Highlights of Facebook’s 4Q 2014 Earnings Call

While a great deal of time was devoted to advertising during Facebook’s fourth-quarter and full-year-2014 earnings call Wednesday, several other topics were addressed, as well

Zuck4Q2014CommunityInfographic650While a great deal of time was devoted to advertising during Facebook’s fourth-quarter and full-year-2014 earnings call Wednesday, several other topics were addressed, as well.

Facebook co-founder and CEO Mark Zuckerberg shared the following statistics related to usage of Facebook and its applications during his opening remarks:

One interesting sign of our continued growth in engagement is through our progress on visual and public content. More than 2 billion photos are now shared daily on Facebook, Instagram, Messenger and WhatsApp. Video also grew significantly this year, with an average of more than 3 billion video views daily on Facebook. And there are now more than 2 billion interactions every week on Facebook between public figures and their fans.

Instagram is also growing and helping people share and consume the most engaging content in different communities across the world. Instagram reached 300 million monthly actives, with more than 70 percent outside of the U.S. Average time spent using the app continues to be very strong compared to other mobile services. Across Facebook and Instagram, we’ve done a very good job on engagement, especially when it comes to helping people find and consume content they like.

Next, let’s talk about our efforts over the next five years to build the next generation of Facebook services. We expect WhatsApp and Messenger to connect hundreds of millions of more people and become indispensable services for the world, as well as important contributors to our business. Messenger and WhatsApp recently achieved impressive new milestone. In November, Messenger reached 500 million monthly actives, and at the beginning of January, WhatsApp reached 700 million monthly actives, with more than 30 billion messages sent each day. These numbers speaks the quality of both products and the size of the opportunity ahead to help billions of people communicate and collaborate.

Chief operating officer Sheryl Sandberg chimed in on video:

In just one year, the number of video posts per person on Facebook increased 75 percent globally and 94 percent in the U.S. Today, over 50 percent of people in the U.S. who come to Facebook daily watch at least one video per day, and globally, over 65 percent of Facebook video views occur on mobile.

The most entertaining exchange of Wednesday’s call resulted in Zuckerberg saying he wants investors in Facebook to share the mission of the company. Sanford C. Bernstein & Co. analyst Carlos Karjner asked:

Mark, I think in every earnings call, you talk to investors for a considerable amount of time about Facebook mission to connect the world, and specifically about Internet.org, which suggests that you think this is important for investors. Can you clarify why you think this matters to investors and why you think Facebook can make a significant difference of scale?

Zuckerberg replied:

Well, it matters to the kind of investors that we want to have, because we’re a really mission-focused company, and we wake up every day and make decisions because we want to help connect the world, and that’s what we’re doing here. So part of that the subtext of your question is that yes, if we were only focused on making money, we might put all of our energy on just increasing ads to people in the U.S. and the other most developed countries. But that’s not the only thing that we care about here.

So I do think that over the long term, focusing on helping to connect everyone will be a good business opportunity for us, as well. And we may not be able to tell you exactly in how many years that’s going to happen, but I think that as these countries get more connected, the economics growth, the ad markets growth and Facebook and the other services in our community or the No. 1 and Nos. 2, 3, 4 and 5 services that people are using, then over time, we will be compensated for some of the value that we have provided. But this is why we are here: We are here because our mission is to connect the world, and I just think it’s really important than investors know that.

Sterne Agee analyst Arvind Bhatia brought up the potential monetization of WhatsApp with this question:

Just quickly on WhatsApp, I know the focus will be user growth for a while, but in the future, as you do turn on the monetization engine, just curious: What are some of the primary ways that you’re assuming growth will come — from advertising, or games perhaps? And also on WhatsApp user growth, would you be able to call out where that’s coming from? Are there any particular areas that are stronger, and I’m curious how that’s doing in the U.S.?

Zuckerberg responded:

So you’re right that the focus for WhatsApp is on helping to connect a lot more people, all right. So when (WhatsApp co-founder and CEO and Facebook board member Jan Koum) and his team joined us, one of the first things that we agreed on, and why I think it made sense for them to join, is that now, they can focus for a few years on getting to 1 billion and continuing to scale beyond that. SMS is an incredibly global and universal product, and I think WhatsApp just has a huge opportunity to serve billions of people. In terms of what the business looks like, I mean, at the end of the day, it’s a distribution business, like Facebook and Instagram — how do you most effectively convert that into business opportunities for customers, whether that’s through payments or ads or other different kinds of structures.

We’ll figure out what the optimal thing will be, but the first order of things to do is to help our billions of people here, help to continue to increase engagement. I mean, people are spending a lot of time in WhatsApp, sending more than 30 billion messages per day, which is really crazy when you think about the volume there compared to the global SMS volume overall. And I think if we do that, there will be a number of opportunities.

People asked me this question a while ago, when we talked about games on Facebook, as well. And I always talked about our canvas business on desktop, even though its payment is actually the same thing as our business on mobile around app install and engagement. What developers test for is distribution, and whether they’re doing that through payments or ads or whatever it is, it kind of is all the same. The most important thing is to help people connect, help people and businesses connect and create business opportunities, and then you get a small amount of the value that you’re creating on top. So that will play out over the next set of years, and it’s one of the intellectual challenges that I am really looking forward to tackle.

UBS analyst Eric Sheridan asked on the subject of search:

It’s early days, but what is the company seeing in terms of the way people are interacting with the new search functionality inside Facebook broadly? And then maybe tying it back to advertising, what might that mean for closing the loop with some of your small and midsized business advertisers?

Zuckerberg replied:

So, our view on this is that there is a lot of unique content that people have shared on Facebook, a lot of personal content, recommendations from friends that you can get that you just wouldn’t be able to get through a traditional Web search service or other app. And we’re on this multiyear voyage to basically index all of the content and make it available to people and rank it well. We started off by launching Graph Search, which I think included more than 1 trillion different connections in the first system.

And the second round of the search progress that we just started rolling out at the end of last year was post search, which now has indexed more than I think 1 trillion posts, which, I mean, the sizes of these corpuses are bigger than anything in a traditional Web search corpus that you would find. So it’s an interesting and fun challenge to make this work. We’re seeing that that people immediately understand how they can use this and find content that they have seen in News Feed before or that they’ve posted with just a few keywords.

And we’re excited about that, but there is a lot more to do. So we’re not really thinking about advertising in it yet on the scale that our community operates — 1 billion searches per day is actually not that big compared to what we think the opportunity here should be. And we’re just continued to keep on working on it because there is just a lot of unique value that people should be able to get from their friends on Facebook search.

Deutsche Bank analyst Ross Sandler addressed video with the following question:

How important is it that Facebook posts the videos versus I guess sharing clips from third-party players in the feed, and what percent of those 3 billion streams daily is Facebook-embedded versus from other players? Ae you able to monetize videos from third-party players today? Is there is a way to work around that in the future?

Zuckerberg answered:

This thought that we shared 3 billion per day is all made on Facebook. So there are probably other shares from other video services, as well. The reason that I think made video is so valuable for people using our service is that when someone uploads a video to Facebook directly, we can optimize how it delivers right. So we can make it auto-play. We can find the right quality and bit rate to send down to the person based on their connection over time, and optimize all kinds of different things. So what I think people are finding from public figures to everyday videos that people are uploading is that the best experience that you can get is by uploading content native to Facebook, which is, I think, the big part of the growth that we seeing there.

Readers: What were your impressions of Facebook’s fourth-quarter and full-year-2014 earnings report?

Image of fourth-quarter red pencil courtesy of Shutterstock.

david.cohen@adweek.com David Cohen is editor of Adweek's Social Pro Daily.