Meta Platforms, Inc.
Q3 2020 Earnings Call Transcript

Published: 30 Oct 2020

[Operator:]

Good afternoon. My name is Mike and I will be your conference operator today. At this time, I would like to welcome everyone to the Facebook Third Quarter 2020 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. This call will be recorded. Thank you very much. Ms. Deborah Crawford, Facebook’s Vice President of Investor Relations, you may begin.

[Deborah Crawford:]

Thank you. Good afternoon and welcome to Facebook’s third quarter 2020 earnings conference call. Joining me today to discuss our results are Mark Zuckerberg, CEO; Sheryl Sandberg, COO; and Dave Wehner, CFO. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward‐looking statements. Actual results may differ materially from those contemplated by these forward‐looking statements. Factors that could cause these results to differ materially are set forth in today’s press release, and in our quarterly report on Form 10‐Q filed with the SEC. Any forward‐looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events. During this call we may present both GAAP and non‐GAAP financial measures. A reconciliation of GAAP to non‐GAAP measures is included in today’s earnings press release. The press release and an accompanying investor presentation are available on our website at investor.fb.com. And now, I’d like to turn the call over to Mark.

[Mark Zuckerberg:]

All right, thanks everyone for joining us today. I hope you’re all staying safe and doing well. We had another strong quarter as people and businesses continue to rely on our services to stay connected and create economic opportunity, especially during these tough times. Now 2.5 billion people around the world use one or more of our apps each day, more than 200 million businesses use our free tools, and there are more than 10 million active advertisers across our services. And most of these are small businesses, which otherwise would have a much harder time moving online and reaching customers during this pandemic – and that’s something I’m really proud of. Before I cover other topics, the election is of course top of mind for everyone right now, so I want to start there. I’ve discussed our efforts many times on previous calls, but I want to take a few minutes to reiterate how far we’ve come since 2016. Four years ago, our security teams were looking for traditional threats like hacking, but what we ended up seeing was something new – coordinated interference campaigns, using fake accounts, that tried to spread misinformation and discord. Since then, we’ve built the most advanced systems in the world to find and remove these threats, and it shows in the numbers. In the years since, we’ve taken down more than 100 networks, including from Russia, Iran and China, and we block millions of potentially abusive accounts every day. No other company has systems nearly as advanced.

[Sheryl Sandberg:]

Thanks Mark, and hi everyone. I join Mark in thanking all of you for joining us today. This was a strong quarter for us as more businesses shifted online to reach customers, tell their stories, and sell virtually. Our total ad revenue for Q3 was $21.2 billion, which is a 22% year-over-year increase. Our largest verticals were eCommerce, Retail, and CPG and we continue to see broad growth across sectors as advertisers continue to optimize for measurable objectives like sales and website visits.

[Dave Wehner:]

Thanks, Sheryl, and good afternoon everyone. Let’s start with our community metrics. In September, we estimate that approximately 2.5 billion people used at least one of our services on a daily basis, and that approximately 3.2 billion people used at least one of our services on a monthly basis. Facebook daily active users reached 1.82 billion, up 12% or 197 million compared to last year. DAUs represented approximately 66% of the 2.74 billion monthly active users in September. MAUs grew by 291 million or 12% compared to last year. Turning to the financials. All comparisons are on a year-over-year basis unless otherwise noted. Q3 total revenue was $21.5 billion, up 22% or 21% on a constant currency basis. We benefited from a currency tailwind and had foreign exchange rates remained constant with Q3 of last year, total revenue would have been $114 million lower. Q3 ad revenue was $21.2 billion, up 22% or 21% on a constant currency basis. The acceleration in advertising revenue growth from Q2 to Q3 was largely driven by strong advertiser demand resulting from the accelerated shift from offline to online commerce that we saw in connection with the pandemic. We are seeing particular strength among small and medium sized businesses. We are proud of the role that our services are playing in helping people stay connected and businesses reach consumers during these challenging and uncertain times. On a user geography basis, year-over-year ad revenue growth rates improved in all regions compared to Q2. Asia-Pacific and Europe were strongest and grew 30% and 25%, respectively. Both regions benefited from currency tailwinds. U.S. and Canada grew 20%. Rest of World grew 12% and was impacted by foreign currency headwinds. In Q3, the total number of ad impressions served across our services increased 35% and the average price per ad decreased 9%. Impression growth was driven by both Facebook and Instagram. The decline in average price per ad was primarily driven by the ongoing mix shift towards geographies and Stories ads, which monetize at lower rates, although year-over-year pricing trends improved from the second quarter due to broad improvements in advertiser demand coupled with slower impression growth. Other revenue was $249 million, down 7%, primarily due to the timing of a new product launch as we transitioned to Quest 2 which we began selling in the fourth quarter. Turning now to expenses. Q3 total expenses were $13.4 billion, up 28% compared to last year. In terms of the specific line items

