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 fourth quarter and full year 2020 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 fourth quarter and full year 2020 earnings conference call. Joining me today to discuss our results are Mark Zuckerberg, CEO, Gerald 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 gap to non-gap 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, everyone, for joining us today. I hope you are all staying healthy and well. Our community and business had a strong end of the year. As COVID continued to keep many of us apart and at home, People and businesses continue relying on our services to stay in touch and create economic opportunity. 2.6 billion people now use one or more of our apps each day, and more than 200 million businesses, mostly small businesses, use our free tools to reach customers. Those numbers give a sense of scale, but some of the stories we hear show the impact. Groups have formed where COVID long haulers are helping each other through this scary experience where there's Not much else to turn to. Teachers are sending class assignments to students through WhatsApp. Local bookstores and coffee shops are using Instagram to let customers know they're open for curbside pickup. We saw people come together to raise $1.8 billion for nonprofits and personal causes through our fundraising tools last year, including $175 million for COVID-related causes alone. I'm proud of the role that our service has played in helping people support each other during what has been such a hard time. Now, I've spent a fair amount of time on recent earnings calls talking about our election integrity efforts, so I'm not going to discuss them at length today, but I do want to call out that according to our estimates, we easily surpassed our goal to help 4 million people register to vote as part of the largest ever effort, largest effort to distribute authoritative voting information in recent history. And I want to thank everyone involved in our teams and outside involved with that effort. So today, I'm going to focus on our product work. And specifically, I'm going to focus on four themes that I'm excited about for the year ahead. Communities, private messaging, commerce tools for small businesses, and building the next computing platform. So let's start with communities. I think that helping people build communities is one of the most important things that we can do. Our social fabric is made of multiple different layers through which we get our social support. First, we have friends and family. That's the most personal layer. Then we have communities we're a part of where we feel a sense of purpose and belonging, explore interests, develop skills, grow as individuals, and meet new people. And then finally, there's the safety net that society and government provide. And in many parts of the world, there's been an unfortunate decline in community participation over the last several decades. That's that second layer. And this isn't something that we can solve alone, but I think we can help. So now that we've helped billions of people stay connected with friends and family, helping everyone find and participate in communities that are meaningful to them has been our next goal. And we even updated our mission a few years ago to reflect this, making it give people the power to build community and bring the world closer together. Today, more than 600 million people are now members of a group on Facebook that they consider to be meaningful in their lives. This is growing steadily over time, and I hear all the time from people who are in parenting groups that there are major resources that navigate raising kids, or from people who found a group that shares the same health condition and they can lean on that community for knowledge and support, or from people who've moved to a new place and joined local groups to meet people and get situated. Our product focus Now is to develop this community infrastructure beyond feeds and message boards to help people build and run full self-sustaining community institutions. So we're building tools to help groups get things done together and provide support for people that span messaging, video chat, and even community's own websites. And we're exploring different ways to raise funds, including donations, merchandise, and membership fees, to help group leaders support their community's operations and hire people for different roles that are needed to build sustainable communities for the long term. So as we continue to focus on this, we need to make sure that the communities that people connect with are healthy and positive. And that's something that we've been focused on for a while now. One way, of course, that we do this is by taking down groups that break our rules against things like violence or hate speech. And in September, we shared that we had removed more than one million groups in the last year alone. But there are also a lot of groups that we may not want to encourage people to join, even if they don't violate our policies. So, for example, we stopped recommending civic and political groups in the U.S. ahead of the elections. We're continuing to fine-tune how this works, but now we plan to keep civic and political groups out of recommendations for the long term, and we plan to expand that policy globally. And to be clear, this is a continuation of work we've been doing for a while to turn down the temperature and discourage divisive conversation in communities. Now, along these same lines, we're also currently considering steps that we can take to reduce the amount of political content in newsfeed as well. We're still working through exactly the best ways to do this, and to be clear, of course we're still going to enable people to engage in political groups and discussions