Meta Platforms, Inc.

Good afternoon. My name is France, and I will be your conference operator today. At this time, I would like to welcome everyone to Facebook first quarter 2021 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 1 and then the number 4 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 first quarter earnings conference call. Joining me today to discuss the results are Mark Beckerberg, 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 annual report on Form 10-K 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.sb.com. And now I'd like to turn the call over to Mark.

Hey, everyone. Thanks for joining us today. Before we get started, I just want to take a moment to say that we are very worried about the COVID situation in India and also in Brazil. I'm hoping that we can get this virus under control soon, and in the meantime, we're focused on what we can do to help there. Now, turning to the results, this was another strong quarter. More than 2.7 billion people now use one or more of our apps each day, And more than 200 million businesses use our tools to reach customers. And this has been an intense year. And I am proud that we continue to deliver value for people and businesses around the world. Now, over the past couple of quarters, our business has been performing better than we expected. And this has given us the confidence to increase our investments meaningfully in a few key areas that have the potential to change the trajectory of the company over the long term. So on today's call, I'm going to talk about the opportunities that we're pursuing in augmented and virtual reality and around commerce, business messaging, and creators. First, let's talk about building the next computing platform. Now, I believe that augmented and virtual reality are going to enable a deeper sense of presence and social connection than any existing platform. They're going to be an important part of how we will interact with computers in the future. So we're going to keep investing heavily in building out the best experiences here, and this accounts for a major part of our overall R&D budget growth. Quest 2 is doing better than we expected, even after the holiday season. We continue to see good engagement, and we keep shipping updates that make Quest better and better, including Air Link, which enables wireless streaming of games and content from PCs, and support for 120 Hz refresh rates. Now, achieving Quest's high quality in a wireless form factor has been a major breakthrough. Having wires wrapped around you just really breaks the sense of presence and immersion. The technology to deliver a great experience wirelessly is very advanced, and most companies aren't going to be able to deliver this. But we believe that it is the minimum bar for a high-quality experience. This quarter, we also shared more about our future investments, including neural interfaces for interacting with AR, and we started testing our new avatar system, which will be a key part of how people express themselves and connect. One interesting trend is that we're seeing the app ecosystem broaden out beyond games into other categories as well. The most used apps are social, which fits our original theory for why we wanted to build this platform in the first place. We're also seeing productivity and even fitness apps. So for example, we launched a tool so people can subscribe to services like FitXR to do boxing and dancing in VR just like they would for biking on Peloton. We introduced App Lab so developers can ship early versions of their apps directly to consumers without having to go through the Oculus store. And between App Lab and streaming from PCs, we're pioneering a much more open model of app store than what's currently available on phones today. Now over time, I expect augmented and virtual reality to unlock a massive amount of value, both in people's lives and the economy overall. There's still a long way to go here, and most of our investments to make this work are ahead of us. But I think that the feedback that we're getting from our product is giving us more confidence that our prediction for the future here will happen, and that we're focusing on the right areas. Now, beyond AR and VR, I want to call out some of the other long-term opportunities that we're really focused on, especially in commerce and business messaging. Commerce has been growing in our services for a while. but it has become a lot more important as the pandemic has accelerated a broader shift towards businesses moving online. In the last year, we've seen online storefronts stay open even when physical stores closed. And going forward, online commerce will continue to offer an increasingly personalized and convenient experience. Commerce ads continue to do very well and drive a meaningful amount of our overall business. We built Marketplace into one of the world's leading services for people to buy and sell. And I am pleased to share today that more than 1 billion people visit Marketplace each month. And now we're investing in building for the future of commerce. So we launched Shops last year. And as I recently shared, there are now more than 1 million monthly active shops and over 250 million monthly shops and visitors. We're also focused on building more native commerce tools across our apps. We recently updated WhatsApp catalogs so businesses can keep them updated from their computers and to include what's in stock. We launched carts on WhatsApp last year and people have used them to send orders more than five million times. We're also building up broader infrastructure to support commerce. everything from payments to customer service and support. And WhatsApp Payments is now live in India, and we have gotten approval in Brazil to launch shortly, too. We're starting to see a meaningful shift in the way that people communicate with businesses. For a lot of people, online commerce is less about websites and shops and more about messaging. So people want to to get support and make purchases right from a chat. Smaller businesses want to show their products and take orders via messages, and larger businesses want reliable and secure infrastructure to communicate with their customers. Businesses using the WhatsApp business API are already sending more than 100 million messages per day. Over the last year, during the height of COVID, total daily conversations between people and businesses on Messenger and Instagram grew by more than 40%. More than 3 million advertisers are already using click-to-message ads to direct people to Messenger. And since we introduced click-to-WhatsApp ads, nearly 1 million advertisers have already started using them too. And now the next step here is we're going to make it possible to create those click to WhatsApp ads from directly within the WhatsApp business app. The next step is to make it easier for businesses to adopt all these services and to give them the tools that can handle messages and customer relationships. Our acquisition of customer is going through regulatory approvals, and we're looking forward to offering businesses a native way to manage their customer relationships on our platform. Now, I want to be clear that we have a long way to go to build out a full featured commerce platform across our services, and this is a multi-year journey, but I am very committed to getting there. This modern commerce system is going to bring together a number of areas where we either already have strong offerings like in ads, community tools, and messaging, with areas like shops and business messaging and payments that we are focused on ramping up now. As part of this, we're also investing more in building out better customer support for our product. For the last several years, we've focused a lot on content moderation and privacy work, and I view customer support as the next pillar of the trust and safety work for our services. The last area that I want to discuss today is around creators. I think that a positive vision for the future of the economy is one where more people get to do creative work that they enjoy rather than jobs that they don't. And to get there, we need to build out the creative and monetization tools to support this creator economy. People create an incredibly diverse set of content across our services from long-form writing to live conversations to documentaries and augmented reality filters. And our goal is to support the full range of human expression and to be the best platform for millions of creators to make a living. Now part of this is gonna be delivering a suite of tools and products that span all the ways that people wanna create and consume content. I believe that at the intersection of every media type and every audience size, there is a compelling experience to build. For example, I recently discussed our audio roadmap, and we already support audio calls for private audio communication, but now we're also building out live audio rooms, which we think will be especially useful for groups and communities. We're building sound bites for sharing and consuming short-form audio clips broadly, and we are supporting podcasts for sharing and listening to long-form audio. And we're also partnering with Spotify to launch a music player in the Facebook app. So we also need to connect these experiences with easy options for monetization, whether that's subscriptions, tipping, or enabling creators to give product recommendations and enable commerce. And with Instagram and Facebook, we have a unique ability to bring creators and commerce together, and we will share more on that later this year. Now, together, these efforts around creators, commerce, and the next computing platform are a few of the big areas that we are doubling down on going forward. And in each of these, there is a unique opportunity to help people connect in deeper ways and to support a stronger economy for everyone. I'm optimistic that our work in all of these areas will help accelerate some of the positive emerging trends that we are seeing in the world.