusting to a new digital advertising landscape brought about by recent mobile platform changes while navigating a complex set of macro economic challenges given the resulting revenue hadn't headwinds we have adjusted our plans for hiring an expense growth this year
spk_2: we continue to see a lot of opportunity across our investment priorities and remain committed to dedicating additional talent and capital towards these areas while ensuring our investment prenup plans are appropriately calibrated to the operating environment with that france let's open up the call for questions thank you we will now open the lines for a question and answer session to ask a question press one followed by the number four on your tone phone please pick up your handset the for asking a questions to ensure clarity if you are streaming today's call these new church computer speakers
spk_8: and our first question is from the line of brain know lamp with morgan stanley please go ahead
spk_2: thanks to my questions i have to the first one on unreal of engagement appreciate the color about the percentage time it's going through reels why the ask about incrementally the of that time and you can you talk to as low that about what you're seeing on total time spent on both core facebook as well as instagram in the us as your see seeing this really strong real of engagement moving through the overall user base and then the second one table and ask you about callbacks the understanding this year the investments in a i'm seen learning etc
spk_8: how should we think about our to this year's have access or of one time as they may not persist a multiyear basis or is it better think of it maybe the capital intensive the business and be structurally higher going forward thanks
spk_2: a prenup i'll take a crack at both of those and market out any color if he wants you know in terms of cannibalization you know real does pulled time away from other surfaces but we do believe it's added to overall engagement and you know you know we've seen that in the past with some with other products like stories and so we're seeing a stent similar i so
spk_10: miller pattern there in terms of overall engagement for both facebook and instagram you know there's a lot of eat of complexity with with with kind of looking through that period of coded on because that that tends to create a lot of different you know peaks and troughs in in engagement but if you'd look back engagement for both facebook and instagram
spk_0: you know remain above the levels they were a pre pandemic and that's true but globally and and in the us
spk_11: so i think you know we're we're we're we're pleased with that on on nightcap tax front you know let me let me just sort of address the overall the overall ramp it's it's true we are investing your significantly in ai and machine learning investments
spk_2: it had to power ranking and recommendations for you know things like ads reels and feed and so that that does you know that does add to the catholics intensity of the business and we do think there is additional capital intensity of the businesses we make know significant investments in ai and machine learning on top of just additional capacity growth we're not sharing and i'll look beyond twenty twenty two at at this point perhaps you can go to the next hour and and our next question is aaron certain with the goldman sachs please go ahead thank you so much for taking the question really want big picture in one more michael question mark he heard one of the questions we get the most from investors is when you think about were you trying to go with the metaverse longer term how do you think about the under the spin cycle versus the monitor zeeshan cycle when you think about creating hardware both on the physical side the distribution lay the hardware versus the content and the creator cycle you need to sell for on the metaverse over the medium to long term am and seconds your ahead of i don't know if i missed it or not but i think last quarter you called out on the apple privacy changes that the head with my get worse into one that it was into force can you give us an update of how those headwinds continued to evolve and whether what you built over the last couple years of somewhat future proofed against future changes that apple might make in the i was ecosystem thanks so much yeah i can give some context in the first one and then and then dave can can speak to the second question i think that the cycle here between investment and the a meaningful enough revenue growth to be near are very profitable can be there can be long and i think it's can be longer for reality labs than for a lot of the traditional software that we've built and if you think about just a bit of context that may be useful and why we've ramped expenses so much is you especially with the success that we've seen with quest to we're now are basically funding product teams to be building our future products two or three versions into the future because you know when you're designing hardware it's these are multi year plans that you're building and in kind of figuring out all the pieces that are to go into that so we have multiple teams in parallel that we have sort of now spun up on this goes for vr as well as augmented reality and and a bunch and and the other work that we're doing and is is sort of driven by the success that we feel like we're seeing in in in the the markets and and the technology distorting to be ready to really ramp up to those expenses we're experiencing today rhyming to having having those teams operating is something that the you see way on that on on the results and you know is one of the reasons why i think the growth rates and expenses have have have been so high and i think it will continue investing more over over some period but at some point we will have all those product teams fully staffed on for for you know it gets a few versions into the future and then the growth rates there will come down but it's it's not going to be until those products really hit the market and and scale in a meaningful way
spk_8: and in this market unzipping big that this will be a a a have a big revenue or profit contributor to the business so that's why the i've given the color on past calls that i expect us to be in a later this decade right may have you may be primarily this is that a laying the groundwork for what i would expect to be a very exciting twenty thirty years when this is like you know where it went witnesses is so sort of more established as the
