Meta Platforms, Inc.

Good afternoon. My name is Mike and I will be your conference operator today. At this time, I would like to welcome everyone to the Facebook third quarter 2019 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, please press star, then the number one on your telephone keypad. This call will be recorded. Thank you very much. Ms. Deborah Crawford, Facebook's Vice President of Investor Relations, you may begin.

Thank you. Good afternoon and welcome to Facebook's third quarter 2019 earnings conference call. Joining me today to discuss our results are Mark Zuckerberg, CEO, Sheryl Sandberg, COO, and Dave Wehner, CFO. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. 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 quarterly report on Form 10-Q filed with the SEC. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During this call, we may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. The press release and an accompanying investor presentation are available on our website at investor.fb.com. And now I'd like to turn the call over to Mark.

All right. Thanks, Debra. Thank you all for joining us today. Before we get started, I want to talk about the announcement we just shared that Sue Desmond-Hellman is going to be leaving our board to focus on her health and other commitments. Sue has been a wonderful and thoughtful voice on our board for six years. And I'm deeply personally grateful for everything that she has done for this company. This was a good quarter for our community and our business. There are now around 2.8 billion people using Facebook, Instagram, WhatsApp, or Messenger each month, and around 2.2 billion people using at least one of our services daily. The Facebook app had a particularly strong quarter, including in the US and Canada. We also recently released that we estimate that more than 140 million businesses, mostly small businesses, are using our services each month to grow, create jobs, and become social hubs in their communities. This has been a busy quarter on a lot of fronts. We've launched a number of new, exciting products, like Facebook Dating in the U.S., which is doing quite well. Threads for Instagram, our camera-first experience to share with your close friends. Facebook News, our dedicated product for news that we've built in partnership with news publishers, and we introduced Horizon, a new social experience for VR. We also released hand-tracking technology for Oculus and Oculus Link, so your Quest is basically now a Rift 2. We're making progress building out the private social platform across WhatsApp, Messenger, and Instagram Direct, and we have multiple exciting initiatives around commerce and payments that we're moving forward, from Marketplace to Instagram Shopping to payments in WhatsApp, and continuing our discussion on Libra. This has also been a busy quarter on the policy and social issues front. We formally entered into a settlement with the FTC to make structural changes and build a rigorous privacy program that will set a new standard for our industry. We're about a year out now from the 2020 elections, and we just announced that the systems we've built are so advanced that we've proactively identified and removed multiple foreign interference campaigns coming from Russia and Iran. And we found ourselves in the middle of the debate about what political speech is acceptable in the upcoming campaigns. But today, I want to focus on talking about principles. Because from a business perspective, it might be easier for us to choose a different path than the one that we're taking. So I want to make sure that everyone is clear about what we stand for and why we're making some of the decisions that we're making. Now, I gave a speech a couple of weeks ago about the importance of standing for voice and free expression. I believe strongly, and I believe that history supports, that free expression has been important for driving progress and building more inclusive societies around the world. That at times of social tension, there has often been an urge to pull back on free expression, and that we will be best served over the long term by resisting this urge and defending free expressions. Today is certainly a historical moment of social tension, and I view an important role of our company as defending free expression. Now this has never been absolute, and of course we take our responsibility to prevent harm very seriously too. I think we invest more in getting harmful content off our services than any other company in the world. Those who follow us closely know that we have more than 35,000 people working on safety and security, and that our budget for this work is billions of dollars a year. more than the whole revenue of our company at the time of our IPO earlier this decade. And we're going to keep on investing more here. But while we work hard to remove content that can cause real danger, I think we also need to be careful about adopting more and more rules that restrict the way that people can speak and what they can say. Right now, the content debate is about political ads. Should we block political ads with false statements? Should we block all political ads? Google, YouTube, and most Internet platforms run these same ads. Most cable networks run these same ads. And, of course, national broadcasters are required by law to run them by FCC regulations. And I think that there are good reasons for this. In a democracy, I don't think it's right for private companies to censor politicians or the news. And although I've considered whether we should not carry these ads in the past, and I'll continue to do so, On balance, so far I've thought that we should continue. Ads can be an important part of voice, especially for candidates and advocacy groups that the media might not otherwise cover so they can get their message into the debates. And it's hard to define where to draw the line. Would we really want to block ads for important political issues like climate change or women's empowerment? Now instead, I believe that the better