Revenue increased 56% year-over-year (YOY) to $28.6 billion. Amazing how long of a runway they have on their advertising business alone, and they have many optionalities embedded within the business (e.g. AR/VR, payments, commerce)
Operating income increased 107% YOY to $12.4 billion Largely from operating leverage, as their cost on security and R&D spreads over a large pool. Facebook’s operating margin has started to normalize again.
Operating margin increased from 32% to 43%.
Facebook daily active users (DAUs) and monthly active users (MAUs) continue to rise.
Average Revenue per User (ARPU) continues to rise, note that there’s usually a spike in Q4 due to the holiday season (retailers advertise aggressively during this period). The Dip after Q4 of every year is normal, we have to evaluate YOY performance.
Family Daily Active People (DAP) and Monthly Active People (MAP) which include users across all its platform (e.g. Instagram and Whatsapp) continue to rise as well.
Likewise, its Family Average Revenue per Person (ARPP) continues to rise
Notes from Earnings Call (Italics are my comments)
Mark Zuckerberg highlighted three key building blocks for Facebook:
Creators. Facebook looks to attract the best content creators across all media forms – text, photos, audio, gaming, and video.
Video now accounts for half of all time spent on Facebook. On-demand video, i.e. Facebook Watch, is growing faster than other content in News Feed and they are looking to compensate content creators, similar to Youtube. Facebook has never compensated creators anywhere near the scale of Youtube, it remains to be seen how this will compress the margins. Youtube gives content creators $0.50 for every ad dollar generated. However, this will be beneficial over the long term as content is key to keeping users engaged.
Instagram Reels is the largest contributor to engagement growth on Instagram.
The company is continuing to make progress in AI to ensure that social feeds provide the best user experience. In other words, make it more addictive.
Beyond video, they have also launched Live Audio Rooms, podcasts, and Bulletin, which is a subscription service for writers.
Commerce. Facebook is world-class at helping users discover products (targetted ads), and they are looking to build out the full stack. In other words, they are aiming to allow consumers to purchase the product without ever leaving Facebook’s platform.
Besides lowering friction for consumers and giving them a more personalized experience, this will help circumvent Apple’s privacy regulations, as it will prevent Facebook from tracking once a user leaves Facebook’s platform. By integrating everything into They are also looking to expand their stack in offline commerce storefronts, specifically with payments. WhatsApp payments are now fully available to everyone in India and Brazil. They are looking to add new payment features in Messenger such as QR codes and they have announced that they will be making Facebook Pay available outside of Facebook’s family of apps.
Next computing platform. The number goal for Facebook is to build the metaverse. It is a place where you can hang out, play games with friends, work, create, and more. The defining quality of the metaverse is presence, the feeling that you’re there with another person or in another place.
From the Q&A:
Even though the creator economy has multiple platforms going after this pie (e.g. Youtube, Tik Tok), creators are likely to be on all platforms. It is important if creators want to monetize their platform (e.g. paywalls), Facebook must provide the tools for creators to do so. And Facebook is world-class at monetizing content.
For the metaverse, it’s still in the early stage and Zuck is focused on building products that scale. There’re no concrete plans on monetization but Zuck hinted along the lines of digital goods (e.g. customizable avatars) or drawing a commission from creators. They will not be selling devices at a large premium (referring to Apple) and instead price them affordably so that they can serve as many people as possible.
On the shift towards video, it generally has lower impressions per the amount of engagement compared to News Feed. They’re working hard on machine learning and AI to increase their ad value.
On whether the rising ad prices would deter small businesses from advertising on Facebook, Sheryl Sandberg explained that this is a good pressure in the system because it makes the ads more relevant for the people who are seeing them. Advertisers are incentivized within an auction system to find the group that is generating the highest ROI and thus would seek out the most relevant group to advertise to.
All-in-all, it’s a great quarter for Facebook and management to continue to display clear direction on where the company should go. A few years ago the earnings call would be filled with discussion on platform security and content regulation, now it’s centered around Facebook’s products and I’m excited to see how their metaverse strategy plays out.