[Operator:]

We will now open the lines for question-and-answer session. Your first question comes from the line of Brian Nowak from Morgan Stanley.

[Brian Nowak:]

Thanks for taking my question. I have two, one for Mark one for Dave. Mark, there’s a lot of different types of consumer behavior on the platform for messaging, posting videos, stories, shopping, et cetera. I’d be curious as you sort of look at the way in which people are using the products now versus the start of the year pre-COVID? What’s changed the most that surprised you? And how does that sort of impact your product priorities as you continue to make sure you’re delivering value for your advertisers over the next couple of years? And then Dave, I wanted to ask one about the initial 21 OpEx guide, and you mentioned sort of R&D and technical talent. Are there any specific projects or initiatives where you sort of look at and you say these areas really need to invest maturely harder and next year than you may have this year. Thanks.

[Mark Zuckerberg:]

Sure. Thanks for the question. In terms of what behaviors we really saw with COVID, it was an increase in what – well, first of all, there was an increase in almost everything across the board, which I think was somewhat temporary and is now returning to baseline levels of growth, which is partially what we’re seeing, but in terms of some of the more permanent trends, I think more people are doing kind of synchronous forms of connection. So voice calling and video calling, I think, we’re seeing a continued to be elevated in a lot of areas. We’re seeing a stronger need for community. That’s been a theme that we’ve seen for a while, but I think especially with COVID and people feeling a little more isolated that has grown the need to do that online that we’re really going to double down and invest in that area to help even more than we are today, building out the infrastructure for communities as a foundation going forward. People have more time where they want entertainment, so we’re seeing video and gaming and things like that grow as well. And that seems to have been sustained. That’s on top of all the commerce trends where I don’t think we know exactly which way this will turn as Dave and Cheryl both said whether this is a sort of a one-time shift towards a dramatic increase in the amount of commerce that’s happening online, versus a continued trend that we will see. But certainly we haven’t seen any decline or return to baseline off of the quite elevated levels of online commerce behavior that we see both from consumers and small businesses.

[Dave Wehner:]

Hey Brian, I’ll take that second question. As Mark outlined in his prepared remarks, we’re making significant investments in hiring across a wide range of new products. I’d probably talk about, big investments that we’re making in our longer term, AR/VR work through Facebook Reality Labs, as well as continued investment scenarios like messaging, commerce and Reels. The other thing that I would mention on the 2021 total expense guide is that we expect to have higher expenses from office operations and travel once we have seen larger parts of the workforce return to the office. We estimate that in 2020, we saved approximately $1.5 billion on those expenses. And in 2021, we would be kind of working off a higher employee count, which is ultimately what drives those expenses. So we’d expect to see a snap back of some of those savings.

[Operator:]

Your next question comes from the line of Eric Sheridan from UBS.

