Facebook: The “Time Well Spent” Earnings Transcripts.

(Facebook Inc. (FB) Q3 2017)
Our community continues to grow, now with nearly 2.1 billion people using Facebook every month, and nearly 1.4 billion people using it daily. Instagram also hit a big milestone this quarter, now with 500 million daily actives. And we saw good results in the business, where total revenue grew 47% year-over year and we had our first quarter with more than $10 billion in revenue. But none of that matters if our services are used in a way that don’t bring people closer together — or if the foundation of our society is undermined by foreign interference.

I’ve expressed how upset I am that the Russians tried to use our tools to sow mistrust. We build these tools to help people connect and bring us closer together. And they used them to try to undermine our values. What they did is wrong and we’re not going to stand for it. Now, for those who have followed Facebook, you know that when we set our minds to something, we’re going to do it. It may be harder than we realize upfront, it may take longer, and we won’t be perfect, but we will get it done. We’re bringing the same intensity to these security issues that we’ve brought to any adversary or challenge that we’ve faced. The first step is doing everything we can to help the US government get a complete picture of what happened.

We’ve testified in congress over the past couple of days about the activity we found in last year’s election. We’re working with congress on legislation to make advertising more transparent. I think this would be very good if it’s done well. And even without legislation, we’re already moving on our own to bring advertising on Facebook to an even higher standard of transparency than ads on TV or other media. That’s because in traditional media, there’s no way to see all of the messages an advertiser is showing to different audiences.

We’re about to start rolling out a tool that lets you see all of the ads a page is running, and also an archive of ads political advertisers have run in the past. We’re also working with other tech companies to help identify and respond to new threats, because as we’ve now seen, if there’s a national security threat involving the internet, it will affect many of the major tech companies. And we’ve announced a number of steps to help keep this kind of interference off our platform. This is part of a much bigger focus on protecting the security and integrity of our platform and the safety of our community. It goes beyond elections and it means strengthening all of our systems to prevent abuse and harmful content.

We’re doing a lot here with investments both in people and technology. Some of this is focused on finding bad actors and bad behavior. Some is focused on removing false news, hate speech, bullying, and other problematic content that we don’t want in our community. We already have about 10,000 people working on safety and security, and we’re planning to double that to 20,000 in the next year to better enforce our Community Standards and review ads. In many places, we’re doubling or more our engineering efforts focused on security. And we’re also building new AI to detect bad content and bad actors — just like we’ve done with terrorist propaganda.

I’m dead serious about this, and the reason I’m talking about this on our earnings call is that I’ve directed our teams to invest so much in security — on top of the other investments we’re making — that it will significantly impact our profitability going forward, and I wanted our investors to hear that directly from me. I believe this will make our society stronger and in doing so will be good for all of us over the long term. But I want to be clear about what our priority is: protecting our community is more important than maximizing our profits. So security and the integrity of our services will be a major focus.

Beyond this, our focus is on building community. I talked about this last quarter when we changed our mission to focus on building community to bring the world closer together, and that’s more important now than ever. And this gets into our roadmap for the next 3, 5 and 10 years. Over the next three years, the biggest trend in our products will be the growth of video. This goes both for sharing, where we’ve seen Stories in Instagram and Status in WhatsApp grow very quickly, each with more than 300 million daily actives, and also for consuming video content. We recently launched the Watch tab, where you can discover shows, follow creators, connect with people watching an episode, and join groups with people with similar interests to build the community.

But as video grows, it’s important to remember that Facebook is about bringing people closer together and enabling meaningful social interactions; it’s not primarily about consuming content passively. Research shows that interacting with friends and family on social media tends to be more meaningful and can be good for our well-being, and that’s time well spent. But when we just passively consume content, that may be less true. When done well, video brings us closer together. We’ve found that communities formed around video like TV shows or sports create a greater sense of belonging than many other kinds of communities. We’ve found that Live videos generate 10x the number of interactions and comments as other videos. But too often right now, watching video is just a passive consumption experience. Time spent is not a goal by itself. We want the time people spend on Facebook to encourage meaningful social interactions. https://s21.q4cdn.com/399680738/files/doc_financials/2017/Q3/Q3-’17-Earnings-call-transcript.pdf

(Facebook Inc. (FB) Q4 2017)
But 2017 was also a hard year. The world feels anxious and divided, and that played out on Facebook. We’ve seen abuse on our platform including interference from nation states; the spread of news that is false, sensational, and polarizing; and debate about the utility of social media.

We have a responsibility to fully understand how our services are used and to do everything we can to amplify the good and prevent the harm. This is my personal challenge for 2018. One of the most important things we can do is make sure our services aren’t just fun to use but also good for people’s well-being and for society overall.

