Meta Platforms, Inc. (META) Q3 2012 Earnings Report, Transcript and Summary

Good afternoon. My name is Jay, and I will be your conference operator today. At this time, I would like to welcome everyone to the Facebook third quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. (Operator Instructions) Thank you very much. Ms. Deborah Crawford, Director of Investor Relations, you may begin.

Thank you. Good afternoon, and welcome to Facebook’s third quarter earnings conference call. Joining me today to talk about our third quarter results are Mark Zuckerberg, CEO; Sheryl Sandberg COO; and David Ebersman, CFO. Before we get started, I’d like to take this opportunity to remind you that during the course of this call, we will make forward-looking statements regarding the future events and the future financial performance of the company. We caution you to consider the important risk factors that could cause actual results to differ materially from those in the forward-looking statements in the press release and this conference call. These risk factors are described in our press release and are more fully detailed under the caption Risk Factors in our quarterly report on our Form 10-Q filed with the SEC on July 31, 2012. In addition, please note that the date of this conference call is October 23, 2012, and any forward-looking statements that we make today are based on assumptions as of this date. We undertake no obligation to update these statements as a result of the new information or future events. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today’s earnings press release. This call is being broadcast on the Internet and is available on the Investor Relations section of the Facebook website at investor.fb.com. A rebroadcast of the call will be available after 6 p.m. Pacific time today. The earnings press release and an accompanying investor presentation are also available on our website. After management’s remarks, we will host a Q&A session. And now I’d like to turn the call over to Mark.

Thanks, everyone, for joining us. I’m going to use this time today the same way I will use it on most of these calls, to talk about our vision and strategy. Our mission is to make the world more open and connected. We do this by building services that give people the power to share whatever they want and stay connected to whomever they want, no matter where they are. For at least the next few years, there are three pillars to our strategy. First, we want to build the best and most ubiquitous mobile product. Second, we want to build a platform so that every new app that gets created can be social and enable people to share. And, third, we want to build a strong monetization and economic engine to build Facebook into one of the world’s most valuable companies. I’m going to give an update on where we are in building each of these pillars. Let’s start with mobile. I think our opportunity on mobile is the most misunderstood aspect of Facebook today. Most people underestimate how fundamentally good the trend towards mobile can be for Facebook. This is because there are three trends that are kind of compounding together. First, mobile will give us the opportunity to reach way more people than desktop. Second, people on mobile use Facebook more often. And, third, long term, I think we’re going to monetize better per amount of time spent on mobile than desktop. All of these combined together make mobile a much larger opportunity for us than I think most people realize. Now let’s go through each of these points. First, we should be able to reach more people on mobile than desktop. To us, this isn’t really controversial. In the coming years, there could be billions more…

Thanks, Mark. We made a lot of progress in our advertising business in the third quarter. Our total third quarter revenue was $1.26 billion, with $1.09 billion coming from advertising. This represents a 32% year-over-year increase in overall revenue and a 36% increase for advertising. With a billion people using Facebook monthly, we have created the largest, most engaged community of real people in the world. Building on this extraordinary asset, the goal of our advertising business is to transform how people and businesses connect. Our scale and targeting capabilities make Facebook increasingly important for marketers – brand marketers, direct marketers, local businesses, and developers – as they move customers all the way through the marketing funnel. For brand marketers like Walmart and Procter & Gamble, Facebook offers the ability to reach customers, build awareness, and drive positive association, affinity, and consideration. We help brand marketers develop ongoing and often daily relationships with customers, in many cases for the first time. Facebook is starting to combine the science of CRM with the scale of brand marketing. For direct marketers like Amazon and Capital One, working with Facebook can achieve high ROI by tapping into our incredibly accurate targeting capabilities. This represents a significant opportunity for us in a $55 billion global market. For the 12.8 million local businesses that already have Facebook pages, our products, including location and interest targeting and Offers, deepen customer relationships and drive sales. With tens of millions more local businesses around the world not yet on Facebook, we offer a simple path for SMBs to go digital and drive customers into their stores. And for developers, we spur app downloads and installs and help them reengage customers to generate revenue. Facebook is uniquely positioned to succeed in this rapidly growing global market. We believe that…