spk_2: the primary computing platform at that point i think there will be results along the way for that too
spk_8: but but i do think that this is gonna be on doesn't belong or cycle on some of the software parts of what we're doing in the metaverse will think have near term opportunities to monetize and and a global see how that goes on in a certainly horizon will roll out across all platforms and they're all it'll will be a number of things that we can do their that that will have shorter cycles that might resemble a little bit more but we're used to it apps
spk_0: a but overall and but that's that's kind of the context i want to brunt of to of on that
spk_12: herrick i'll take a second part the second question that you had you know we've we expect to you know we've expected you know ongoing privacy headwinds from the iowa changes and we continue to see them those are obviously factored into our cue to outlook along with the impact on demand that we're seeing from things like the war in ukraine you know more specifically a t t continues to be a headwind but we're also seeing incremental headwinds from iowa fifteen and and other regulatory changes and again be factored all those headwinds into our cue to outlook you know of course any you know any outlook on platform headwinds depends in part on the platforms and cells and how they write an important
spk_13: policies i had to put that copy out in as well
spk_14: you know when you look at what we're doing to mitigate those you know near term we're working on improvements to our current solutions and cheryl talked about some of those like privacy and have technologies you know medium term we see the opportunity to move clients more towards onsite conversions are you working a lot of success and things like click the messaging ads legion
spk_8: ads and then you know more nathan effort and shop ads and then longer term we're rebuilding our as back to employ more machine learning an ai to be more effective at odds with with less data so your we think we've got out a response that we're building into the new environment and you know we're optimistic about future our next question is some just and post a bank of america for help wait a minute to follow on you give our outlook for for maybe ten billion dollar have limbless this year is afford assume you're a decent chance of that into one and when you lock and key for you could see progress mom i think there is a lot of concern for the social companies on upload sixteen potential changes with with ip addresses and other factors in the past you been able to call our potential headlines or in the future one if you have he can say anything about i was sixteen are or how you thinking about potential future apple
spk_2: changes thank you
spk_8: yeah sure
spk_0: you know on that you had the ten billion dollar impact we'd be shared are estimated you know ten billion dollar impact on a t t last quarter to give you know a sense of the order of magnitude and we believe it's still to be that order of magnitude on the expected high impact
spk_12: it it's you know it's not a precise point estimate and you know we don't plan updated also worth noting it's that that's not a it's not a lapping there was an impact from a in the second half of last year as well so that's not a you know all in the increment in his there was an impact last year i'm also be on a p t we expect to see additional targeting and measurement had went from iowa city fifteen and other regulatory changes i don't i don't think we have anything at this point
spk_2: to share about about sixteen
spk_15: and then i think also just and you asked about sort of the second half you know we would expect the growth rate in three to be modestly higher than the queue to rate since we will be laughing
spk_2: the first full quarter impact of atp into three but there's obviously a lot of uncertainty baked into our key to outlook and that implies uncertainty in the second half as well i next question is from emmett with such jp morgan since the head thanks for ten the questions for for mark just curious as as a iteration of content takes over from social cues hope you could talk about what some of the biggest changes will be to the user experience and then perhaps month nation as well long time and then second in terms of reels how do you think about the timing for twenty one adds more and what needs to happen and the product for that to happen best yet so i can talk about the a driven recommendations and and discover engine pardon me back and start to give some context on the ads to and than and somehow can jump in there you i think that the biggest shift here is that now the universe of content that are candidates to show when a person's feed is way bigger it was used to just be ok here's a people here that friends or businesses or pages the you follow and and maybe with on the order of it thousand or a few thousand potential posts a day that we could show and we built a news feed system that could help rank those to to show the the most interesting ones to you with at the top but fundamentally that was more a are you a challenge of of ranking a relatively small number of posts in the order that would be optimal now with it's a much more open ended things are millions of a piece of content that we could potentially show a person on and as our understanding of people and our understanding of content gets better through a eye on were now better able to across all different content type text links photos short form videos long form videos so everything on basically built to understand what the content is about match more with what people are interested in which means that there's a lot more it's to show people the social content from your friends i think will continue being in a lot of the most unique and and valuable content in the system said i will still be there but in addition to that you'll now have a lot of other interesting content so overall what it what does that mean on to get it will this will be a part it'll make the services more interesting to me that there's more interesting stuff to consume and and interact with both in and facebook and instagram which should contribute to engagement over time you know the parts of is that are about reels i think have some in some specific monetization questions where we need to ramp up that format
