Mike Isaac

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Growth, Mobile and More: Facebook’s First-Quarter Earnings

Facebook CEO Mark Zuckerberg at the Facebook Home launch event.Well, the numbers are in. Facebook made its revenue estimates this quarter, coming in at $1.458 billion, though missed its profits by a penny at earnings per share of 12 cents.

The real story here is mobile (as always). The company’s mobile ad revenue accounted for 30 percent of the overall ad biz — a whopping jump from the 23 percent of mobile ad revenue raked in last quarter.

A good thing for the social giant, considering the company’s entire user base is slowly trickling over to accessing the site via mobile device. Monthly active users viewing the site on mobile devices came in at 751 million, a 54 percent jump year over year.

Scary at first, perhaps, for the Web industry as a whole, with all the companies in the Valley scrambling to make the move to mobile effectively. Now, optimistic as ever, Facebook continues to position it as an opportunity, not a liability.

Check out my notes from the company’s quarterly conference call earlier on Wednesday, starring CEO Mark Zuckerberg, COO Sheryl Sandberg and CFO David Ebersman.

———————
1:55 pm PT: Gotta love the flute music. Holding patiently.

2:00 pm: About to start!

2:02 pm: Buncha standard legalese. Please hold for actual substance.

2:03 pm: First up, Mr. Zuckerberg.

2:04 pm: Zuck says he’s surprised how the growth keeps going even though there’s more than a billion people using the service.

Funny, considering the growth rate is slowing overall.

2:04 pm: FLASH — Zuck is super stoked on Facebook Home, the company’s recent mobile software release.

It’s great! Gonna be huge! Alas, we just released it and only a few phones can use it. So please hold for more awesomeness.

2:06 pm: Next up, Instagram. Zuckerberg also loving how great CEO Kevin Systrom is doing with the platform. 100 million users. Fantastic!

2:07 pm: Zuckerberg playing up how important Facebook Platform is to the company. Especially mobile apps from third parties.

“I think it’s clear now that we can create a lot of value for devs by providing identity,” he said. “We’re starting to see real revenue from mobile app installs.”

2:08 pm: Platform emphasis makes sense. Facebook really needs great content flowing through the news feed to keep you coming back and looking at it. That means cool-looking apps and stuff.

2:10 pm: Again, big emphasis on Home, Graph Search and the like as “long-term investments.”

In other words — THE MONEY FROM THESE PRODUCTS WILL COME LATER, Y’ALL.

2:11 pm: Time to Lean In! COO Sheryl Sandberg is on the call.

2:11 pm: Sandberg reiterating how awesome the shift to mobile is. We check our phones so often, that’s perfect for mobile ads!

Mobile ads biz doing great internationally — “particularly in Asia.”

2:12 pm: Sandberg, like Zuckerberg, is pushing the company’s mobile app install ads product. Basically a paid way to stick your app inside the mobile news feed. Click on it, and it’ll send you to the Google or Apple app store and have you download the app.

For what it’s worth, I’ve heard anecdotally that those ads do indeed drive significant downloads. Good ad product, it seems.

2:13 pm: Sandberg talking about the Atlas acquisition, which closed last week.

Big deal for ad measurement success. Basically it’ll be another way to show the ad folks that yes, your Facebook ads are worth it and no, don’t measure by clicks like you’re used to with your stuffy old Google ads!

2:15 pm: Sandberg, in a nutshell: FORGET CLICKS. We got way better ways to measure ad success.

2:18 pm: Sandberg feeling great on Q1, and still pushing the fact that it’s early days in the ads biz for Facebook. Keep on keepin’ on.

2:19 pm: Here comes CFO Ebersman.

2:19 pm: Mobile still huge in terms of who’s accessing the site. As we know.

2:20 pm: Crazy. Mobile-only users visiting Facebook on a monthly basis at 189 million users.

2:21 pm: Payments and fees revs were up year on year. Games in particular were up 12 percent.

Huh. Q1 saw a record number of people playing games on Facebook.

2:23 pm: Warning: Expenses are gonna swell. But we’ve been saying that for a while. Infrastructure, engineers, new campuses, new products — all of that costs money.