Thanks, Sheryl, and good afternoon, everyone. I want to build on Mark and Sheryl’s comments and share our progress in the areas of user growth, revenue, and financial performance. Let’s start with users. We ended September with 1.007 billion people using Facebook, up 26% from a year ago. 584 million people accessed Facebook each day on average in September, up 28% from the prior year. We grew monthly and daily users in all geographic regions, led by Brazil, India, and Japan. Mobile continues to drive our user growth, and we ended Q3 with 604 million monthly mobile users, up 61% versus last year. None of the user numbers include Instagram, which as Mark mentioned passed 100 million registered users and continues to grow. We’re pleased that engagement patterns remain impressively strong around the world in terms of visitation as well as content shared and feedback created, as measured by likes and comments. We still see 58% of our monthly users coming back to Facebook each day, even with more than a billion people using Facebook, including later adopters, and despite a constantly evolving competitive environment. This speaks to the value of our service and the strength of our network. Now turning to revenue. As Sheryl said, total revenue was up 32% from last year, and ads revenue was up 36%. If exchange rates had stayed constant, total revenue would’ve increased 38% and ad revenue 43%. Over the first two quarters of 2012, our ad revenue growth with constant exchange rates was 38% and 33%, so our Q3 number of 43% demonstrates we’re seeing positive impact from our recent investments in monetization. Ad revenue growth was driven by a 27% increase in the number of ads delivered and a 7% increase in the average price per ad. The increase in ads…

(Operator Instructions) Our first question comes from Justin Post with Bank of America Merrill Lynch. Your line is open. Justin Post – Bank of America Merrill Lynch: Great. A couple questions for you on mobile. First, can you talk about total engagement as you look at individual users, both on PC and mobile? Are you seeing that engagement grow if you add up both in minutes or likes or other metrics? Can you talk about total engagement of your user base and how that’s trending? And then thanks for the mobile disclosure, 14% of revenues. Can you say – last quarter you gave us kind of how you were ending the quarter. Can you say if that mobile was kind of accelerating as the quarter progressed? Thank you.

Sure. I can take both those questions. So first of all, in terms of engagement on mobile and web, we continue to see that content created is growing across the world, and feedback, which we measure in terms of likes and comments, continues to grow well as well. So the engagement story on Facebook continues to be a strong one that we’re pleased about. In terms of the sort of Feed revenue, at the end of the second quarter, we disclosed that at that point we were running at about $1 million a day, and we used that metric because we’d just started ramping up towards the end of the quarter, so we felt like giving you the numbers for the whole quarter was not representative of where we were. Those numbers continued to ramp through the quarter. We ended the third quarter with more than $4 million a day coming from Feed and about three-quarters of that coming from mobile Feed. But going forward, I think we’ll stick to the metric of mobile as a percentage of revenue.

Our next question comes from Gene Munster with Piper Jaffray. Your line is open. Gene Munster – Piper Jaffray: Good afternoon, and maybe just following up on Justin’s question, can you talk – obviously you guys have been putting the pedal to the metal, and I think, Dave, you just kind of gave some metrics around the impact to the overall experience. But first question is, is there anything that makes you believe that the acceleration in mobile is impacting the experience? And second, can you talk about any sort of cannibalization from the desktop to mobile in terms of ad revenue?

Yeah, I can take this. We’re carefully monitoring user engagement and sentiment, and we’re pleased with the results so far. We look at how users are engaging on our platform. And as we’ve increased the number of ads in News Feed, we’ve been carefully monitoring that engagement. Our revenue’s growing, and that means, as I discussed, we have a lot of new clients. We also have a lot of clients and customers who are spending more with us. So we’re seeing increased revenue and increased budgets from them. Some of the revenue also is moving over from the right-hand column to News Feed, and that’s part of our strategy. We are putting more emphasis on the products that are running through News Feed, rolling out products, because that’s where the natural ad format is for mobile.