So far, this year, we’ve already announced a couple of important updates. The first is prioritizing meaningful social interactions over passive consumption of content. Research shows that strengthening our relationships improves our well-being. When we use social media to connect with people, that correlate to the long-term measures of well-being that you’d expect, like happiness and health. But passively watching videos or reading articles may not have those same effects.

You can think about it this way. When you see a photo from a friend or News Feed, that’s not just content that makes you smile or laugh. It’s an opportunity to connect with that friend, to reach out to them, and to remind them that you care about each other. That connection is deeply important to us as people. But when you see a video or a news article, even if it’s informative or entertaining, unless you start a conversation around it, you’re not building a relationship.

We’ve also gotten feedback from our community that these moments that lead us to connect are the unique experience that people want and expect from Facebook. But in the last couple of years, the ecosystem of public content like video, news, posts, or businesses has grown massive, to the point where it’s starting to crowd out the personal connection that people value most.

News and video will always be an important part of Facebook, but when people are spending so much time passively consuming public content that it starts taking away from the time people are connecting with each other, that’s not good. So let me be clear: helping people connect is more important than maximizing the time they spend on Facebook. As a result of this update, you will now see more content from friends, family, and groups that leads you to interact with people and less public content that leads to more overall time spent.

Now, as I made clear announcing these changes, I expect the time people spend on Facebook and some measures of engagement will go down as a result. But I also expect the amount we actually interact with each other to go up over time. We’re already starting to see this play out. On our last earnings call, I said that video done well can bring people together, but too often today, watching video is just a passive experience. To shift that balance, I said that we were gonna focus on videos that encourage meaningful social interaction, and in Q4, we updated our video recommendation and made other quality changes to reflect these values.

We estimate that these updates decrease time spent on Facebook by roughly 5% in the fourth quarter. To put that another way, we made changes that reduced time spent on Facebook by an estimated 50 million hours every day to make sure that people’s time is well spent. That’s how serious we are about this.

Now, we don’t normally share time metrics because they’re not the best way of understanding engagement, but this shows how committed we are to making sure that the time you spend on Facebook is valuable. Through this process, we’ve also gotten a sense for how some updates impact other metrics as well. For example, changes we made to improve quality in the fourth quarter contributed to a decline in people using Facebook daily in some countries.

By focusing on meaningful interactions, I expect the time we all spend on Facebook will be more valuable, and I always believe that if we do the right thing and deliver deeper value, our community and our business will be stronger over the long term. In this case, it intuitively makes sense. If people interact more, that should lead to a stronger community, and we already know that time in News Feed interacting with people is more valuable than time passively consuming video or news. When you care about something, you’re willing to see ads to experience it, but if you just come across a viral video, then you’re more likely to skip over it if you see an ad.

So, I want to be clear. The most important driver of our business has never been time spent by itself. It’s the quality of the conversation and connection, and that’s why I believe this focus on meaningful social interaction is the right one.

The second update we announced is about making sure the information you see on Facebook comes from broadly trusted and high-quality sources in order to counter misinformation and polarization. The idea is this update will show more news from sources that are broadly trusted across the community, and not only by those who read them directly. For example, take The Wall Street Journal or The New York Times. Even if you don’t read them or you don’t agree with everything they write, most people have confidence that they’re high-quality journalists. On the flipside, there are blogs that have intense followings but are not widely trusted beyond their core audience. We will show those publications somewhat less.

Preventing false news, hate speech, and other abuse is another important area of focus for us. In order to protect the security and integrity of our platform, we’re investing in both people and technology. We now have around 14,000 people working across community ops, online ops, and our security efforts. That’s almost double where we were a year ago. We’ve also built new technology to detect suicidal posts that have helped first responders reach more than 100 people who needed help quicker, and we’ve built AI systems to flag suspicious behavior around elections in real time and remove terrorist content.

Thanks to our AI system, 99% of the ISIS and Al-Qaeda-related terror content we take down is now removed before anyone even flags it as such, and in some cases before anyone sees it. We’ve also made progress demoting false news in News Feed, which typically reduces an article’s traffic by 80% and destroys the economic incentives that most spammers and troll farms have to generate these false articles in the first place.

Finally, we’ve started rolling out a major ad transparency effort. We support Congress passing legislation to make all advertising more transparent, but we’re not gonna wait for them to act. We’ve already begun launching a way for anyone to view the ads of pages running on Facebook, Instagram, and Messenger, even if they aren’t in the intended audience. We’re testing this in Canada first with the goal of rolling it out in the US this summer, ahead of the mid-term election. https://s21.q4cdn.com/399680738/files/doc_financials/2017/Q4/Q4-17-Earnings-call-transcript.pdf

Learn how the “Time Well Spent Movement” started.

Image By Anthony Quintano from Honolulu, HI, United States – Mark Zuckerberg F8 2018 Keynote, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=72122399

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