Instagram Ad Plans Highlight Facebook’s Q2 2015 Earnings Call

By David Cohen Comment

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Facebook held its second-quarter earnings call after market close Wednesday, and chief operating officer Sheryl Sandberg spent a healthy chunk of time discussing advertising on Instagram.

The social network provided some general usage stats, saying in an email that users are spending an average of 46 minutes per day on Facebook, Messenger and Instagram, and adding that the end-quarter total of 1.49 billion monthly active users represented one-half of the world’s online population.

Facebook added that 65 percent of its users return daily, and that 450 million of its users actively use events, creating more than 16 million events each month, and that its groups feature is used by 850 million people per month.

Co-founder and CEO Mark Zuckerberg shared much of that information in his opening remarks during Wednesday’s earnings call:

Several products in the Facebook application are reaching global scale, too, now with more than 450 million people using events each month and more than 850 million people using groups. And when it comes to time spent across Facebook, Messenger and Instagram, people are now spending more than 46 minutes per day on average, and that doesn’t include WhatsApp.

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As for Instagram ads, Sandberg mentioned during her opening remarks that more advertisers will gain access “over the coming months,” with new features and better targeting, as well, and she also responded to two analysts’ questions on the subject.

During her opening remarks, Sandberg said:

We continue to make progress with ads on Instagram. In the second quarter, we launched Instagram ads in Brazil, Germany and Japan. We also introduced additional capabilities for marketers, including carousel ads on Instagram, which brands are using in creative ways–for example to showcase a spring fashion collection, gradually reveal a full panorama or show different views of a location. Over the coming months, Instagram ads will be available to more advertisers with new formats, better targeting and the ability to buy online, as well as through third-party planners. As we ramp Instagram ads, we remain focused on quality and relevance to ensure the best experience for people and the highest performance for marketers. And as always, our highest focus is on the consumer experience with Instagram.

When pressed for more details by JPMorgan Securities analyst Douglas Anmuth, Sandberg responded:

On Instagram, we are opening up to more advertisers. I talked about some of our global rollouts in the past quarter. We’re also opening up more capabilities, which means more formats like direct response, more ways to buy, like self-serve. That said, and it’s important to understand this: While we think there’s a lot of interest and great opportunity, we’re going to be really thoughtful and strategic about how we ramp revenue. Instagram remains small relative to Facebook, and it’s going to really take time to have significant impact on our growth.

Goldman Sachs analyst Heather Bellini asked Sandberg later in the call:

I just wanted to ask a little bit more about as you start to speak with more advertisers on the Instagram opportunity, how are you and they thinking about the differences in how they’ll engage with their customers across both platforms? And I guess what I’m getting at is do you see Instagram targeting a different type of advertiser, or do you expect people to leverage both platforms and almost think of them as kind of separate areas to budget for?

Sandberg replied:

I think one of the things that’s interesting about Instagram is while the ads are really visually appealing–and that brings to mind certain verticals like fashion or autos, things where the visual really matters–what we’re seeing is that lots of different verticals can use the platform really well. So a recent example, HTC working with its agency, Swift, did Instagram videos to raise awareness of its mobile device warranty program. So it targeted 18- to 34-year-olds, and it did five short videos with these funny moments of where you’re about to break your phone, and it got a six point lift in awareness of what is a warranty program. I think that’s not something you would think of typically as Instagram.

In terms of Instagram and Facebook, we believe that marketers are looking to connect with people in a really deep way, connect with the right people, and our targeting, we think, is really strong compared to any other platform, at the right time. And that really means mobile. And we see such engagement on both Facebook and Instagram along with the different targeting and ad formats. We believe we’ll be able to have and are already starting to have a relationship with marketers that grows across both platforms. Our focus with our marketing partners is their business results. I talked about in my remarks how we’re looking for conversion. We’re trying to help them measure. If you do a car ad for us, how many vehicles were driven off the lot? We see what products you use within Facebook or Instagram, or Facebook and Instagram, as less important as the best products for the right marketer at the right time to drive their business results, and we like having more abilities, more products, more applications to work with so that we can drive business results.

Other topics of interest that were discussed during Facebook’s second-quarter-2015 earnings call Wednesday evening included:

Advertising overview

Sandberg said during her opening remarks:

People are spending more time on their mobile devices and on Facebook apps. We continue to get more than one out of every five minutes on smartphones in the U.S., and mobile usage is driving our growth globally, as well. We believe we have the best-performing mobile ad product in the market, and video‘s making it even better. With so many consumer videos being watched on Facebook, video ads are a natural part of the News Feed experience. For marketers, video has always been a compelling format. Now Facebook enables mass reach and cross-device targeting and measurement abilities far superior to what other platforms offer.

Our second priority is growing the number of marketers using our ad products. In the second quarter, we announced that 40 million small and midsized businesses have active Facebook pages, and this number continues to grow. Earlier this month, I hosted SMB roundtables in Berlin and London. I got to hear firsthand how advertising on Facebook is helping SMBs to sell their products, grow their businesses, hire new employees and even expand to other cities and countries.

We’re increasing our engagement with the global SMB community and have now held more than 80 local boost-your-business events around the world, meeting thousands of businesses and getting their feedback on how we can make our products work better for them. We’re also building out our leadership teams around the world. In recent weeks, we’ve added senior talent to our international teams, including a new head of Latin America and new regional leadership in several countries in EMEA (Europe, the Middle East and Asia). We also opened an office in Johannesburg, our first in Africa.