Next we have the line of Scott Devitt with Morgan Stanley. Your line is open. Once again, Mr. Devitt with Morgan Stanley, your line is open. Next we have Youssef Squali with Cantor Fitzgerald. Your line is open. Youssef Squali – Cantor Fitzgerald: So I was just wondering if you can maybe give us some examples of instances where you guys are already seeing better monetization on mobile than on desktop. And, David, can you just quantify the contribution of Instagram in the quarter, both top and bottom line, if possible?

We’ve been working on ad products that monetize on mobile, as I said, into News Feed. And so one example of a product that’s uniquely mobile is Mobile App-Install Ads that Mark mentioned and I mentioned as well. That’s an experience that’s uniquely mobile, and it’s a good example of an ad product that really works in that format.

In terms of Instagram, we closed the acquisition towards the end of the third quarter, so the impact was next to zero, certainly zero on the top line, and next to zero on the bottom line. In the fourth quarter, we will have expenses both from the employees and the investments we’re making in Instagram and also the amortization of the intangible assets that we acquire.

And to add one more thought on monetization on mobile versus desktop, which I think is the heart of the question, if we’re measuring engagement and the results from page post ads, comparing them when they’re placed on the right-hand side to those that are being placed in News Feed. And comparatively, the ones in News Feed – and that’s on both mobile and desktop – are eight times more engaging, and we see 10 times the ad recall. And that makes sense, because News Feed is where a lot of the engagement on Facebook takes place, so by moving those promoted posts or page posts into News Feed, we’re increasing engagement and results as well. Youssef Squali – Cantor Fitzgerald: Thank you.

Next we have Heather Bellini with Goldman Sachs. Your line is open. Heather Bellini – Goldman Sachs: Great. Thank you very much. I had a question for Mark. I guess I was wondering, given the monetization products that you mentioned at the start of the call, if you could maybe rank-order for us – how would you rank those in terms of their ability to drive revenue in calendar 2013, and which ones should be watching most closely? Thank you.

Yeah, I mean, I look at it in terms of we’re building a lot more integrated ad products now, right? And if you look at where we were historically, most of the ad inventory was in this right-hand column. It was a separate experience. And we had this ad team and their job was to kind of drive that service, and they could provide that service to every other product team. So the Messages team focuses on building the best Messages product, and now when they can run that on the side to make money. Now what we’re basically doing is we’ve told every product team that they’re responsible for the advertising experience within each of their products, so the News Feed team is coming up with better ad experiences than just being able to run kind of general ads on the side. And what we’re seeing is that across each of these consumer products that we have, we’re just getting more tailored advertising experiences. So I think there are multiple ways to look at it. I mean, you can look at it by market segment for advertisers, or you could look at it by consumer product; that tends to be how I look at more. But I mean whether it’s a News Feed or the mobile apps that we’re building, or Timeline or any of these things, I think we’re just going to see a lot better products for both users and advertisers.

Our next question is from Scott Devitt with Morgan Stanley. Your line is open. Scott Devitt – Morgan Stanley: Okay, great. We got it this time. And, sorry, I got cut off, so if you’ve answered, just pass. But, Mark, you mentioned ad network in your commentary, and you also discussed search as a business opportunity for Facebook in the middle of the quarter at an event. And so just wonder if you could talk a little bit more about those opportunities in terms of the approach that you would take to build businesses such as that. And then secondly, David, you mentioned changes in the ad product as a driver for growth in ads served, and what were those changes that were made? Thanks.

Sure. So on platform, the basic approach that we have is we think that almost every product category is going to get transformed in some capacity, some abrupt, some kind of subtle transitions over time, where we think that at the end of this process, the winning products in every category are going to be social ones. And one question that I get frequently is just how, if we enable companies to build better products, how does Facebook make money from that? And I think it’s a fair and good question, because then we have to build our platform in a sustainable and profitable way. But rather than focusing too early on, on trying to figure out exactly what the economic relationship is going to be with each of these partners, what we’re primarily focused on is just enabling these companies to grow. And the basic idea is that there are many different ways that we make money from the different platform partners, right? So most of the companies that develop with us – probably shouldn’t say most – but a lot of them buy a lot of ads with us, right, and are some of our biggest advertisers, if you look at the list of advertisers. We’re running a few tests now where on mobile apps and on desktop, some developers are running our ads on their sites, and that’s another way that we can get a revenue share and can get some revenue and profit from these developers growing in engagement. We obviously have the Payments system as well, so developers can integrate that, and we take a cut of that. And there may be other ways in the future that make sense as well that we can talk to developers about exploring. But the basic idea is that we are first focused on helping developers transform these categories, and then we believe that there are going to be a number of different ways of that that revenue can come back to us.