spk_4: but the parts of the switch or just about showing better content and feared should actually monetize quite naturally and that's something that i think we're gonna
spk_6: and we're starting to see that that kind of wrap up and face spoken and instagram already the part party experience on the reels monetization side i mean i think that the the main question here is your yeah there's the cycle which i'm mean shipwright jump in and talk a little bit more about this is is just eat or take some time for all the advertisers to optimize the creative right it's like when we start doing stories they add add that were designed for news feed and ah
spk_4: and it took some time for them to create affective content for stories and i think we're going to see the same thing for reals and you know the way we think about the pacing of this is that and we do show ads with with rios bite
spk_0: we're going to show more as the content gets better
spk_16: and is that ramps up to to not be a big pain point of the user experience or we basically match this that way of the ads get better across all these different formats we were willing to to show more of them and on and and that's wife improving the quality of ads is also been really important for business or not sure if there's anything else they want to add another cheryl it's a really important thing to think about because it's something we're very optimistic about we have great consumer engagement on rails we have fast growth and we have a playbook for taking that kind of consumer engagement and rolling out ads and to the experience this is gonna be a multiyear journey like stories but it's one were very optimistic about and as marx said it's about helping
spk_4: advertisers create the format of ads that matches the clinton now what we've learned over time is the more we do for our advertisers the better off we are the more we automated the more we can help them target the more we can help them are formed the creative and the experience we have putting ads and stories of to black directly applicable but the other reason we're really optimistic is we think this can create great results for advertisers that the end of the day advertisers are chasing or ally they're going to go where they get a return on their investment and while still monetize as at a lower rate versus feet and stories advertisers who are using it or seeing really promising results or share an example the pros is a direct to consumer haircare brand and they a be tested adding a real that placement to their usual campaign they thought twenty three percent lower cost per purchase fifty two percent higher unique audience reach and three times higher video completion to it that says is that this format work not just for this advertiser but we're hearing this for many across the board and we think we can help a lot of advertisers adopt this in the upcoming years
spk_8: our next question is some use of squali from to with securities please go ahead during a second the questions have to first mark on the regulatory for it looks like european and us regulators are getting more liable how to proceed to address issues like and you trust and interoperability the news on a transatlantic data transfer him to pretty positive just stepping back and looking at the new and va
spk_2: in
spk_8: that seems to be formed particularly between european and us regulators you see this as being more mostly rule or less her whole to facebook and then maybe maybe this for days with the stockdale so much can you may be talk about employee retention and have you think about cash compresses start me up and current environment thank you
spk_2: i think the regulatory question now is really critical an interesting time in regulation for our industry because the rules governing the internet are being we thought and rewritten certainly in europe but increasingly around the world
spk_0: are you spoke about that the be may we expect the i'm a to have significant challenges for industry
spk_17: we're working with european regulators on these rules if they are largely and range of what we were expecting but the final text has not been released yet and the details on this will matter but overall the regulatory environment is a real challenge for our industry one we think we are well set up to meet working class the with regulators and doing things in our technology like privacy enhancing technologies to do more with less with less data that we expect this to can be is to continue to be a significantly challenging time not just for us but across our whole industry yeah and use if it's debut so on a on a bomb
spk_8: retention and recruiting front i mean i'd say you know we continue to have success in recruiting as demonstrated by the fifty eight hundred net new hires this quarter so we're we're pleased with our ability to do that also you know on
spk_18: you know on the retention front attrition which has stepped up since since what we experienced during the pandemic is is really still broadly consistent with levels that we had seen pre pandemic so
spk_8: you know it's saw it it's definitely something that we're tracking and obviously you know the stock price something that we that we watch but done you know the trends are you know relatively in line with you know expectations so from that sense
spk_19: where we feel like we're doing we're doing okay
spk_2: or next question is from the line of march maldic with bernstein please go ahead
spk_8: yes hi thanks for taking the question at the first have yet to some it's going their that that you thousand and eight accurate to the world and pieces of calories as a lot of it is the macro this is it the new users or something else and then the second question good luck luckily all give it your players with you i'm in what the operating expense and down a little bit there any call you can turn out that that affected prioritize a slight changes that i've been spending intensity of some of that no longer term initiative like the medalists wasn't from the near term stuff like this method of thank you
