soared to all-time highs after it reported second-quarter
earnings last month. Since then, the stock has managed to hold
its ground as the market continues to digest the implications of
the social network's
. While the company's increased revenue and earnings have had
their fair share of the spotlight in the weeks following the
earnings report, there are still some key items from the
company's conference call that are worth a closer look.
Here are the five most important quotes from the call that you
don't want to miss.
There is room for higher engagement
Facebook CEO Mark Zuckerberg:
One thing that's exciting is that there is still a lot of
room to grow. On average, people in the U.S. -- people on
Facebook in the U.S. -- spend around 40 minutes each day using
our service, including about 1 in 5 minutes on mobile. This is
more than any other app by far, but overall, people in the U.S.
spend about 9 hours per day engaging with digital media on TVs,
phones and computers. So there's a big opportunity to improve
the way people connect and share across how we all engage with
the rest of media as well.
Investors in this hot growth stock want to know that the
social network's growth story is not over. While Facebook's
year-over-year revenue growth rate of 67% during the quarter did
beat expectations, it was notably the first time the key metric
slowed sequentially in the past five quarters. Therefore,
Zuckerberg's reassurance that "there is still a lot of room to
grow" is good news.
Facebook CEO Mark Zuckerberg (right) in his conference room.
Of course, with Facebook already taking up 40 minutes of
users' time each day, improving engagement further will not be
easy. Nevertheless, the added perspective of the significant
amount of time people spend engaging with digital media does make
a convincing case that there is still opportunity for engagement
growth in the company's most important market.
The focus is both near and long term
We're going to continue investing aggressively in areas that
are important for our mission and long-term strategy, but we
will also stay focused on our core products and business. This
is the best way for us to continue creating value for our
Given Facebook's robust valuation with a wildly optimistic
future already priced in, investors want to see the company
executing on both near- and long-term strategies. Fortunately,
Facebook appears to be doing exactly this.
Long-term strategies include the company's efforts to bring
affordable Internet access to every person in the world through
Internet.org, and the social network's
of Oculus and WhatsApp (still pending a closing) -- two big bets
that the company is making on its efforts to connect the world.
While the strategies may be speculative in nature, it's good to
see the company at least making bets.
Near-term plans to build Facebook's business vary widely.
Paramount among the plans, however, are Facebook's efforts to
give its users more tools to share. Key examples include its
Messenger and Instagram apps. And other new apps and tools will
spring up from Facebook's
, purposed to find new ways to build value for Facebook users by
providing new contexts for the network beyond the blue app with
which the world has become so familiar.
More concrete ways Facebook wants to build immediate-term
value is through a continued shift to mobile (where ads are more
engaging) by growing the number of marketers on Facebook, and by
improving the company's ad products.
Instagram can be monetized, after all
Facebook COO Sheryl Sandberg:
[We]'re seeing positive early demand from marketers for ads
on Instagram ...
When Facebook initially announced it was going go acquire
Instagram for about $1 billion, there were many doubts that the
social network overpaid. But it's becoming increasingly clear
that $1 billion was a bargain. Not only has the service grown
from just 30 million active users to over 200 million, but
Facebook is now also proving it can successfully monetize this
large user base.
Sure, Facebook hasn't made public any specific revenue figures
for Instagram, but it's likely that "positive early demand from
marketers for ads" on a platform with more than 200 million
monthly active users this early in the game easily justifies the
$1 billion price tag.
Facebook video ads may steal from TV budgets
We also introduced premium auto-play video ads this year.
Video on Facebook helps brands extend their TV investments by
combining traditional reach-focused campaigns with our
unparalleled targeting abilities. To date, we've run about a
dozen campaigns and the early data show promising results.
While video ads on Facebook are still in their very early
stages, the idea of big marketers extending their TV investments
to Facebook is exciting -- and yet another area for potential
Facebook is rolling out video ads to big marketers. Source:
Ads are declining while pricing power is
Facebook CFO Dave Wehner:
In Q2, the average effective price per ad increased 123%
compared to last year while total ad impressions declined 25%.
The decrease in ad impressions continues to be driven by the
shift toward mobile usage, where people are shown fewer ads
compared to desktop.
Investors want to know that Facebook doesn't have to add any
more ads in order to grow revenue. Bombarding users with a higher
number of ads to grow revenue could take away from the user
experience. A trend of decreasing ad impressions and soaring
pricing power, therefore, is the holy grail for social platforms.
Fortunately, a shift to mobile, where ads are more effective,
enabling the company to achieve this. The improving value
proposition for advertising on Facebook is boosting pricing power
at rates well beyond the rate of decline in ad impressions. Even
better, Facebook doesn't have to do much in order for this trend
to continue; the shift to mobile, by itself, is the major driving
If this trend can continue for several more years, this
pricing power leverage in an increasingly mobile environment
could prove to be a substantial long-term lever for revenue.
Leaked: Apple's next smart device (warning, it may
Apple recently recruited a secret-development "dream team"
to guarantee its newest smart device was kept hidden from
the public for as long as possible. But the secret is out,
and some early viewers are claiming its everyday impact
could trump the iPod, iPhone,
the iPad. In fact, ABI Research predicts 485
million of this type of device will be sold per year. But
one small company makes Apple's gadget possible.
And its stock price has nearly unlimited room to run for
early, in-the-know investors. To be one of them, and see
Apple's newest smart gizmo, just
5 Things Facebook Inc.'s Management Wants You to
originally appeared on Fool.com.
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