So, Scott, you were asking about the comments I made that in the quarter, this quarter, the number of ads we showed grew at a similar rate to user growth after – in the recent past we’ve been growing ads more slowly because of the shift to mobile, and the product changes helped to offset that. So one product change, for example, would be in this quarter we showed ads in News Feed on both mobile and personal computers, and the year-ago quarter we didn’t. We have made other changes through the period of time, several of which I think had a positive impact on the number of ads we show per page on personal computer use.

Next we have the line of Ross Sandler with Deutsche Bank. Your line is open. Ross Sandler – Deutsche Bank: Great. Just two quick questions. First for Mark on the platform, one of the things we all hope to see Facebook do one day is kind of monetize your strong distribution without touching the user experience with ads. We assume that you guys have thought about this quite a bit, so is there any strategy in the works where you guys could potentially charge for API calls or something that isn’t related to the advertising products? And then, David, a question about the geographic revenue mix. So most of the ad acceleration happened in the U.S. Most of your other regions on a local FX basis decelerated a little bit. So have the new mobile ads been rolled out in those other regions yet, or is that a catalyst that we will see in the coming quarters? Thanks.

Well, I’ll just talk a bit about how we’re thinking about platform monetization. One of the reasons why we favor approaches like having developers buy ads or run our ads or accept payments is that we end up getting a portion of revenue or the value that’s created, as opposed to if you were doing something that was tied to our cost spend, then that’s – it’s a less-efficient way to get value for that value that we’re helping other folks create. So it’s definitely something that we think about. But, again, one theme that I talked about earlier was how each product group now is in charge of the ads experience for that product, and what you’re seeing the platform team build are things like Mobile App-Installs, which is an advertising product for providing distribution for developers, and that’s one of the things that I’m really excited about. It’s a mobile-first product, it’s for developers, a lot of folks who aren’t traditionally Facebook developers still want to spread their apps on mobile, so I think it has a lot of potential.

In terms of the geographic mix for our advertising revenue, the new products that are most important to us, or were most important in the third quarter, which is the ads in News Feed, are adopted or were adopted more quickly by our U.S. clients than globally, and that’s what we would expect just given how these things tend to play out. But if you look at ad revenue year over year across the world, actually Asia and rest of world grew at a faster rate than the U.S. did, and Europe grew a little bit more slowly. So while I do think the U.S. has grown more in terms of dollars because the base is bigger, we’re pleased with how we’re growing across the world with, again, Europe lagging a bit more than we’d like.

Next we have the line of Mark Mahaney with Citi. Your line is open. Mark Mahaney – Citi: Great, thanks. I hate to ask about desktop, but I will. It looks like the desktop ad revenue actually declined sequentially. Is that just normal seasonality, FX, or is there any color there? I’d assume that you’d expect that to normally grow sequentially? And then could you talk about where you think advertisers are in terms of developing good creative for sponsored story ads? We’ve seen mixed success in kind of the ads we’ve tried to track to date. Do you feel that that’s a process, six-month, 12-month process, of advertisers really coming to grips with the most effective way to display those ads? I know it’s a – you have to do work, they have to do work. Where do think the advertisers are in doing the work to help that product? Thank you.

I’ll take the first one. I don’t think the desktop trend is a seasonal one. I think that we opened up a lot of inventory on mobile in this quarter, and so we had advertisers who shifted some spend that might’ve been on the desktop computer into mobile feeds, because our relationships with advertisers – they’re not different advertisers on the two sets of devices, so I think that’s the trend you’re seeing there.