if they want to. These can often be important and helpful, and they can be ways that people organize grassroots movements or speak out against injustice or learn from people with different perspectives. So we want these discussions to be able to keep happening, but one of the top pieces of feedback that we are hearing from our community right now is that people don't want politics and fighting to take over their experience on our services. So one theme for this year is that we're going to continue to focus on helping millions of more people participate in healthy communities, and we're going to focus even more on being a force for bringing people closer together. Next, let's talk about private messaging. As we've discussed before, while people enjoy connecting with friends and communities in the digital equivalent of a town square in apps like Facebook and Instagram, the fastest growing social experiences are about connecting privately in the digital equivalent of the living room in services like WhatsApp and Messenger. So that's why we kicked off a big effort a couple of years ago to reimagine what a modern social platform would look like if you built it from the bottom up to be privacy first. And we identified several core principles. A private social platform should be built around the most intimate interactions that we have, and that's one-on-one conversations. The most important aspect of privacy and security is that your conversations should stay between you. And that means that your conversations should always be end-to-end encrypted, and they should disappear when you're done with them. Safety and reducing spam matter too, and that means that we should maintain a minimum amount of metadata to build sophisticated tools to stop bad actors using these services. And you should have choice over what services you use. So we should make messaging as interoperable as possible across our apps. And finally, no matter what, we should only store people's data in countries where we know we can keep it secure. And we should continue opposing data localization in countries with weak records on human rights or privacy. Now, I think that these are the privacy principles that matter most to people. First and foremost, people care that their conversations stay private. But after that, people also care about safety and other convenience too. And from this perspective, WhatsApp and the direction that we're heading in with Messenger are the best private social apps available. Now, we have a lot of competitors who make claims about privacy that are often misleading. Apple recently released so-called nutrition labels which focused largely on metadata that apps collect rather than the privacy and security of people's actual messages. But iMessage stores non-intended encrypted backups of your messages by default, unless you disable iCloud. So Apple and governments have the ability to access most people's messages. So when it comes to what matters most, protecting people's messages, I think that WhatsApp is clearly superior. Now, Since I try to use these earnings calls to discuss aspects of business strategy that I think are important for investors to understand, I do want to highlight that we increasingly see Apple as one of our biggest competitors. iMessage is a key linchpin of their ecosystem. It comes pre-installed on every iPhone, and they've preferenced it with private APIs and permissions, which is why iMessage is the most used messaging service in the U.S., And now we are also seeing Apple's business depend more and more on gaining share in apps and services against us and other developers. So Apple has every incentive to use their dominant platform position to interfere with how our apps and other apps work, which they regularly do to preference their own. And this impacts the growth of millions of businesses around the world, including with the upcoming iOS 14 changes, many small businesses will no longer be able to reach their customers with targeted ads. Now, Apple may say that they're doing this to help people, but the moves clearly track their competitive interests. And I think that this dynamic is important for people to understand because we and others are going to be up against this for the foreseeable future. Now, our messaging services continue growing, but it is an uphill battle, and our services just need to be that much better as private social platforms to succeed. So to make sure that we remain the best, a couple years back we kicked off a number of long-term efforts that have started shipping recently, and more of these projects around strengthening encryption, ephemerality, interoperability, and offering other tools are going to be shipping throughout this year. All right, so now let's talk about commerce. Our goal here is to give every individual entrepreneur and small business access to the same kinds of tools that historically only the big companies have had access to. And we've always cared about this, but the pandemic has made it more urgent. So it used to be the case that only large companies could afford to have analytics or targeted advertising capacity to reach their customers. And it was expensive to build these capabilities and it often required building teams and storing large amounts of data in-house, which most small businesses can't do. And so one of the things that I'm most proud of is that we build the tools so we can offer these same capabilities to small businesses, often for free. So when you hear people say that we hold a lot of data, That's because hundreds of millions of businesses that would have otherwise had to do this individually and would have had no easy way of doing so are now using our services to help them reach customers. And when you hear people say that we're connecting data from lots of sources, that's to help