Meta Platforms, Inc.

Good afternoon. My name is Dave and I will be your conference operator today. At this time, I would like to welcome everyone to the Meta fourth quarter and full year 2022 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, please press the one then the number four on your telephone keypad. This call will be recorded. Thank you very much. Ms. Deborah Crawford, Meta's Vice President of Investor Relations, you may begin.

Thank you. Good afternoon and welcome to Meta Platform's fourth quarter 2022 earnings conference call. Joining me today to discuss our results are Mark Zuckerberg, CEO, and Susan Lee, CFO. Javier Olivon, COO, is also on the call and will join Mark and Susan for the Q&A portion. 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. Hey, everyone, and thanks for joining us today. 2022 is a challenging year, but I think we ended it having made good progress on our main priorities and setting ourselves up to deliver better results this year as long as we keep pushing on efficiency. And I said last quarter that I thought our product trends look better than most of the commentary out there suggests. And I think that's even more the case now. We reach more than 3.7 billion people monthly across our family of apps. On Facebook, we now reach 2 billion daily actives and almost 3 billion monthly. The number of people daily using Facebook, Instagram, and WhatsApp is the highest it's ever been. Now, before getting into our product priorities, I want to discuss my management theme for 2023, which is the year of efficiency. We closed last year with some difficult layoffs and restructuring some teams. And when we did this, I said clearly that this was the beginning of our focus on efficiency and not the end. And since then, we've taken some additional steps, like working with our infrastructure team on how to deliver our roadmap while spending less on CapEx. Next, we're working on flattening our org structure and removing some layers of middle management to make decisions faster, as well as deploying AI tools to help our engineers be more productive. As part of this, we're going to be more proactive about cutting projects that aren't performing or may no longer be as crucial. But my main focus is on increasing the efficiency of how we execute our top priorities. So I think that there's going to be some more that we can do to improve our productivity, speed, and cost structure. And by working on this over a sustained period, I think we'll both build a stronger technology company and become more profitable. I'm very focused on doing this in a way that helps us build better products. And because of that, even if our business outperforms our goals, this will stay our management theme for the year, since I think it's going to make us a better company. Now, at the same time, I'm also focused on delivering better financial results than what we've reported recently. And on meeting the expectation that I outlined last year, of delivering compounding earnings growth even while investing aggressively in future technology. Now next, I want to give some updates on our priority areas. Our priorities haven't changed since last year. The two major technological waves driving our roadmap are AI today and over the longer term, the metaverse. So first let's talk about our AI discovery engine. Facebook and Instagram are shifting from being organized solely around people and accounts you follow to increasingly showing more relevant content recommended by our AI systems. And this covers every content format, which is something that makes our services unique. But we're especially focused on short-form video since Reels is growing so quickly. And I'm really proud of our progress here. Reels plays across Facebook and Instagram have more than doubled over the last year, while the social component of people resharing Reels has grown even faster and has more than doubled on both apps in just the last six months. The next bottleneck that we're focused on to continue growing reels is improving monetization efficiency, or the revenue that's generated per minute of reels watched. Currently, the monetization efficiency of reels is much less than feed. So the more that reels grows, even though it adds engagement to the system overall, it takes some time away from feed and we actually lose money. But people want to see more reels, though. So the key to unlocking that is improving our monetization efficiency so that way we can show more reels without losing increasing amounts of money. We're making progress here, and our monetization efficiency on Facebook has doubled in the past six months. In terms of the revenue headwind, we're still on track to be roughly neutral by the end of this year or maybe early next year. And then after that, we should be able to profitably grow reels while keeping up with the demand that we see. In our broader ads business, we're continuing to invest in AI, and we're seeing our efforts pay off here. In the last quarter, advertisers saw over 20% more conversions than in the year before, and combined with a declining cost per acquisition, this has resulted in higher returns on ad spend. We continue to be excited about the monetization opportunity with business messaging, too. Facebook and Instagram are the first two pillars of our business, and in the next few years, we hope to bring Messaging online is the next pillar. One way of doing this is click-to-message ads, which is now at a $10 billion run rate. Paid messaging is the other piece of this. We're earlier here, but we continue to onboard more businesses to the WhatsApp business platform where they can answer customer questions, send updates, and sell directly in chat. For example, Air France started using WhatsApp to share boarding passes and other information other flight information in 22 countries and four languages. And businesses often tell us that more people open their messages and they get better results on WhatsApp than other channels. AI, it's the foundation of our discovery engine and our ads business. And we also think that it's going to enable many new products and additional transformations in our apps. Generative AI is an extremely exciting new area with so many different applications and One of my goals for Meta is to build on our research to become a leader in generative AI in addition to our leading work in recommendation AI. The last area that I want to talk about is the Metaverse. We shipped Quest Pro at the end of last year. I'm really proud of it. It's the first mainstream mixed reality device. We are setting the standard for the industry with our Meta reality system. As always, the reason why we're focused on building these platforms is to deliver better social experiences than what's possible today on phones. And the value of MR is that you can experience the immersion and presence of VR while still being grounded in the physical world around you. We're already seeing developers build out some impressive new experiences like Nanome for 3D modeling, molecules and drug development, Archeo for architects and designers to create interiors, And of course, a lot of great games. The MR ecosystem is relatively new, but I think it's going to grow a lot over the next few years. Later this year, we're going to launch our next generation consumer headset, which will feature meta reality as well. And I expect that this is going to establish this technology as the baseline for all headsets going forward and eventually, of course, for AR glasses as well. Beyond MR, The broader VR ecosystem continues growing. There are now over 200 apps on our VR devices that have made more than a million dollars in revenue. We're also continuing to make progress with avatars. We just launched avatars on WhatsApp last quarter, and more than 100 million people have already created avatars in the app. And of those, about one in five are using their avatar as their WhatsApp profile photo. I thought that that was an interesting example of how the family of apps and metaverse visions come together. Because even though most of our Reality Labs investment is going towards future computing platforms, glasses, headsets, and the software to run them, as the technology develops, most people are going to experience the metaverse for the first time on phones and start building up their digital identities across our apps. All right, so those are the areas we're focused on. AI, including our discovery engine, ads, business messaging, and increasingly generative AI. and the future platforms for the metaverse. And from an operating perspective, we are focused on efficiency and continuing to streamline the company so we can execute these priorities as well as possible and build a better company while improving our business performance. And as always, I'm grateful to our teams for your work on all of these important areas and to all of you for being on this journey with us. And now over to Susan.