spk_2: so i'll take the first question sort of in in terms of the regional regional grad so you know group growth slowed in all regions due to pricing had winds up currency was obviously a headwind and in all the international regions europe you know decelerated mean a very meaningfully and and the existing headwinds were compounded by the effect of obviously the ukraine war in north america we have a relatively higher exposure to offsite objectives so the targeting and measurement challenges i conceded impact growth in in that region more also i'd i'd note that in north america impressions were down year over year in que one so add impressions we're done here we are that the rate improved from from queue for so it was primarily a demand driven deceleration when we look at a pack in the rest of world it benefited from strong demand in products like click the messaging apps i'm in rest of world growth decelerated least of all regions macro conditions in brazil improved a bit after softness in the second half of twenty twenty one and then in a pack a with relative strength was pretty broad based but i'd call a particular strengthen in india and that's benefiting from a good supply tail wins in terms of impression growth yeah in terms of priorities it's it or or priorities are broadly consistent with what i wanted on the last call you know is the beginning of the year site i outlined a lot of that that that basic focus areas for the company in a worse the most earnings calls all or talk about a few areas that them that i've been particularly focused on tom yeah i think we're pacing some of the investments across on each of these areas but more importantly were shifting for the bulk of the energy inside the company towards that it's high priority areas on a away from other areas so it worked were big company at this point it's not just all about recruiting and adding new people from the outside a lot of it is in we have a lot of awesome people here and a lot of a decision that we to make on a day to day basis are on how do we direct that really talented people are already out the company and we want to make sure that rather than just always relying on i'm just getting more and more new people from the outside which what we're gonna keep on doing were recruiting a lot on i wanna make sure that our teams are disciplined about require ties internally one thing that i want to add just as as a bit of cultural commentary on the attrition question is arm
spk_0: i don't think that this sort of volatility that companies face is always that unhealthy for making sure the you have the right people and companies
spk_20: you know it's own during during covered in we saw the attrition levels go down a lot because people didn't wanna get new jobs which probably meant that are there were people are staying at the company who didn't care that much about you know what we were doing is is it compared to what we would have wanted on and i'm just trying to leave the company in a way where where positioning ourselves as
spk_21: as of the premier company for building the future of social interaction and the metaverse if you care about those things i think were getting the best people to come work here how if you care about doing awesome a i work on stuff like the discovery engine on across all these different types of formats were the only place that doing that
spk_20: i'm that that's that's a great problem and
spk_21: is that that we're adjusting attract a lot of a lot of talent and yeah i know that sometimes people are critical of yards model but it drives a lot of value for businesses and people around the world and i think the people believe in that on in in want to see that are continue to grow i want them here too so yeah i think we'll we'll see attrition go up and down
spk_4: over time i think we're doing okay now is dave says but i don't necessarily think that periods like this
spk_22: where were prioritizing a little bit more where we're focusing and growing
spk_4: is is is going to be unhealthy over the long term actually think it's going to make us a better company
spk_6: our next question is from michael nice and sin with month nice and since please go ahead
spk_8: i want to sell one for days
spk_2: your in the past when pretty clear that idea said it had to pop album measurement targeting to be given update on how close you are closing the gap on and we will be for and then targeting what you said a monotone issue you didn't a sense of how could you give you the ai solutions maybe see that up in any updates
spk_8: and the consortiums talking about and then they just quickly unreal it's cool as park and something computers a if you could on the impact on revenue from not you from having more news but not much as he has the same rate or or speed of on on these weird stories that matter questions thanks
spk_23: so on the mitigation timeline we've talked before and i talked before about to see challenges from the i iowa which is like you mentioned targeting and measuring performance
spk_0: working your medications on both they're both a multifaceted challenge and they are interconnected because better measurement the leads to better targeting for advertisers on the first we are improving our systems as we test them learn and supporting advertisers with best practices and we're working on automating tools that will help advice
spk_24: ties are target target better and we have to do it with less data we have to do more with more aggregated an anonymous data on measurements we've been able to close a good part of the under reporting gap and share that with advertisers but the rest of the gap will take us longer to close this is a particularly big challenge for small businesses because we have to work with them we have to work with them obviously and our in our longer tail and more and more resource intensive way yeah and you know i can address to the real question i think we've we've touched on a few times so i don't know have a whole lot it's added it but you know it now makes up for a you don't the meaningful portion of people's time on instagram you know market the step that it's over twenty percent of people's time on instagram
spk_20: so that speaks to there being a good opportunity as we ramp ads in ah in reels but it's been a very early days in terms of ads in reels but but that being said it's going to take it can do as cheryl said a multi journey if you look at stories
