Facebook (FB)

Q2 2012 Earnings Call

July 26, 2012 5:00 pm ET

Executives

Deborah Crawford

Mark Zuckerberg - Founder, Chairman of the Board and Chief Executive Officer

Sheryl K. Sandberg - Chief Operating Officer and Director

David A. Ebersman - Chief Financial Officer

Analysts

Spencer Wang - Crédit Suisse AG, Research Division

Mark S. Mahaney - Citigroup Inc, Research Division

Jason Maynard - Wells Fargo Securities, LLC, Research Division

Douglas Anmuth - JP Morgan Chase & Co, Research Division

Herman Leung - Susquehanna Financial Group, LLLP, Research Division

Scott W. Devitt - Morgan Stanley, Research Division

Anthony J. DiClemente - Barclays Capital, Research Division

Heather Bellini - Goldman Sachs Group Inc., Research Division

Laura A. Martin - Needham & Company, LLC, Research Division

Kenneth Sena - Evercore Partners Inc., Research Division

Benjamin A. Schachter - Macquarie Research

Daniel Salmon - BMO Capital Markets U.S.

Presentation

Operator

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Good afternoon. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the Facebook Second Quarter 2012 Earnings Conference Call. [Operator Instructions] Ms. Crawford, you may begin your conference call.

Deborah Crawford

Thank you. Good afternoon, and welcome to Facebook's first earnings conference call. Joining me today to talk about our second quarter results are: Mark Zuckerberg, CEO; Sheryl Sandberg, COO; and David Ebersman, CFO.

Before we get started, I'd like to take this opportunity to remind you that during the course of this call, we will make forward-looking statements regarding future events and the future financial performance of the company. We caution you to consider the important risk factors that could cause actual results to differ materially from those in the forward-looking statements in the press release and this conference call. These risk factors are described in our press release and are more fully detailed under the caption Risk Factors in our final prospectus filed with the SEC on May 18, 2012.

In addition, please note that the date of this conference call is July 26, 2012, and any forward-looking statements that we make today are based on assumptions as of this date. We undertake no obligation to update these statements as a result of new information or future events.

During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. This call is being broadcast on the Internet and is available on the Investor Relations section of the Facebook website at investor.fb.com. A rebroadcast of the call will be available after 6:00 p.m., Pacific Time today. The earnings press release and an accompanying investor presentation are also available on our website. After management's remarks, we will host a Q&A session.

And now I'd like to turn the call over to Mark.

Mark Zuckerberg

Thank you, Deborah, and thanks to everyone listening for joining Facebook's first earnings call as a public company. We appreciate having the opportunity to speak directly to all of you and to share our perspective on how we're doing in fulfilling our mission of making the world more open and connected. Hopefully, you'll come away from today's call with a clear sense of the investments we're making to create value over the long term by making Facebook even more useful for all of the people who use our services worldwide.

We ended June with 955 million monthly active users, over 1/2 of whom used Facebook on a daily basis and over 1/2 of whom used Facebook for mobile devices. We saw more people using our services at the end of June than at the end of March across all key countries, including 3 million more people in the U.S. Growing the network of people who use Facebook and expanding the social experience is available to them remains the foundation of our efforts and the key to our future success.

I'm going to focus the rest of my comments today on our top priorities across our product areas for 2012, specifically mobile, platform and social ads.

Let's start with mobile. Mobile is a huge opportunity for Facebook. Our goal is to connect everyone in the world. And over the next 5 years, we expect 4 billion to 5 billion people to have smartphones. That's more than twice as many people that have computers today. So building great services for these devices is essential for us to help people connect. We also think that people are inherently social, and having a device with you wherever you are creates more opportunities for sharing and connecting.

We're finding that people are quickly adopting our mobile services. As of the end of June, 543 million people were actively using our mobile services every month, each month. That's 67% more people than the 325 million who are using our mobile services just a year ago. We've also found that people who use our mobile services are more active Facebook users than people who only use our desktop services. On average, mobile users are around 20% more likely to use Facebook on any given day. So mobile not only gives us the potential to connect more people with our services, but it also gives us the ability to provide more value and a more deeply engaging experience.

We don't just want to have the most widely used mobile apps, though. We want to build the best apps and we also want to build experiences that are deeply integrated as possible into every device and mobile app that people use. We're investing very heavily in improving our mobile apps, primarily across iOS, Android and the mobile Web. This involves building out world-class teams with competencies in different technical stacks, making significant investments in improving the technical foundation of our apps and designing new products and integrating into these mobile systems as deeply as we can.

We've made some good progress from the past quarter as we released our Camera app, shipped new releases of messenger, shipped 2 releases of our Android app, agreed to acquire Instagram and worked with Apple to integrate Facebook into their upcoming release of iOS. Going forward, you should expect to see a frequency of improvement to each of these mobile experiences.

Finally, we're also beginning to demonstrate that we can advertise effectively within the mobile experience. I'll discuss social ads more in a minute. But at a high level, our Sponsored Stories, which we launched in mobile News Feed earlier this year have grown quickly and demonstrated early success.

Now let's shift to platform. We believe one of the biggest opportunities we have is to create the identity and social layers that all new apps and websites can be built on top of. We think almost every product is better when you can experience it with the people you care about. So over time, we expect almost all of these products should naturally become social. Since there's no way we could ever build all of these ourselves, we're focused on building a successful platform, which enables developers to build great social experiences into their own apps by integrating with and exchanging information with Facebook.

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