2:24 pm: So take note of that last thing Ebersman said.

Q1 had a record number of people playing games on Facebook, while Zynga’s contribution to that dropped by 37 percent. Other game developers are up 60 percent.

That’s a big deal. Larger diversification of the games and payments ecosystem.

2:29 pm: Growth and engagement geographically is up internationally, Ebersman says.

Mobile obviously responsible for that.

2:30 pm: A question about different screen form-factors.

2:32 pm: Zuckerberg: Sure, there will be more screens. Whether it be desktops, or phones, or “glasses … whatever the products are.”

“The big question for us is which platforms do we see growing the quickest?”

2:32 pm: “Ads during the first six or seven years of Facebook were just in the right-hand column.”

“Whatever the form-factors going forward…” we’ll get it right. –Zuck

2:35 pm: A question on Atlas: “As people are looking more holistically at all the ad spend they’re doing, they’re looking at everything leading up to that purchase — not just the last click.” –Sandberg

2:36 pm: So again, the Atlas buy is about more measurement than just the last click before buying a product. Offline influence, etc.

2:36 pm: Sandberg “increasingly encouraged” by SMBs around the world in their willingness to take up Facebook’s ad biz.

Hope so! That’s not really where the focus is right now, though.

2:38 pm: Sandberg really pushing the fact that tons of SMBs have Facebook Pages.

Still doesn’t help the little guys without massive followings break through to the news feed, though. We’ll see.

2:40 pm: Ooh, a video ads question!

Hope they don’t dodge it.

2:40 pm: Sandberg says video is a “really exciting area” — and advertisers can use Facebook’s existing embeddable video product in their ads.

Continuing to explore the area, Sandberg says, but nothing to announce today.

Shucks.

2:41 pm: Ah, a question about Instagram and monetization.

When you gonna slap ads on our pics, Sheryl?

2:41 pm: Zuck on Instagram: “They’re really doing well and growing quickly.”

Focus should be on community building. He’s optimistic on biz opportunity, but they aren’t slapping ads on anything just yet.

“They’re growing a lot faster now and were faster to get to 100 million than Facebook even was,” Zuckerberg says.

2:43 pm: Boring question, boring response.

Mobile mobile mobile.

2:44 pm: Two questions: Platform and Graph Search.

Zuckerberg is super happy with gaming ecosystem and how it’s doing, despite “Zynga,” whose growth ain’t great.

Ouch!

2:45 pm: Poor Zynga can’t catch a break.

2:45 pm: Zuck on platform (in my words): Please, dear god, developers. Give us your apps. Distribute them here.

2:46 pm: As far as Graph Search goes, repeat after me. Early. Days.

2:46 pm: “The launch wasn’t this point where we expected a ton of people to start using it. … real roll-out will start pretty soon.” –Zuckerberg on Graph Search

2:47 pm: Fun question from Mark Mahaney: Do the kids still like Facebook? I hear it’s not hip anymore.

2:47 pm: Ebersman: Facebook is awesome for everyone, regardless of age! And yes, kids still like Facebook.

Telling: Ebersman really emphasized Instagram’s influence with the young crowd.

2:49 pm: Funny. I asked my 12-year-old neighbor the other day which apps she used — she told me Twitter, Snapchat and Instagram. (No Facebook!)

2:50 pm: Lotsa mobile app install ad buyers are new advertisers to Facebook.

Makes sense why Zuckerberg keeps making his call to arms for developers.

2:55 pm: “Owning our own data centers removes another party from the mix.”

Also lets them “build them exactly how we want them to look.” Best for efficiency, Ebersman said.

This in light of a recent announcement that Facebook would be building another data center in Iowa.

2:56 pm: Hmm. Sandberg advocates promoted Pages product to SMBs rather than other larger ad spend products.

Sort of a “no duh.” But I’m still not convinced the little guys are getting good ROI there.

3:00 pm: So, 3 percent of the payments revenue bump came from user-promoted posts and, to a lesser extent, Facebook’s Gifts product.

Hmm.

3:01 pm: And that’s a wrap, folks.


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