Advertising (naturally), mobile, video and applications were the dominant themes during Facebook’s first-quarter-2015 earnings call Wednesday evening.
Advertising
Facebook chief operating officer Sheryl Sandberg said during her opening remarks:
Two new products we introduced this quarter are good examples of this. The mobile Ads Manager app gives marketers the ability to manage their ad campaigns from their mobile devices. It’s early, but we’re already seeing more marketers managing their activity on mobile. We also launched a page-creation tool for feature phones, which has been a big driver of page adoption in high-growth emerging markets, where smartphones are less common.
Looking ahead, we believe video will play a significant role in bringing more marketers to mobile. More than 75 percent of global video views on Facebook occur on mobile, and we believe mobile video will become more important to marketers over time. Lionsgate‘s Age of Adaline premiere is a great example. To promote the film, Lionsgate targeted young women on Instagram with multiple video ads over the past few weeks. This week, since the film opens Friday, it is retargeting the audience from the Instagram campaign on Facebook. We expect more marketers to put mobile video at the heart of their campaigns in the future, and we’re well-positioned to drive this shift.
Our second priority is growing the number of marketers using our ad products, and we’re making great progress. In the second quarter of last year, we shared that we reached 30 million active business pages on Facebook. This number continues to grow as more and more small businesses are using our free pages product, and we remain focused on converting these page owners into advertisers. One way we’re doing this is by providing simple, easy-to-use products. Over 80 percent of our new advertisers start with entry-level tools like a promoted post or a page like. We are increasingly focused on making sure these tools work well on mobile. We’re also educating marketers on how to use Facebook more effectively. We recently launched two online training resources: Blueprint for large clients and agencies, and Learn How videos for small businesses. These efforts are paying off. In the first quarter, we announced that we now have over 2 million active advertisers.
Our third priority is making our ads more relevant. More relevant ads lead to better returns for marketers and better experiences for people. We’re pleased with the increased adoption of our targeting tools like custom audiences and conversion tracking. In the first quarter, we introduced dynamic product ads, which allow marketers to launch ads for different audiences. We also introduced carousel ads on Facebook and Instagram, which allow marketers to advertise for specific products. Adoption of our targeting tools and these new ad formats help make our ads more relevant.
We’re also focused on insights and measurement. We want to help marketers accurately measure the performance of their campaigns and then apply that learning to improve their returns. In the first quarter, we released an ad relevance score, a way for marketers to better understand how people respond to their ads. This helps marketers test different types of creative and optimize performance. We also launched conversion lift, a tool that scientifically measures how much additional business was driven from Facebook ads. This is important because it shows that ads on mobile can drive sales in retail stores and via other channels.
Sterne Agee director of research Arvind Bhatia said in a research note issued prior to the release of Facebook’s financial results:
Facebook has continued to roll out auto-play video ads with additional advertisers, and we expect a gradual expansion throughout this year. Ultimately, video ads will help Facebook more directly go after the $200 billion-plus worldwide TV advertising market. We note that in the U.S. alone, roughly 90 million to 100 million people are using Facebook during primetime TV hours.
And on the topic of small and midsized businesses, in response to a question from Wells Fargo Securities analyst Peter Stabler, Sandberg said:
On SMBs, we have a very small test in the U.S. We started last quarter with buy on Facebook, and that enables people to buy products from merchants with a buy button on pages, and it is a product that is used and aimed at SMBs. We’re also very focused on helping SMBs have a presence, especially a mobile presence. 35 percent of SMBs in the U.S. — which is probably ahead of most other countries — don’t have a Web presence at all, and an even smaller percentage of SMBs have a mobile Web presence or any kind of mobile presence that works. And so pages are a good and free and easy way to have a mobile presence, and that’s something we’re very focused on growing.
Mobile
Mobile growth was a key part of Facebook’s earnings release Wednesday, and the social network pointed out that Facebook and Instagram combined are responsible for one out of every five minutes spent on mobile in the U.S.
City Index senior market analyst Ken Odeluga said in an email to SocialTimes:
The CEO and management team have made little secret of the fact that they want to be a mobile-first business. (Facebook co-founder and CEO Mark Zuckerberg) has set an unofficial target for these mobile apps to hit 1 billion users, at which point the company trains its advertising and monetization efforts on them.
Facebook’s focus on mobile comes through even in its financial filings, which now offer many comparable data points about its mobile device business. They’ve realized everything on the Internet will be mobile, essentially.
The company has also begun offering more data to advertisers, both to help them understand what users are saying about companies and products and to help them test how effectively their ads encourage customers to buy things from stores.
Video
Facebook said it topped 4 billion daily video views during the first quarter of 2015, adding that more than 80,000 videos have now been embedded on third-party websites, and that more than 75 percent of global video views on the social network now occur on mobile.