[Eric Sheridan:]

Thanks so much. Maybe I’ll try two also. First maybe following up on Brian’s question the way Dave answered it, but turning it back to Mark. Mark I would love to understand your philosophy around what you think the company needs to either invest in, or sort of solve for the unlock on augmented reality of the long-term and sort of a broad-based consumer and enterprise platform, but to be that sort of next wave of computing that you’ve talked about in the past. What do you see as sort of the three to five-year roadblocks you’re investing against and key unlocks you are looking for in the business? And maybe Sheryl, if I could just ask you probably the number one question we get from investors is that all the innovation you guys are doing on the commerce side, whether it be Facebook Shops, or transformation of Instagram around shopping and checkout. Given the way you framed your statements around the shifts in commerce in real time as we continue through this COVID period, how are those sort of platforms positioned to capitalize very short-term Q3 into Q4? And how are you thinking about the ability for those shifts to be there for advertisers and commerce participants in 2021 and beyond? Thanks.

[Mark Zuckerberg:]

Sure. Well, I can take the first one in terms of some of the milestones for the next computing platform. I think that there are a few things that I’m really looking for. So there’s virtual reality, there’s augmented reality. And then there’s the whole kind of operating system of sort of spatial computing and 3D around that. And there are pieces that need to come together on each of those. VR, we are the most advanced in, the big milestone that I’m focused on here is we want to get to 10 million active units in our VR systems, because we think at that point that’s when it will become the ecosystem will really be able to be self-sustaining and accelerate where independent developers will be able to start. It will really economically make sense for independent developers to prioritize the Oculus platform above alternative gaming platform is because the install base will be sufficiently large, that they will get good returns. Right now, we’re funding a lot of the content development ourselves. But we hope that, that at some point in the next few years, we’ll reach that. And we feel like we have line of sight to that. Part of building out AR is going to be a little bit harder in that. VR, people do it, they do at home. It’s meant to be pretty immersive. Obviously, you want the headset to be as small and comfortable as possible, but fundamentally it’s not the type of thing that you’re going to be wearing down the street that you need to really have a very kind of stylish or socially acceptable form factor just yet. Whereas I do think to have viable augmented reality consumer glasses, you need to clear a number of technological hurdles to make it so that all of that technology fits and what would be kind of a normal, maybe thick rimmed consumer glasses form factor. So these are – there were a number of fundamental technological advances that still need to be made there, which is why I think that that product is still a few years out. But it’s one that we’re very excited about. The work that we’re doing on VR and AR, we’ll share some of kind of the operating system and ecosystem around them of 3D development and spatial development. And that’s also shared across some of the AR effect and things that we’re seeing, people use in Reels and the Camera and Instagram and Facebook and Messenger. And that work I think is going quite well, where there are hundreds of thousands of creators and developers and people building for that, but all of those pieces basically need to come together for the ecosystem to work. And I’ve been very impressed and excited by the progress that our teams have made on this. But I think that the new Quest 2 product is extraordinary. I love using it. And I’m really proud of the work that we’ve done there.

[Sheryl Sandberg:]

Let's talk about commerce. We’ve been focused on making commerce more convenient, more accessible, secure, across our app for people in businesses. We always were at the top of the funnel for discovery and for connecting people to many businesses and products around the world. And we saw even before the pandemic, an opportunity to keep moving people down that funnel. What happened with coronavirus is we just massively accelerate the – this shift massively accelerated, and we really doubled down on shipping commerce products so that we could help the now 10 million small businesses who advertise, but the hundreds of millions who really rely on our free tools so that they would be able to pivot online. And so, Mark mentioned shops in his remarks. We launched this very quickly in Q2 and we’re seeing - it’s early, but we’re really pleased with the progress. We’ve just announced expansion to WhatsApp. We’re building for Facebook, we’re building for Instagram. And I think what we see is that acceleration really works, and it’s good because we can provide these tools to small businesses, but it also accelerates our ad revenue, and I’ll share an example. There’s an indigenous brand called Sisters Sage. They make handcrafts and wellness products, like soaps. And they were founded by sisters. And before coronavirus, they were selling at local farmers’ markets and mall kiosks. So that obviously just went away overnight. They pivoted to Facebook and Shopify, were able to put themselves online. And then used our targeted ads and have had 9 times return on ad sales and have increased their sales by 2 – over 2.5 times during this. And so what we see is that when we help provide the commerce tools, it can help the small businesses that rely on us, and it can also drive our ad revenue.