On the question of where advertisers are, as I said before, we’re a third thing, we’re not TV, we’re not search. We are social advertising. And I would say our clients are in different parts of that adoption curve. We have clients who have done a lot with us. They’ve now increasingly, especially this year, seen the results and seen how it affects their actual in-store sales. And they really understand it, and they’re doing more and more. We have some clients who haven’t done as much and haven’t quite figured out how to do this. And I think it’s going to be a slow but steady progression. We see more people doing more and understanding how to make social ads really work for them. We’re also working hard at developing better tools. So some of the things we’re announcing and working with – if you think about Custom Audiences, Custom Audiences enables you, an advertiser, to segment to different parts of their customer segment different ads. That’s really important for making those ads perform better as well. And all the work we’re doing on measuring is also really important, because by measuring, we not just prove the results we have to marketers, but we then get results, which we can then use to improve the ads.

Next we have the line of Jordan Rohan with Stifel Nicolaus. Your line is open. Jordan Rohan – Stifel Nicolaus: Thank you so much. I hope this question comes across okay. Click-through rates may indeed be high on the Feed. I’m curious if you’re able to measure how many of these clicks are accidental and intentional or due to the smaller form factor of smartphones? Put another way, do you see difference between the click-through rates in the Feed between small-form-factor handsets, which are mobile, and larger-form-factor tablets, which may also be considered mobile, but where one could see fewer fat-finger clicks? Separately, do you have any feel for post-click conversion rate metrics that could enable an advertiser to equate the value of a click from Facebook, whether it’s mobile, desktop, or wherever, and a click from Google or – and how you think about that?

I think on the first question, I mean, there are inadvertent clicks on every platform for every company that shows advertising, so it’s just something for us to continue to be aware of and monitor, but I don’t think it’s a specific issue to Facebook, and I do think over time it’s the kind of issue we’ll be able to make good progress at managing.

On the second question, which is basically the efficacy and the value the ads provide, it really depends upon what the different products are and what people are measuring. We are seeing our products create great value and create increasing value in many cases for our customers. But different people are measuring different things. So with brand advertisers, they’re looking for a brand lift, all the brand metrics people look at, ad recall, affinity, and then sales, which we’ve just started the process of measuring this year. With other advertisers like Mobile App-Installs, they’re looking for those mobile apps to be installed, and we’re measuring all of those across the spectrum.

Next we have the line of Doug Anmuth with JPMorgan. Your line is open. Doug Anmuth – JP Morgan: Great, thanks. Just wanted to ask two questions. First, just going back to ads in the News Feed, can you talk about where you think you are now in terms of coverage and inventory levels versus where you could potentially be going forward? Just trying to get an understanding here for how much more gains there are from inventory versus advertisers, more advertisers coming on board and driving pricing up higher? And then secondly, can you talk a little bit about the early benefits that you might be seeing from the Facebook Ad Exchange, how much inventory has been opened up here, and is there any chance that the Ad Exchange can help stabilize the sequential desktop declines that you’re seeing? Thanks.

On the mobile ads, as you’ve seen, we’ve definitely put a lot more ads into Feed as part of growing the mobile revenue. I think you’ll see us increasingly put ads in Feed as well, but there’s a lot of growth that comes not from just more ads in Feed, but from better ads in Feed. Every time an ad is more targeted, more relevant, the marketer gets better value, and it’s better for the people in Feed. And if you look at the types of ads we have in Feed, while we’re really pleased with the progress of increasing our mobile revenue, we also think we have a long way to go in making those ads better, more relevant, higher value. And we’re at the very beginnings of that. We’re measuring across all our different ad products the value they provide for marketers and people, and I think you’ll see a lot of progress in quality, and we believe that progress in quality will translate to revenue as well. On the Facebook Ad Exchange, it’s really early. We just took the Facebook Ad Exchange out of beta in September. We’re not really seeing breakdowns of how much each product is generating in terms of revenue, but that one is small, and we are going to scale each product as we feel comfortable that they’re a great experience for people and for our marketers.