Zuckerberg said during his opening remarks:
We’re also making good progress with video. We’re very pleased with our growth here, and this quarter, we reached a new milestone of more than 4 billion daily video views. We also launched an embedded video player that allows people to watch Facebook videos across the Web, and more than 80,000 videos have now been embedded on third-party websites. Spherical videos are going to be supported in News Feed later this year, allowing you to change your viewing angle for a more immersive experience. Supporting new types of content like this is an important part of preparing for the future of how people want to share.
Apps
Facebook said WhatsApp has reached 800 million monthly active users, while groups tallied 700 million, Messenger boasts 600 million and Instagram totals 300 million MAUs and 200 million daily active users.
The social network added that more than 45 billion messages are now sent on a daily basis, pointing out that more than 10 percent of mobile voice-over-Internet-protocol calls worldwide are placed via Messenger, and that Instagram users are spending an average of 21 minutes per day on the photo- and video-sharing network.
App Annie also pointed out that Messenger, the flagship Facebook app, WhatsApp and Instagram were the four most downloaded non-game apps globally, and that Messenger was No. 1 (not including games) in Brazil, France, Germany, the U.K. and the U.S.
Zuckerberg said during his opening remarks:
We’re building this family of apps because we want people to be able to share whatever moments they want with all the different sets of people they care about. Over time, we expect people to share richer content with an increasing frequency, so we want to continue developing new and better tools to facilitate this expression.
With WhatsApp, we continue to be pleased with our growth, and the team remains very focused on building new features to serve their community and expand. For Messenger, this has been a particularly busy quarter. We launched the Messenger Platform, which allows people to use creative new apps to have richer conversations. We also began rolling out payments on Messenger to give people an easy, secure way to send money to their friends. And we announced a new way for people to communicate with businesses using Messenger. We’re really excited by the potential to build Messenger into a service that helps people to express themselves in rich new ways and to access useful services.
With Instagram, our growth remains impressive, and this quarter, we reached a new milestone of more than 200 million daily actives. Growth in Asia, Europe and Latin America is particularly strong, with our community growing in some countries by more than 100 percent year-over-year, including Japan, South Korea and Indonesia. Combined with an average 21 minutes per day that people spend on Instagram, this is a good sign of this community’s continuing and growing strength.
Now, let’s talk about how we’re working with developers. Last month, we held F8, our annual event for the global developer community. Creating the future of sharing isn’t something that we can do on our own, but by supporting developers, we can deliver more apps and experiences for our community. At F8, we presented new tools to help developers build, grow and monetize their apps, including better sharing experiences from apps to Facebook and new analytics to help developers better understand how people are using their services. More than 30 million apps and sites have been built using Facebook developer tools, and last year, we drove more than 3.5 billion app installs. We think these improvements are going to create a lot of value for our community.
Bhatia said in his research note:
Near-term, the focus for WhatsApp will be user growth. The company recently reported that WhatsApp reached 800 million users during April, up from 700 million in January. We expect little in the way of monetization in the near term. Both WhatsApp and Facebook Messenger introduced free voice calling, and we believe this will further boost user growth and engagement.
Instagram has been very slow and deliberate in terms of its monetization efforts in the U.S., and it didn’t begin showing ads until October 2013. International monetization only began in 2014. We think monetization of Instagram will accelerate in the back half of 2015.
eMarketer principal analyst Debra Aho Williamson said in an email to SocialTimes:
The Facebook family is starting to gel, and we’re getting a better idea of how the company’s various properties are coming together. However, we’re still waiting for indications of how much ad revenue Facebook is getting from Instagram, and it will be important in coming quarters for the company to start to show how much momentum it’s gaining in video advertising and off-Facebook ad targeting.
Speaking of Instagram, JPMorgan Securities analyst Douglas Anmuth asked:
What are the signals that you’ll be looking for to tell you when it’s the right time to ramp-up the advertising on Instagram more?
And Zuckerberg replied:
We think about this the same way that we do ads in Facebook today. The primary goal is to increase the quality. That’s our strategy for growing the business. There’s more inventory that we can open up on Instagram over time because it’s so early, but we’re going to do that once we get to formats that are working well for businesses and that we feel really good about in the consumer experience.
And this has been a theme for our ad strategy and product development for more than a year now, maybe two years, where folks have consistently asked us what we’re going to do to increase the amount of ads that we’re showing. And our response has been that we’re going to focus on improving the quality and relevance and that’s both going to perform better for the people using our services and businesses who are buying ads. And that strategy, I think, is bearing out and we’ll continue to apply it to all of the things that we do.