[Operator:]

Your next question comes from the line of Justin Post from Bank of America.

[Justin Post:]

Hey, thank you. Mark, on prior calls, you mentioned that eventually margins have to kind of – I mean expense growth kind of has to match revenue growth. So interesting in the midpoint of your range 32% expense growth. Does that show some optimism on revenues? Or are you investing in some products that could pay-off with some revenues down the road? And just thinking about the progress with messaging, you have a deal with DD in Brazil and opening up with other platforms. Is that something you’re excited about over the next couple of years of starting to really show some revenues? Thank you.

[Dave Wehner:]

So Justin, why don’t I take the first part of that, which is on the expense growth guidance? And there we’re not giving guidance on revenue growth and there’s not implied guidance on revenue growth. So at the midpoint, you’ve got that right. It’s sort of in the low-30s on an expense growth basis that fairly consistent with where our head count growth is right now. And that really reflects the opportunities we see to invest. We’ve been successful with hiring and retaining talent. We’ve got a lot of priorities given everything we have seen from COVID and the shift to online with commerce, with messaging, and also the big investments that we’re making for the long-term in Facebook Reality Labs. So I think it’s clear that we would expect there to be a margin decline next year based on that guidance, but we’re not giving specific revenue guidance at this time. And then Mark, do you want to cover the messaging?

[Mark Zuckerberg:]

Sure. I think the short answer is yes. I think the goal is to build out a commerce platform around messaging with all of the tools starting with Facebook Shops, which we’ve already announced will be coming to WhatsApp and Messenger. So any small business, we’ll be able to set up a shop and have that kind of automatically establish a presence in those services too. We’re building out a number of tools around business messaging, so that people can follow-up and complete transactions and get support through messaging, and then payments so people can complete transactions too. One of the early monetization products that is working quite well or click to messaging ads, so that way someone can get a business can run ads in Facebook or Instagram and in the destination for that ad can take the person to a thread, chat thread, either in Messenger or WhatsApp to kind of further build out the relationship with the consumer or a completed transaction. And that’s growing quite well. And I’m quite excited about that, but overall, this is a big priority is building out all of these commerce tools both to that small businesses and all kinds of businesses can do this kind of commerce in Facebook and Instagram, but also within messaging, like you say.

[Operator:]

Your next question comes from the line of Brent Thill from Jefferies.

[Brent Thill:]

Thank you. If you could just maybe talk a little bit about the real engagement in what you’re seeing so far, I know it’s early, but any observations there. Thank you.

[Mark Zuckerberg:]

I’m happy to jump in here. I’m quite excited about the progress here. It’s still quite early. We’ve expanded Reels into more than 50 countries. We’ve launched a number of new features. The results are encouraging. There’s a lot more work to do here as well. And I don’t have any specific numbers to share here. Dave, I assume you don’t have any specific numbers that you would share either.

[Dave Wehner:]

Yes, that’s right. I think we’re encouraged by the initial results, but it’s still early.

[Operator:]

And your next question comes from the line of Heather Bellini from Goldman Sachs.

[Heather Bellini:]

Great. Thank you. I had two questions. Mark, I know you’ve been asked a lot about AR/VR on this call. But I was wondering if you could share with us, how do you think about the advances you’re making on that front, helping to drive differentiation from an eCommerce perspective and how much of a competitive differentiator can your work be here as commerce obviously continues to accelerate online. And then I just had a quick one for Dave about any update on the percentage of revenue from the top 100 advertisers I could have missed that. Thank you.