Next we have the line of Brian Wieser with Pivotal Research. Your line is open. Brian Wieser – Pivotal Research: Thanks for taking the question. Can you dimensionalize the nature of your advertiser base between small advertisers versus large brands that work with agencies? And secondarily, can you talk through the geography of the advertisers, not the users, but how the breakdown diverges? And specifically with mobile, is much of it coming from the U.S. versus internationally? Thank you.

When we think about the four key marketer segments we have – brand, direct, local businesses, and developers – they’re all very important to our revenue in advertising. And they’re important in different ways. The brand advertisers are really important for the engagement they drive and the reach that they’re buying and the sales they’re able to generate. The direct marketers, as we’ve done more with FBX, Custom Audiences, those products work across the board, but they’re particularly important for direct marketers. The local business story is a very good one this quarter. We’ve long believed, and I’ve long believed, that this is the Holy Grail of the Internet, that local businesses have the ability to really generate a lot of revenue and provide a lot of value for the people who see those ads. But it’s just really hard to get local businesses online. We’ve had great numbers of local businesses who are using our free products. We have 12.8 million have Facebook pages, 8 million of them use that page monthly, and over 3.5 million post weekly. But what you saw this quarter with the launch of Promoted Posts is a really big step function in converting those people who are using our free page product into paying customers. With over 300,000 pages using Promoted Posts, 25% – more than 25% of those are from new advertisers. So we’ve always had this thesis that people will use our free products and then as we roll out products that are easy and simple for local businesses, we’ll see broad adoption. And I think we really saw that here. And with developers, we continue to iterate on both the Payments side and the advertising site. We think Mobile App-Install Ads – this is very early and I want to stress how early it is – but they’re also very promising.

In terms of advertising revenue by geography, the discussion I’ve provided thus far was by user geography. You were asking about where the revenue is attributed if you focus on where the advertiser comes from, where we’re going. As you would imagine, the revenue is going to skew more to the developed world in that kind of a comparison, because you have large global companies that are trying to advertise to users throughout the world, more than you have people in developing markets who are trying to reach people in the United States, for example. So if you were to pick the U.S. as an example, the by-advertiser attribution of our ad revenue to the U.S. is going to be considerably – maybe not considerably but a bit higher than if you look at it by attribution in terms of user geography.

Next we have the line of Daniel Ernst with Hudson Square Research. Your line is open. Daniel Ernst – Hudson Square Research: Yes, good afternoon. Thanks for taking my call. Mark, sort of a big-picture question for you. As you’ve transitioned to more of a mobile environment where on the web, Facebook is essentially a platform that applications run on, to the mobile environment, where Facebook for the most part is an application that runs on other people’s platforms, whether it’s Apple or Android from Google. And how does that change the opportunity, the way you look at the business long term? And as a related matter to that, as you look to monetize the Open Graph network with so many applications and websites that link into you, what do you see as the opportunity to begin to push the ad network beyond mobile into other websites and use your social data to actually push ads outside the network? And could that be a business that takes a life of its own above advertising on your own, by itself? Thanks.

Yeah, I think it’s a good question. And this is why in my opening remarks I spent a bunch of time talking about how I think that in this counterintuitive way, I think a lot of folks have the question that you have of whether the fact that iOS or Android are these mobile platforms, is that a worse environment for Facebook? And I think what we’ve found that is because of these three compounding factors – more users, more time spent, and the ability to have more monetization, which we’re not there yet, but we think we’re going to get there – that we’re actually much better positioned on mobile than we were on desktop before. And I think some of the trends and data points that we’re laying out here today kind of start constructing that case a bit more. In terms of the actual platform, we’re really an information-sharing platform. We never were an environment for running apps, right? Even on desktop, when you have these games that are very deeply connected to Facebook, they’re not building in some kind of Facebook environment. They’re basically building websites that connect with Facebook and make it so you can pull your friends in and then use Facebook for distribution and sharing. So what I see on mobile is I don’t think that developers are going to be building apps that are literally inside the Facebook app. But what we do see is a lot of success in getting developers to connect their apps to Facebook. So I mentioned these stats where eight of the top 10 iOS apps are connected to Facebook, and 40% of the top 400 iOS apps have the Facebook SDK and are using that in some capacity. So to me, that’s a good sign. And we don’t directly compete with iOS or Android to be a platform for developers as an environment for building apps. And we think that we can basically build an environment, or build this information platform that goes across iOS and Android and mobile web and every other mobile platform that’s out there where every developer who’s building anything on any of those can use Facebook. And we think that that puts us in a really strong position.

