mark_zuckerberg

Adam Tow

Social


Facebook had a giant Q2, which looked like many of its previous quarters: Revenue and profits were both way up, driven by a boom in mobile ads.

But once Wall Street had digested those numbers, Mark Zuckerberg and his team wanted to make sure that investors didn’t get used to them, at least on the profits side.

On the company’s earnings call, they took great pains to indicate that they were in the process of making very big bets on stuff that won’t pay off for a very long time, like Oculus Rift, the virtual reality company it just bought for $2 billion, and WhatsApp, the messaging startup it plans to buy for $19 billion.

Facebook could reduce some of the risk with a “cheap and easy approach,” Zuckerberg said — jamming ads into new apps, or shoving payment opportunities into them. “But we’re not going to do that.”

Investors seem okay with that. Facebook shares, which were trading up about four percent when the call started, moved up as the afternoon progressed. They’re now up about five percent.

———-
EARLIER:

A quick look at Facebook’s Q2: Revenue of $2.91 billion and earnings of 42 cents a share. Wall Street had expected at least $2.81 billion and 32 cents, but this isn’t enough to impress investors — the stock is basically flat after hours. Update: Now traders seem a bit more interested, and have pushed shares up a couple percent.

If you’ve seen Facebook’s earnings reports over the past few quarters, then the highlights will seem familiar: Facebook is still growing its usage numbers, and its mobile ad business — which was literally nonexistent when it IPO’d a couple years ago — is now giant and accounts for 62 percent of the company’s ad revenue.

Usage numbers, straight from the press release:

  • Daily active users were 829 million on average for June 2014, an increase of 19 percent year-over-year.
  • Mobile DAUs were 654 million on average for June 2014, an increase of 39 percent year-over-year.
  • Monthly active users were 1.32 billion as of June 30, 2014, an increase of 14 percent year-over-year.
  • Mobile MAUs were 1.07 billion as of June 30, 2014, an increase of 31 percent year-over-year.

There is not much more to chew over here, so we’ll duck out temporarily until the earnings call, which we’ll cover live at 5 pm ET.

Until then, here’s one of several up-and-to-the-right charts from FB investor relations. This one explains how much users are worth to Facebook, depending on where they live:

Peter Kafka July 23, 20142:01 pm

Greetings! Back now, and awaiting word from Mark Zuckerberg, Sheryl Sandberg and crew. Starting now:

Peter Kafka July 23, 20142:02 pm

Zuckerberg, reading: “A good quarter for us.”

Peter Kafka July 23, 20142:03 pm

“Still so much room to grow” – lots of time spent on FB, but people spend lots of time on media and digital media, so we can cut into that pie.

Peter Kafka July 23, 20142:05 pm

Still trying to “connect everyone.” This involves both Internet.org — Internet access in developing/Third world —  and apps like Instagram.

Peter Kafka July 23, 20142:05 pm

Messaging and messenger app a big deal. Remember that we told you we got David Marcus from PayPal to run that? He’s good.

Peter Kafka July 23, 20142:06 pm

Instagram cruising. We updated the app!

Peter Kafka July 23, 20142:06 pm

“Next, let’s talk about understanding the world.” 1 billion search queries a month.

Peter Kafka July 23, 20142:07 pm

Public content push (i.e. “be more like Twitter,” sorta) going well. Repeats World Cup stats. “Public content will continue to be a growing focus for us.”

Peter Kafka July 23, 20142:07 pm

Supporting developers: References F8 plans/disclosures. 

Peter Kafka July 23, 20142:08 pm

“Hundreds of apps” using the new deep-linking structure they rolled out.

Peter Kafka July 23, 20142:09 pm

Some ad chat.

Peter Kafka July 23, 20142:09 pm

“It’s been a quarter with good performance.”

Peter Kafka July 23, 20142:09 pm

Here’s Sheryl Sandberg. “A strong second quarter.” Repeating stats from release.

Peter Kafka July 23, 20142:10 pm

Everything up and to the right.

Peter Kafka July 23, 20142:10 pm

Focusing on small business and brand marketers, as well as investments in ad products, ad tech.

Peter Kafka July 23, 20142:11 pm

A story about small business in India. There is a startup in India that uses Facebook ads. It is working well.

Peter Kafka July 23, 20142:12 pm

World Cup was pretty cool, right?

Peter Kafka July 23, 20142:13 pm

Brands like the World Cup, too. Did you see that McDonald’s thing where french fries were players? No? It reached 125 million people.

Peter Kafka July 23, 20142:17 pm

Now CFO David Wehner, reading his script. 

Peter Kafka July 23, 20142:20 pm

A reminder that $19b Whatsapp deal hasn’t closed. Still expects it do so this year.

Peter Kafka July 23, 20142:21 pm

And a reminder that when that deal does close, it and Oculus deal will add “significant” expenses.

Peter Kafka July 23, 20142:23 pm

Okay! Now on to Q&A. Hoping for something interesting here.

Peter Kafka July 23, 20142:24 pm

First analyst refuses to ask a question! Dead air.

Peter Kafka July 23, 20142:24 pm

Second analyst also not asking! 

