It wouldn’t be a Facebook earnings call if CEO Mark Zuckerberg wasn’t a bit vague about the same questions analysts have been asking quarter after quarter.
Specifically, just how will Facebook monetize its social media network, and specifically Messenger?
Zuckerberg eventually answered analysts’ questions about those plans but not without giving a rather lengthy answer about Facebook’s plan of attack over the next few years. He concluded his remarks by asking for patience, emphasizing that the execution needs time to be done right.
He reminded us that Facebook Messenger has 700 million users and that it hit a billion downloads on Android. WhatsApp is also seeing positive growth, and the Web experience is being enhanced. But in some sense, that’s all old news.
So, what exactly is the plan?
Well, here’s the not-so-short playbook that Zuckerberg let us all in on, starting with making sure Messenger isn’t inundated with distracting ads that turn consumers off.
“The playbook that we’re going to run with Messenger and WhatsApp is kind of similar to how we thought about building a business in Facebook and News Feed — where if you go back to 2006 and 2007 there were a lot of people who were encouraging us to put banner ads and inorganic content into the experience,” Zuckerberg explained. “What we decided was that over the long term, the ads and monetization would perform better if there was an organic interaction between people using the product and businesses.”
And that’s how Facebook decided to build free Pages for businesses and to add Insights to attract more businesses to using those pages that sifted into consumers’ News Feeds. It’s through the success Facebook has seen in its News Feed in terms of driving value, helping businesses find customers and vice versa, and for businesses to sell products and grow.
But how does that relate to messaging? You may be asking yourself.
“Messaging, I think, is going to be pretty similar. Right now, some people in WhatsApp use the service in order to message businesses. Messenger, I think, is more people-to-people today, and we’re working on a lot of different things that make it so that people can get value in interacting with businesses,” Zuckerberg said. “We have a number of other things that we are working on in Messenger and WhatsApp. But the long term bet is that by enabling people to have good organic interactions with businesses, that will end up being a massive multiplier of the value of monetization down the road when we work on that and really focus on that in a bigger way down the road.”
While “a number of other things” might not have been as specific as analysts were hoping for, they at least got a little taste about what’s next for Messenger and its monetization plans. Even as vague as they were. For now, it’s clear that Facebook is focused on growing its organic interaction, which in turn they believe will help create more commerce opportunities between consumers and businesses.
But, of course, as we all know, the algorithms that Facebook uses to decide what ends up in people’s News Feeds are heavily skewed away from those little, tiny, small businesses that hope to deliver messages to their 2,500 fans organically. As a social network that makes its money via advertising, those businesses need to buy ads to be seen. It didn’t start out that way, but that’s how it ended up. Will Messenger follow that same playbook? Time will tell.
Before wrapping up the call, Facebook COO Sheryl Sandberg provided more insight into Facebook’s eCommerce vision as it relates to attracting businesses and connecting those businesses to consumers.
“ECommerce is one of our top categories of advertisers, and we are already driving a lot of product sales through Facebook. But, importantly, our eCommerce initiatives are really about connecting consumers with markets so they can buy with companies. They are not buying through us,” Sandberg said. “We are testing a buy button through a new section on Pages, but buy buttons are letting people buy directly from their advertisers and not from us. It’s pretty early days. We’re pretty excited about what we see in the eCommerce vertical, and we’re going to invest in growing that vertical in growing our ad businesses.”
In terms of earnings metrics for the second quarter, Facebook saw revenue of $4.04 billion and a net income of $719 million, which was a slight dip from last year’s Q2 net income of $791 million. Daily active users on Facebook in June was 968 million, a 17 percent increase, year over year. Mobile daily active users increased by 29 percent to 844 million on average in that same month. Monthly active users was 1.49 billion as of June 30, a 13 percent increase. Mobile monthly active users increased 23 percent on the year to 1.31 billion.