And in response to a question from RBC Capital Markets analyst Mark Mahaney about the potential integration of WhatsApp and Facebook, Zuckerberg replied:
I mean, on the messaging question, yeah, we’re pretty happy with how it’s all going. I think if we’re going to pay $19 billion for a company, we should have pretty high expectations for how it’s going to do. So I do feel good about how we’re doing, but it needs to do a lot more obviously, and we’re very excited about the roadmap of things that we have ahead. In terms of integrating them, no, we’re not going to do that. One of the things that had been interesting while we were watching these different services grow was just how quickly multiple different messaging and communication services were growing at the same time, and it seemed a little bit counterintuitive at first because it seemed like there should have been more overlap than it actually, now in retrospect looking back, seems like there is.
So you can look at countries where both services, WhatsApp and Messenger, are growing very quickly like Brazil, for example. And what you’ll see is that basically people use them a little bit differently. I mean, WhatsApp is more of a clear text-messaging replacement. Facebook Messenger people use to connect with people that they know on Facebook primarily. And then there are differences in the feature sets, where WhatsApp is extremely utilitarian and focused on texting and now voice calling, whereas Messenger is very focused on expression and the whole set of things that fit into the tools around the Messenger Platform that we rolled out at F8, communicating with businesses now, richer tools to communicate in different ways. So I think that these are just going to keep on growing is my expectation and hope, and we’re excited to kind of pursue both different products to serve the different communities.
News Feed
The newest change to Facebook’s News Feed algorithm prompted this question from Deutsche Bank Securities analyst Ross Sandler:
So on the News Feed, you guys recently made tweak to kind of alter the algorithm in favor of friend-oriented content. And then on the other hand, you’re also moving toward hosting publisher content from The New York Times and BuzzFeed and folks like that. So how are you balancing out organic reach between these algorithm changes and then whether or not professional content is hosted inside of Facebook versus coming from a third-party website?
Zuckerberg responded:
For the News Feed question, the North Star for us in News Feed is that we want to produce the best experience for everyone who is using the app and loading News Feed to see what is going on in the world around them, right? There are lots of businesses on Facebook, there are professional content producers, but our main interest here is the people in the community who are using News Feed, not those guys, right? So of course we want to build tools to enable them to share their content and all of that, but we’re constantly refining the algorithms in order to make it so the experience is the best for you when you open up your phone and look at Facebook and there are a bunch of things that are going on, we want to make sure that we’re getting what you care about the most.
And we go to a lot of lengths to make sure that we’re getting signals from people in our community to make sure that we’re doing this correctly, in addition to the different signals that we would get from seeing people use the products. We also do a lot of qualitative surveys to see what people write in that they want to see from us, what people tell us is the most important thing that they saw in Facebook today or saw anywhere in the world today and what they would’ve wanted to have seen on Facebook. And our goal is to just constantly refine this and make it better, and we’re going to keep on doing that because we think there’s a lot of upside and there’s a lot more that we can do.
Now at the same time, in order to make this experience good, there also needs to be good content in the system, right? So we need to make sure that people have the tools to able to share the moments that they care about. But if you’re a professional publisher, you need to have the ability to share a version of the content that you’re producing that you’re proud of, that can load quickly, that can be as rich as the tools enable people to see, and we’re working on a lot of different tools for that.
And you can imagine that as the tools for any of this content get better — people taking photos, newspapers writing news articles, advertisers putting out ads for content that they want to sell — the better that content gets, the more people are excited to see it, and then that informs the ranking in what the community qualitatively tells us that they want to see from us over time, as well. So it’s just a constant cycle on that.
LiveRail
Morgan Stanley analyst Brian Nowak asked for an update on LiveRail, which Sandberg provided:
So on LiveRail, we’re pleased with the performance and the changes we’ve been able to make. Video is obviously super important so having the ability to do — work on video across the Web has been really great. And then at F8, we made two more announcements that I mentioned. What we’re hearing from publishers is that this is a good opportunity and they’re pleased with the extensions we’re making because it can make their ad serving and buying more efficient across the platforms they use.
In terms of areas for improvement, I think there’s a lot we can do. I think have you to look at our ad-tech investments very holistically, from Atlas to LiveRail to the Audience Network. These are all different pieces of the ad tech, but what they’re all working on is taking the relevance and the ability to do people-based marketing and make that available to work on Facebook, but also off Facebook. We believe that because we can do marketing to people and then measure results across what people do in privacy-protective ways, we have an ability to improve the relevance of marketing which will make it better for consumers and increase returns for marketers.
In her opening remarks, Sandberg said:
At our F8 developer conference last month, we made new two important LiveRail announcements that will improve the relevance of ads people see across sites, apps and devices. We extended LiveRail’s video ad platform into in-app mobile display, which will give publishers better ways to manage their ad inventory across devices. We also announced that LiveRail will give publishers access to Facebook’s anonymized demographic information, enabling us to serve more relevant ads to people.
Readers: What did you think of Facebook’s first-quarter-2015 earnings call?
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