Next we have the line of Rory Maher with Capstone Investments. Your line is open. Rory Maher – Capstone Investments: Thanks. First question’s for Mark, and then I have one for Sheryl. A lot of the call has been taken up by creating better monetization products for some of your advertisers. And I’ve been hearing recently about some kind of juxtaposition between user rules and advertising rules. And I know a lot of people point towards the Burger King ad that the app got pulled because people were de-friending people. I’m just curious, is improving -kind of making that process more clear, is that part of your strategy to kind of build out more monetization products? And how do you manage between that and your users? And then Sheryl, you said, I think – I don’t want to misquote, but I think the payments from Zynga were down about 20%. Other games were up about 43%. Did we see similar movements in advertising from games on your platform to acquire users?

Just starting off with the Burger King, that Burger King thing, if I’m thinking of the right thing, was many, many years ago. It was an old app that was -

It was violating our policy.

It was violating our policies by encouraging people to de-friend. I literally think it might’ve been two or three years ago. That’s long gone. But in terms of the balance between good experiences for users and good experience for marketers, we don’t think these are in conflict. We really think they work together. When an advertisement is better for people because they like it better, it also creates more value for marketers. And so our strategy going into that strategic priorities we have is to build products that create value for all of these marketers, measure that value, make it all work on mobile. And we’re not really trading off the user experience versus the marketers’ experience when we do this well. When we do this well, we launch products like Offers that see broad adoption and see people passing it off to their friends. In the Offers example, since launch just this quarter, 100,000 pages created an offer. And of our top 100 offers, on average three-fourths were done by non-fans. That means that people are passing this through the social ecosystem, and their friends are finding it valuable. That’s an experience that’s great for people and great for marketers.

To answer your question about Zynga – or I guess about really advertising in general – as our Games ecosystem has become more diversified in terms of the companies who are doing well, generating Payments revenue for us, we would imagine and do see a – also diversification of ad spend from those developers.

So, operator, we have time for one last question.

Our final question, then, will come from Anthony DiClemente with Barclays. Your line is open. Anthony DiClemente – Barclays: Thank you very much. Sheryl, just wondering, if you could point to any particular success stories on sources of off-line demand generation ad dollars that maybe you could point to? I imagine early on a lot of the sources would be from online, be it display or fulfillment. But is there anything, for example, like print media dollars moving over from newspapers or magazines or otherwise? And then another question on the competitive environment, perhaps for Mark. Just wondering what you’re seeing in terms of users and engagement in international markets where there are other social media platforms that are – any comments there? Is Facebook complementary in some of those markets? And how are you seeing kind of local behavior in terms of users and engagement? Thanks.

To your first question, which is where the budgets are moving from as Facebook revenue increases, it’s really client by client, account by account, how people are doing their spend. We do know that every time we compete for a dollar of advertising, we’re competing against every other opportunity a customer has, whether that’s off-line or online. And our goal is to compare really favorably across all of those. I think the way we’re really doing that now is by putting more products into the market that do a better job of serving the different needs of our different market segments. I think one question people have had is, God, you guys are rolling out so many products. Why? And why are you doing that? And how does that all tie together? And for us, we’re very clear. We have four market segments. We have three priorities. But we need multiple products to serve those different market segments, and that’s what you’re seeing from us. And I think that’s what enables us to compete against all the other advertising opportunities out there.

In terms of the competition, I mean, we compete in all markets for user attention and time and things like that, and the competition looks different from market to market. So it’s sort of hard to give you a blanket answer to that question.

Thank you, everybody, for joining us today. We appreciate your time, and we look forward to speaking with you again.

This concludes today’s conference call. You may now disconnect. Thank you.