A Complete Guide to Facebook’s Q1 2015 Earnings Call

Advertising (naturally), mobile, video and applications were the dominant themes during Facebook’s first-quarter-2015 earnings call Wednesday evening.

1Q2015GraphicAdvertising (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.