spk_24: you know stories we really began ramping and twenty eighteen and you know at the end of last year we mention that in developed markets stories on a sort of per time basis was monetizing at a similar rate as feed so you know it took me many years for that to the close and they're still work to be done across the world on that front but you know reels is going to be a similar opportunity but also will take time for us to close that are to close that gap but but given that it's a it's a good amount of time that people are spending and reels that is it that is a good opportunity for us over
spk_4: that time period
spk_6: i next question is from roster sandler with barclays space head
spk_4: oh yeah just one fall for cheryl can only do that last question
spk_22: so now the horns well known can use ah
spk_6: mobile ideas for targeting to see what there's a lot of interesting new ideas kicking around for the industry around my cohort be targeting her textual or other id free privacy center targeting technique so on are given the questions given the size of facebook and other for you do
spk_0: you have how do you think some of these
spk_25: new techniques are going to perform relative to the rest of the industry and then when you expect him to show up in a more meaningful revenue way i guess what i'm asking is is is the opportunity here you know to claw back some of that ten billion have lost revenue do you think looking for you competitive advantage maybe even odder and he might be able to open up more
spk_26: your ad dollars to to face book with these new techniques and he on that one
spk_25: i
spk_27: i gave in are going back at work when you think about and how we mitigate some of these challenges there's a couple of things to think about one or what does the solutions we have that can be on site so as we develop some of our commerce commerce at products as people are you using things like click to messaging ads quick to messaging apps are a good example of the club
spk_4: the loop at least to the point where you're connecting directly with a customer happens on our service if are calmer sex at if our commerce efforts are successful over the longer term will be able to close that lead directly on our and service the other thing that was interesting and your question is you're right that this is about you know relative comparative advantage in a very highly competitive space that we have been able to use data i think of privacy safe but it's very efficiently some of the data we've relied on we've relied on has changed that's causing some near term near term challenges and headwinds for us but over the long run once that settles out advertisers are going to go where they get the best for
spk_0: time so we have highly engaged platforms we still have very important data that it's first party that we are able to use to target we're working on measurements solutions and we're also working on things that out the industry so we think while these times are challenging over the long run we do have a very strong competitive advantage when you look across the opportunities advertisers have to advertise that offline and online
spk_27: our next question is some brent fill with jeffries space for him
spk_4: i know it's early on rails was asian bit or other early learning florida and and taken away so far share and then the second question which is just unreal budgets are are the permits old silversmith overall centers
spk_1: advertisers or this story
spk_0: drills thanks i can take those that on the first it it is the process i've described which is that we know that if there's a consumer product that consumers are enjoying we are able to move advertisers into that product if a couple of things are trail as mark talk about the format of the ads six and fits into the format
spk_28: of the product wheels which is short form video which is tax which has pictures is a great format for us because those are all things we've already done well both on the consumer front by importantly on the ads france so we are able to create the format of the ads and offer that to advertisers then we need to help advertisers create compelling ads and we need to help them place across are different properties we have a lot of places you can place as we have a lot of experience in this and we are on a ramp it is a multiyear ramp but we've learned things make it as automated it's possible for example rather than ask advertisers create the perfect dad the more you can ask
spk_29: advertisers to give you the components of that ad and created for them the better things will work on every time on targeting try to figure out what are the advertisers real and goals and then we can suggest the products that fit for those and goal so if you tell us you're trying to get us on site conversions you tell us your time
spk_8: get people to message you can and put you into different placements across our at offerings and wales is a very compelling ah part of that on the instrumentality of budgets it's always that's when we roll out a new product there's always some of the budgets which are just being nice reallocated from other parts of our own platform because there are people who will have met a budget or facebook budget on instagram budget over time our goal is to grow their budgets and we do that the same way it is our you know large teams seat on the street working with our global advertisers in our largest clients and it's are online or online ability to sell and monetizing grow that i that i think we are industry leading on working with us and be is where we have to show them the returns and when their budgets and when we were like new products and partially it's incremental as long as we're really delivering great are like compared to what they can get off of our platforms overtime those budgets can continue to grow
spk_2: great operator we have time for one last question very good are less question them will be some allen good with the loop a capital please go ahead
spk_8: mr goal your line is open please go ahead
spk_2: thank you for taking the question to question state concerns you see and they used to be them sequentially into two and a mark on last quarter you spoke yeah you are quite open about the competitive issues on tick tock was you to be impacting the whole industry
spk_8: now anyway quantifying and what you think tick tock is that impacting facebook thank you
spk_1: yeah alan
spk_0: because of the lots of users in in in in russia
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