Peter Kafka July 23, 20142:24 pm

Fair bet: Tech difficulties.

Peter Kafka July 23, 20142:25 pm

Okay. An actual question: More info about “audience network” and LiveRail please, deal. Also: How many people are you hiring via Oculus and Whatsapp deals?

Peter Kafka July 23, 20142:25 pm

Sandberg: We’ll use LiveRail’s video ad network and build on that to sell video ads outside of FB.

Peter Kafka July 23, 20142:26 pm

Wehner: We’re in investment mode. Won’t go into specifics.

Peter Kafka July 23, 20142:27 pm

Q: More info about mobile ad biz, please. Maybe some color? Also, maybe more about TV and Internet ad budgets converging?

Peter Kafka July 23, 20142:28 pm

Sandberg: Everyone thinks that mobile app install ads are all or a “great majority” of mobile ads. “They’re not.” Lots of other stuff. Also, not just app devs. “A good part of our revenue…” but we think mobile ads will be much more than app install.

Peter Kafka July 23, 20142:31 pm

[This makes sense: Whatever percentage of mobile biz app install ads represent -- some people think 50 percent; today I read an note from analyst Doug Anmuth suggesting a third -- FB won't be comfortable if bulk of biz comes from app installs, which may not be sustainable; also, FB likes notion that same TV/brand advertisers it has courted for desktop will work on mobile, too.]

Peter Kafka July 23, 20142:31 pm

Apologies, coming late to discussion of Facebook’s “buy button” and payments plans.

Peter Kafka July 23, 20142:32 pm

Zuckerberg: “Will be years of work” before things like Messenger, Whatsapp, etc., become big businesses. Compares them to FB in 2006.

Peter Kafka July 23, 20142:33 pm

“We’re really serious about doing this the right way” — you won’t see impact in “next short period of time” on P&L.

Peter Kafka July 23, 20142:33 pm

(Or, at least on the revenue side – will show up on the expense side, per CFO warnings)

Peter Kafka July 23, 20142:37 pm

Apologies, had to duck out. Back now.

Peter Kafka July 23, 20142:38 pm

Q about ad pricing. It’s up a lot. Can you talk about organic growth? Also, what will new ad formats do to ad pricing?

Peter Kafka July 23, 20142:39 pm

Wehner: Pricing is up b/c there are more newsfeed ads. “But we are focused on making our ads all better.” 

Peter Kafka July 23, 20142:39 pm

(Nothing about new product pricing)

Peter Kafka July 23, 20142:40 pm

Q: Any news on China? Also, more on David Marcus coming to Messenger — isn’t it like hiring Messi to play for the Miami Heat? (Note to Kara Swisher: Messi plays soccer, the Miami Heat is a professional basketball team.)

Peter Kafka July 23, 20142:41 pm

Zuckerberg: Marcus is a “real talented product generalist.” He’s good at lots of stuff. Messenger will have “some overlap with payments” over time, but that’s just part of it. “We’re really focused on the interactions overall, rather than the mechanisms.” Again, need to do lots of work on that, other stuff. “We have a lot of work to do. We could just try to take the cheap and easy approach” and jam ads in, “but we’re not going to do that.”

Peter Kafka July 23, 20142:45 pm

Zuckerberg reminding analysts that FB used to be an app platform, but isn’t really anymore.

Peter Kafka July 23, 20142:45 pm

But it would very much like to be an app *backbone*.

Peter Kafka July 23, 20142:49 pm

Zuckberg now talking about autoplay video. Optimistic that it will be good. You’re only going to click on something and play it if it catches your eye. Autoplay won’t be only ads, making sure that we’re ramping up organic stuff now (I can verify this is true – FB turned up the autoplay dial on my feed a few days ago. Now it is full of videos from my pals.)

Peter Kafka July 23, 20142:51 pm

[BTW, a note that Zuckerberg sounds much more engaged and confident than I've heard him before on these calls. Answering many more questions, some of them emphatically.]

Peter Kafka July 23, 20142:53 pm

Zuckerberg arguing that FB won’t be all about sharing everything with everyone. One of the reasons he’s psyched about Messenger — you’re going to reach peak “hey everyone look at my photos” anytime now, if you haven’t already.

Peter Kafka July 23, 20142:53 pm

Q: Can you talk about Oculus Rift?

Peter Kafka July 23, 20142:56 pm

Zuckerberg: “Really excited about this.” “This hits on a different part of our strategy… ” I always say some of the stuff we talk about is further out than you think, and this stuff is even further out than that. We’re investing in the next set of computing platforms. Again — totally a long-term play.

Peter Kafka July 23, 20142:57 pm

Q: You talked about public content – are you going to do exclusives for specific content, or stuff from specific people?

Peter Kafka July 23, 20142:59 pm

Zuckerberg: We get lots of exclusive content. We don’t pay for it. People want to give us stuff, because we reach so many people. “You’re not going to come to Facebook to watch a movie, or watch a TV show. … We’re mostly focused on driving success for our partners.”




Follow

Get every new post delivered to your Inbox.

Join 317,771 other followers