Our third priority is making our ads more relevant and effective. Better, more engaging and relevant ads are good for people and marketers, and we’re working hard to improve them. We continue to innovate at a rapid pace by introducing new ad formats and new tools for marketers. This quarter, we expanded carousel ads, which show multiple images in one ad unit. We introduced dynamic product ads, which allow marketers to upload their product catalog and show the right product to the right person at the right time. We also introduced a new ad format called lead ads, a simpler way for people to connect with companies they’re interested in hearing from. We continue to focus on providing world-class products and tools for direct-response advertisers.

Performance of Facebook’s apps

Zuckerberg said during his opening remarks:

Over the past six months, we’ve improved the performance of our core app, reducing crashes on iOS by more than 30 percent and some Android phones by more than 40 percent. On Messenger, people can now send messages up to 20 percent faster, and it’s twice as fast when you start the app. These are just a few examples of how our engineering focus is delivering better experiences for everyone in our community.

Search

Facebook said in an email that its search functionality is used 1.5 billion times per day, and 2 trillion posts on the social network have been indexed, which Zuckerberg touched on during his opening remarks:

With search, we are continuing to build a better experience for our whole community. We recently crossed 1.5 billion searches per day, and we’ve now indexed more than 2 trillion posts. This is a huge set of unique experiences and perspectives, and by allowing people to unlock this knowledge, we have a huge opportunity to create value for the world in the coming years.

Citi Investment Research analyst Mark May asked:

I think you mentioned 1.5 billion daily searches. Just kind of curious what portion of those are commercial–not so much lookups for friends and family, but more commercial oriented–and can you give us an update of where you are in the process of building out an even more robust search experience on Facebook and across the other family of apps?

Chief financial officer David Wehner replied:

On the search experience, from a monetization perspective, the vast majority of the searches are for people or posts, and there’s the potential for there to be commercially relevant content in people’s posts, people searches, which is the largest part of searching, but this is not something that we think is really up the monetizing category. But there’s certainly great content that people are finding using post search, but it’s really–the focus is really to try and allow people to discover content that’s been shared on Facebook that’s relevant to them, and that’s going to be the focus in the near term. And as people consume more content on Facebook, there are opportunities to show them ads in News Feed, so there’s an opportunity there, but it’s really around engaging with content that you want to find on Facebook.

Messenger/WhatsApp

Questions about the relationship between Messenger and WhatsApp have been a part of every earnings call since Facebook acquired WhatsApp last October, and Wednesday’s contribution came from Deutsche Bank Securities analyst Ross Sandler, who asked:

(WhatsApp co-founder) Brian Acton and (Facebook vice president of messaging) David Marcus were basically presenting different strategies in terms of their long-term philosophy around monetization of those two platforms. So if you look out three or five years, do you see the opportunity with Messenger and WhatsApp as being similar, or can you just talk about the strategy there? And is the engagement for the messaging apps similar, higher, or lower than the average for the core Facebook app in terms of daily visits?

Zuckerberg responded:

So the playbook that we’re going to run with Messenger and WhatsApp is kind of similar to how we thought about building a business in Facebook and News Feed, where if you go back to 2006 and 2007, there were a lot of people who were kind of encouraging us to just put banner ads and kind of inorganic content into the experience, and what we decided was that over the long term, the ads and monetization would perform better if there was an organic interaction between people using the product and businesses.

So instead of focusing on ads first, what we did was we built pages, and we made that free. That way, as many businesses as possible could get into the network. And we built insights to make it so that businesses knew how they were driving business when they used pages for free and could post them to News Feed. And then on top of that whole ecosystem, we then had the opportunity to build what has turned into a News Feed business that we’re really proud of, and that we think is driving a lot of value and good content for people who are using the platform and helping a lot of businesses find customers and sell their products and grow overall.

Messaging, I think, is going to be pretty similar, right? Where right now some people in WhatsApp use the service in order to message businesses, Messenger is, I think, more people-to-people today. We’re working on a lot of different things that make it so that people can get value from interacting with businesses. We launched some of them at F8. We have a number of other things that we’re working on across Messenger and WhatsApp. But the long-term bet is that by enabling people to have good organic interactions with businesses, that will end up being a massive multiplier on the value of the monetization down the road when we work on that and really focus on that in a bigger way. So we’d ask for some patience on this to do this correctly, and the game plan will be more similar to what we did in Facebook with News Feed.

E-commerce

UBS Securities analyst Eric Sheridan asked:

I wonder if I could get an update on the e-commerce initiatives, including the partnership with Shopify, and how we should be thinking longer term about e-commerce becoming a bigger and bigger part of the platform.

And Sandberg answered:

E-commerce is one of our top categories of advertisers, and we are already driving a lot of product sales through Facebook, but importantly, our e-commerce initiatives are really about connecting consumers with marketers so that they can buy from companies. They’re not buying through us. We are testing a buy button in the new shop section on pages, but again, that buy button is letting people buy directly from their advertisers, not from us. It’s pretty early days. We’re excited by what we see in the e-commerce vertical, and we’re going to continue to invest in growing that vertical as part of our ads business.

Readers: What did you think of Facebook’s second-quarter-2015 results and earnings call?

Top image courtesy of Shutterstock.

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