Whatever you think of Facebook and the fourth quarter earnings it released Wednesday, remember this: Facebook is m-o-b-i-l-e.
In a conference call with analysts last night, CEO Mark Zuckerberg and company really hammered that point. So pay no attention to the traders who slapped the stock around after the social media giant released fourth quarter earnings. Facebook has big things in store for investors and users, the execs promised. Zuckerberg, COO Sheryl Sandberg, and CFO David Ebersman ran a victory lap around the digital block, touting the numbers (which were actually good) and explaining – to the extent that it suited them – how they pulled in 17 cents/share in the fourth quarter, 2 cents more than Wall Street had predicted, on revenue of $1.59 billion. That’s a 40 percent jump from a year earlier, and, again, better than the $1.52 billion predicted.
1. Facebook is mobile... Did we already say that? The word mobile came up 80 times in the hour-long call – that’s more than once a minute. The term desktop came up only ten times, only once every six minutes. Mark Z. uttered the word in the most memorable way: “Today there is no argument, Facebook is a mobile company.” For the record, mobile accounted for 23 percent of the $1.33 billion advertising revenue in the fourth quarter, up from 14 percent of $1.09 billion in ad revenue in the third quarter. Last year it was about 0 percent.
2. …but Wall Street still doubts Facebook’s mobile chops. This is a show-me town. Monthly mobile users climbed 57 percent from 2012 to 680 million users. And for the first time ever, daily mobile users exceeded desktop users. But mobile monthly user growth was faster last quarter, surging 61 percent from a year earlier to 604 million. Investors also worry that Facebook is replacing desktop ads with cheaper mobile ads. The stock is up nearly 50 percent in the past three months, putting it in “priced to perfection” territory. And the earnings weren’t perfect. So the after-hours stock smackdown continues this morning, with Facebook shares off 5 percent in early trading before paring those losses a bit.
3. Facebook is an app monster. “Among people who learn about new apps on Facebook, 48 percent clicked directly from the Facebook apps to download new mobile apps,” Sandberg said.
4. Zuckerberg doesn’t care what the Street thinks about his company... Despite a rocky debut for the stock and months of overwhelming scrutiny, the CEO’s attitude is unchanged from the IPO. Short-term profit concerns won’t trump what he thinks is best for the company. And in 2013 that means he is going to spend like mad to improve advertiser and user experience, so the company will continue to grow. “This means that we aren't operating to maximize our profits this year, we're doing what we think will build the best service and business over the long term,” he said. Headcount rocketed to 4,619 in 2012 from 3,200 in 2011. Expect overhead to jump by 50 percent this year, said Ebersman.
5. …but Sandberg and Ebersman do. Sandberg and Ebersman reassure: Facebook is making money now and has lots of ideas up its sleeve. Success is here, they said: Every one of the top 100 AdAge Global 100 Advertisers are customers. This translates into some big numbers.
● Facebook Exchange, the real-time auction marketplace for ads has served nearly a billion impressions daily and supports 1,300 advertisers a day. Click rates are higher and conversion costs lower, Sandberg said.
● Nearly 500,000 pages have used “promoted” posts; 30 percent are new advertisers, 70 percent repeat.
● Specialized marketing tools enabled Michael Kors to launch a new sneaker; guaranteed 15 million impressions for Walmart on a Thanksgiving weekend ad campaign; and translate into 42 million accepted special offers on merchandise.
6. Instagram has legs. On New Year’s Day, users downloaded 600 million photos, a record. That doesn’t translate into money yet. But Forbes blogger Robert Hof infers from Zuckerberg’s remarks that he is thinking of using Instagram as a launchpad for video in advertising on a mobile platform. That could be worth $715 million.
7. NewsFeed ads aren’t annoying users. Hard to believe. And they can be used seamlessly between mobile and desktop. Zuckerberg said that only 2 percent of users complained about them. A minor nuisance when you consider that the NewsFeed ads generate “more than eight times the incremental offline sales in ads than on the right-hand side.” That’s not all, NewsFeed likes and comments are up 50 percent, which Zuckerberg attributes to improvements in its ranking system.
8. Data on ad spend by category is on a need-to-know basis. Ad revenue is up 41 percent and that’s the really important metric, Ebersman essentially said in response to a question about whether NewsFeed is cannibalizing the ads on the far-right side of the desktop, which seem to be down 10 percent. “It's hard to really separate out the mobile and desktop or Feed and right-hand column as sort of separate and distinct businesses because for most of our ads, marketers would tell us what ad they want to show and to what audience they want us to show the ad and we choose where it goes.” Hmmm.
9. Clicks are not the best way to measure success, at least for Facebook. “The click is not really the most important metric for us,” said Sandberg, a former Googler. Aren’t click-through rates a core part of revenue? “In fact, now that we've been able to work with companies to look at in-store sales data, we find that of the people who saw a Facebook ad and then purchased the product in the store, 99 percent of them never clicked on an ad. So we are educating the market what the metrics are that are right for us.” Facebook now has a new tool to measure conversion rates – even if users don’t purchase an item when first exposed to the product.
10. Don’t seat Google CEO Larry Page next to Zuckerberg at your next function. Unless you’re planning on a silent or meditative meal. “…our relationship with Google isn't one where the companies really talk,” said Zuckerberg. But fortunately, they don’t have to. Android is an open system, Zuckerberg noted, so the McCoys and Hatfields don’t have to mingle.
11. Actually, don’t seat anyone from Facebook near anyone from Google. The troika appears to believe that their newly launched Graph Search will rock the ad world with structured searches and let them eat Google’s lunch. At last, users will be able to find where the person they reluctantly friended (but always hated in fourth grade) bought their collection of Louboutin boots.
12. Apple is their new BFF. If Apple wants to have a “lockdown system” that’s okay with us, Zuckerberg said. Because Apple is beautiful. “They've been a great partner for us so far and we're really excited about doing more there,” Zuckerberg gushed. Translation: Apple isn’t Google.
13. Microsoft who? Zuck lays it out. There are three major systems on mobile. Android, the surprisingly functional child of that so-yesterday search engine company; Apple, and the mobile web.
14. Zuckerberg still sounds amazingly like…Dudley Do-Right. On speed and with a Westchester accent. Really.