small businesses reach customers more efficiently. Now, big companies often do this themselves, but small businesses can't a lot of times, so we do this for them. So when you hear people argue that we shouldn't be doing these things or that we should go back to the old days of untargeted television ads, I think that what they're really arguing for is a regression where only the largest companies have this capacity. Small businesses are severely disadvantaged and competition is diminished. So with our commerce tools, we've made it so that a business can set up a shop once, And then they will have an online storefront in both Facebook and Instagram immediately, and eventually on WhatsApp and Messenger as well. And we recently expanded checkout to all U.S. businesses, making the process of buying a lot more seamless. And as the lockdowns have continued, we saw more businesses, more small businesses and creators also use paid online events as a way to make money. WhatsApp is also an important part of our strategy here. More than 175 million people message a WhatsApp business account every day, and we're building new features to make it even easier to transact with businesses in the app. We introduced carts, which lets people browse catalogs, select multiple products, and send the order as a message to a business. The more people that interact with businesses, the better tools that we're going to need to provide for businesses to help them support their customers. Many businesses need more than a phone to manage their customer service, so we're building tools to let businesses store and manage their WhatsApp chats using our secure hosting infrastructure if they would like. And we're in the process of updating WhatsApp's privacy policy in terms of service to reflect these optional experiences. Now, to clarify some confusion that we've seen, this update does not change the privacy of anyone's messages with friends and family. All of these messages are end-to-end encrypted, which means we can't see or hear what you say, and we never will unless the person that you message chooses to share it. And business messages will only be hosted on our infrastructure if the business chooses to do so. So we want everyone to know the lengths that we go to to protect your private messages. So we are moving the date of this update back to give everyone time to understand what the update means. Finally, let's discuss our work building the next computing platform. This is one of the areas that I'm most excited about our progress heading into 2021. If you look at the history of computing, every 15 years or so, a new major platform emerges that integrates technology more naturally and ubiquitously into our lives, starting with mainframes and PCs and browser-based computing and then mobile. And I believe that the next logical step here is an immersive computing platform that just delivers this magical sense of presence, that you're really there with another person or in another place. Our phones can't deliver this. And neither can any other technology that has come before it. This is going to unlock the types of social experiences that I dreamed about building since I was a kid. And it's what we're building towards at Facebook Reality Labs. We launched Quest 2 in October and it is on track to be the first mainstream virtual reality headset. We designed it so that anyone could jump in with the best and most immersive experience out there and at a price that makes it available to as many people as possible. I think that Facebook has done more than any other company to help bring virtual reality to the mainstream. And it's been great to see so many people embrace this, especially this year during the pandemic. We're seeing people use it to play games with friends when they can't be together in person, to do workouts in their living room, or to meet with colleagues while they're working from home. So there are a lot of reasons that Quest 2 was one of the hot holiday gifts this year. We're also seeing a growing ecosystem of developers building amazing new experiences for the platform. Right now, more than 60 Oculus developers are generating revenue in the millions. And that's nearly twice as many as a few months ago. In previous quarters, I've talked about our long-term future goals when it comes to virtual reality. But I think that this quarter's results show that this future is here. Augmented reality glasses are going to be a key part of this vision, too. We're still working on some of the foundational technology to underpin these, and the ultimate product is still some years away. But this year, we are excited to deliver a first glimpse of what will be when we launch our first pair of smart glasses from Ray-Ban in partnership with Luxottica. And during this pandemic, we've also seen Portal has proven to be a great way for people to stay connected, and especially over the holidays, families had to celebrate a part. You know, this year, we're focused on expanding the role of Portal and virtual reality presence into the workplace, bringing more features that can improve remote presence, collaboration, and productivity. 2021 has a lot of unknowns. You know, we don't know when vaccines are going to be widely available, when our teams will be back in the office, or when our lives are going to start feeling normal again. But what I do know is that we're going to keep investing in and innovating on the big themes that I discussed here in order to put more power in the hands of people and small businesses. I personally believe that technology can unlock progress and opportunity. And that the full story of the Internet has not yet been written. That's why I'm hopeful for the year ahead and grateful that you were all on this journey with us. And now here is Cheryl to talk about our business.