approach is to work to increase transparency. Ads on Facebook are already more transparent than anywhere else. We have a political ads archive, so anyone can scrutinize every ad that's run. You can see every message, who saw it, how much was spent, and that's something that no TV or print media does. Now, since this is an earnings call, I want to talk about the business impact of all of this. Some people accuse us of allowing this speech because they think that all we care about is making money, and that's wrong. I can assure you that from a business perspective, the controversy that this creates far outweighs the very small percent of our business that these political ads make up. We estimate that these ads from politicians will be less than 0.5% of our revenue next year. That's not why we're doing this. To put this in perspective, the FTC fine that these same critics said wouldn't be enough to change our incentives was more than 10x bigger than this. So the reality is that we believe deeply that political speech is important, and that's what's driving this. Now, other people say that this policy is part of a broader pattern of us building a system that incentivizes inflammatory content to fuel our business. And again, to the contrary, I think that we've done more than any of the other major Internet platforms to try to build positive incentives into our systems. We don't let any of our news feed or Instagram feed teams set goals around increasing time spent on our services. We rank feeds to encourage meaningful social interactions, helping people connect with friends, family, and their communities. We have real people come in and tell us what content they saw that was most meaningful to them and sparked valuable discussions, and then we build systems to try to surface that kind of content. We've taken many steps over the years to fight clickbait and polarization, and now we're even testing removing like counts in Instagram and Facebook. And we do this because we know that if we help people have meaningful interactions, they'll find our services more valuable, and that's the key to building something sustainable and growing over time. Now, last year, you probably remember that we made a series of changes that emphasized friends and family and reduced time spent on our services. One change removed 50 million hours of viral video watching a day. And we did this knowing that it would mean that people spend less time on our apps. which is not what you do if you're just prioritizing engagement over everything else. So I take getting these incentives right very seriously, and we're willing to make huge sacrifices in the short term to do what we think is right and will be better over time. Now, finally, some people say that this is just all a cynical political calculation and that we're acting in a way that we don't really believe because we're just trying to appease conservatives. That's wrong, too. Now, we face a lot of criticism from both progressives and conservatives. And frankly, if our goal, we're trying to make either side happy, then we're not doing a very good job because I'm pretty sure everyone is frustrated with us. Our values on voice and free expression are not partisan. But unfortunately, in our current environment, a lot of people look at every decision through the lens of whether it's going to help or hurt the candidate they want in winning their next election. Now, a lot of people have told us, you've got to pick a side. or else both sides are just going to cause a lot of problems for you. And sadly, from a practical perspective, they may be right, but we can't make decisions that way. So over the next year of campaigns, we're going to be at the center of the debate any time there's content or policies on any of our services that people believe could advantage or disadvantage their side. This may lead to more investigations, and the candidates are going to criticize us. I expect that this is going to be a very tough year. We try to do what we think is right, but we're not going to get everything right. This is complex stuff, and anyone who says that the answers are simple hasn't thought long enough about all the nuances and downstream challenges. I get that some people are going to disagree with our decisions. I get that some people are going to think that these decisions may have a negative impact on things that they really care about. But I don't think anyone can say that we're not doing what we believe or that we haven't thought hard about these issues. I could be wrong, but my experience running this company so far has been that if we do what we believe is right, even when it's unpopular for years at a time, then eventually it has worked out best for our community and for our business, too. And there's a lot at stake here. We're at a crossroads, not only in our own country, but in the future of the global Internet as well. China is building its own Internet and media ecosystem that's focused on very different values. And as these systems compete, the question of which nation's values will determine what speech is allowed for decades to come really puts into perspective the issues that we face today. Because while we may disagree on exactly where to draw the line on specific issues, we at least can disagree. And that's what free expression is about. Voice and expression have been important for progress throughout history. They've been important in the fight for democracy worldwide. And I believe that voice and expression are an important part of the path forward today. And that's why our company will continue standing for these principles. As always, I am grateful for all of your support in everything that we do. And that's especially true today. In addition to these challenges, there are a lot of great things that are going on that I'm incredibly proud of and excited about. And I'm glad that our community and business trends continue heading in a good direction. I'm happy to talk about any of these things in the Q&A. And now here is Cheryl to talk more about our business.