Facebook – Update on Businesses, Key Themes & New Initiatives – 23 July 2021

How would you describe Facebook at a high level?

Could you elaborate on your point about Facebook leaning in to opportunities? How does it identify and prioritise opportunities? E-commerce seems to be a major thrust for the company and a lot of the constituent businesses that you referenced.

What are your thoughts on Facebook’s primary businesses and offerings, such as the Facebook platform, Instagram, Messenger and WhatsApp? How do they differentiate in the marketplaces for both users and advertisers? I’m aware that Messenger and WhatsApp are very early on in figuring out monetisation and really turning that on. How should we consider these four businesses across what they’re doing and what you think they could do in future?

Why do you think there hasn’t been more of a push towards monetisation on Facebook’s messaging properties? It seems people have been anticipating the company turning on the monetisation faucet for these properties for years. The high-profile shift in leadership, particularly at WhatsApp, seemed to presage a monetisation effort, but this seems not to have happened. Is this because the company doesn’t need to do this? Does it think it has the wrong product-market fit? Might users and advertisers reject advertising on these platforms? How important do you think that decision path will be in 1-3 years?

You mentioned Facebook has historically seemed to focus on continued innovation and iteration, and then course-correcting if it didn’t get it right at first. A lot of the company’s priorities are being driven by legal and regulatory matters, content moderation, IDFA [Identifier for Advertisers] more recently and, prior to that, privacy schemas around the world. Would you suggest that as the company has to prioritise those topics, there could be less aggressiveness and innovation? If things are working or if there’s uncertainty about monetisation timing for Messenger or WhatsApp, might these things be de-prioritised?

How would you characterise the importance of coronavirus for Facebook’s primary properties? You touched upon the pandemic’s impact and influence on this area broadly and on Facebook’s properties, which I’d like to explore, especially given Twitter and Snapchat’s Q2 2021 results. There have been more users and usage for a lot of these platforms as people dealt with lockdowns and relied more on them for information, communication and entertainment. There was also the huge downdraught in CPMs and pricing, as I believe a lot of advertisers wondered about the future and made some abrupt, necessary spending decisions. Spending seems to have resumed and pricing has increasingly gotten healthier, and so over Q1-2 2021 there has been the benefits of user and usage gains, along with a rebound in advertising demand and spending, with easier comparisons, given that H1 2020 and even Q3 were fairly tough.

You mentioned commerce as a major theme across Facebook and its different businesses. That seems to be a big priority for Instagram, and I think a lot of people would identify this business as leading on social media combining with or aligning with commerce, given it’s not just enabled advertisements to promote products but provided an in-app, self-contained purchase mechanism opportunity. Facebook itself has been doing quite a bit in and around commerce, launching Shops in May 2020. Could you discuss this fairly major commerce focus, which is a big change from 2-3 years ago?

It sounds as though you’re making a distinction in the focus on legal and regulatory, and being aggressive, innovating and growing, as perhaps more specific to the Facebook property. You said that’s an issue for this property, but Instagram seems to have greater flexibility, innovation and pursuit of growth. The company obviously has all these obligations, but you’re saying that the risks in some cases could be better understood on a property-by-property basis. Is that the right way to consider this?

Could you elaborate on the delicate balance Facebook has been trying to strike between integration and separate apps? The company has been executing on this strategy of separate apps for many years, starting when it split off Messenger into a separate app. Since then it’s added more features and functionality to its constituent apps, but has also rolled out separate offerings such as Facebook Dating or the nascent Facebook Neighborhoods. It’s been somewhat important for the company to keep these separate, yet when some of the legal and regulatory issues became more heated and people started to ask whether it would be easy to split them apart, Facebook was saying the entire back end is tightly integrated, and that a lot goes into making sure these properties are connected and aligned.

Could you discuss competition in the industry? We mentioned the balance Facebook has been trying to strike in integration vs separate apps, and some of the challenges there. I believe you highlighted the competition that some of the company’s properties have run into and how you think that will play out.

Facebook seems to deal with the emerging companies and innovators that come to market by trying to emulate the core of these companies’ offerings, such as when Snapchat was making an impact in the marketplace and then Instagram released Stories, which significantly negatively impacted Snapchat’s growth and other aspects. Every platform seems to have a Stories format, and a lot of players also have short-form video, almost responsive to Snapchat and TikTok. I’m sensing Facebook’s response hasn’t seemed to resonate as much. TikTok seems to have as much momentum as ever, especially given the issues in summer 2020 with the US government and potentially being sold or shut down. How might this play out? A lot of these competitors are understood and have been in place for a while, with more incremental shift than anything else. TikTok seems to be the main wildcard, especially given the change from summer 2020 and its aggressive investment in the US and in creators.

How do you think Facebook assesses Amazon as a significant competitor, particularly on advertising? The media buyers I’ve spoken with over the last year or two consistently point out that in the major digital and social media advertisers, people consider Alphabet, Google and YouTube as number one, Facebook and Instagram as number two and are increasingly referencing Amazon as a top-tier advertising player. Considering the e-commerce thrust we discussed, Facebook would be an advertising company enabling commerce while Amazon would be an e-commerce company enabling advertising.

What are your thoughts on Facebook’s past growth performance and your projections for the next couple of years? Revenues rose 22% YoY in 2020 and growth could accelerate to 35% in 2021. It seems as if you have more users and usage, a rebound in CPMs and relatively easy comparisons, especially in Q2 2021 and to some extent Q3. Revenue gains expected for 2022 and 2023 are significantly lower than the company has had historically.

Do you think Facebook is concerned about decelerating growth? Is the company satisfied with its position, given the current environment, the Facebook blue platform’s other priorities and the restrictions on what it would otherwise want to do with Instagram, Messenger or WhatsApp? Might it try to be creative in driving its revenue growth higher again, given the company’s nature and past achievements?

There seem to have been some changes in leadership, particularly of some of the constituent businesses that we’ve talked about. Instacart indicated in July 2021 that it will be hiring Fidji Simo as CEO, who is responsible for the Facebook app and I understand was widely respected across the company. This marks a continuation of changes in leadership for businesses such as WhatsApp, Messenger and Instagram. What are your thoughts on the people reporting up to Mark Zuckerberg and Sheryl Sandberg?

What is your 1-3-year outlook for Facebook? Do you have any thoughts on its most significant opportunity and greatest risk?