[Mark Zuckerberg:]

Yes. I mean, I think your question on augmented reality is a really good one, because it hits on the fact that we mostly talk about it as a long-term new kind of platform. But in the next couple of years, I also think that there will be opportunities to build these kind of features into our mobile apps in an increasing way to kind of help people express themselves like they’re doing in Reels and stories and in our cameras. We have – as you probably know, rolled out a number of augmented reality, commerce tools in ad format, right. So the type of thing is like for cosmetics, people can try on lipstick or sunglasses to see what they would look like on them. We think we can get to the type to the place where – for more kind of items that you might buy to put in your house. We’ll be able to for a lot more of that stuff, be able to visualize what it would look like in your living room, just through your camera and an augmented reality tool try on clothes, different things like that over time. So there is a lot of this work that I think will help out by building new, innovative experiences in our mobile app. And all of that is also contributing to building up this longer-term development platform around 3D and facial computing that will be very foundational to all of the VR and AR work longer term as well.

[Dave Wehner:]

And Heather, it’s Dave. We don’t have update on the top 100 advertisers’ statistic. But I would say that, we continued to see strong growth from our small and medium-sized advertisers in the quarter, continued strength with our direct response advertisers. So we’re really pleased with the broad base of advertisers that we saw in the quarter end and helping those advertisers connect with business – with consumers in this challenging climate. So I’m really pleased with what we’re seeing on that front.

[Operator:]

Your next question comes from the line of Doug Anmuth from JPMorgan.

[Doug Anmuth:]

Thanks for taking the questions. One for Mark, and then one for Sheryl or Dave. Mark, you touched on interoperability briefly. I was hoping you could talk about your rollout efforts so far. And how we should think about the key benefits and milestones there? And then Sheryl or Dave, would you still expect IDFA to have the same degree of impact on your business as you did three months ago, whenever it is actually rolled out? Or is it possible that the delay has benefited you with more time to work around and leverage other data sets and therefore minimize the impact? Thanks.

[Mark Zuckerberg:]

I can speak about inter-op. It’s been a long-term infrastructure project that we’ve been working on to make it that people can send messages between the apps. We’ve started rolling out interoperability between Messenger and Instagram messaging. And that’s live in a lot of countries around the world now, including in the U.S. The initial feedback I think has been quite positive as it brought a number of features to Instagram that we previously it only had in Messenger. The big benefit, the way that I think about this is that in a lot of countries around the world there is a primary messaging app that most people use. In the U.S., that it doesn’t quite exist in the same way. iMessage is certainly the leading messaging app. But of course, people on Android can’t use it. And there’s still a quite large portion of the population is on Android. So the messaging experience in the U.S. is very fragmented compared to what you would experience if you were in India or China or Brazil, or a lot of countries in Europe, which I think just makes it confusing. It means that people have to have all these different apps to reach people that they’re not sure where to reach people. It makes it a little bit harder to build out the business ecosystem, because now businesses have to work across all these different places. So our goal is to make it, so that people can just choose the one of our apps that they prefer using the most for messaging and can reach all the people who they want to reach across all of our different apps from whichever of the apps is their favorite. And of course, they can continue using multiple if they want. This is going to be a choice that people have. But I think it should simplify things and make it to that these three different networks that we’ve had between Messenger, Instagram, and WhatsApp can start to function a little bit more like one connected interoperable system. And that’s the vision. There’s more work to happen here. We of course, want to bring in WhatsApp to that interoperability as well. There are more features we want to add even to the Messenger, Instagram interoperability. But it’s good to see this starting to roll out after what has been a pretty large engineering and infrastructure project.

[Dave Wehner:]

And Doug on IDFA, and I guess, iOS 14 more broadly. Obviously Apple did delay the implementation of certain elements of their iOS 14 launch as it relates to some of the privacy initiatives. So I think that impact won’t be felt in Q4, where prior we would expect to have seen that in Q4. So I think it’s mainly a delay in the impact rather than it’s a change in the impact. So we’re going to experience that in 2021. Specifically as it relates to IDFA, it’s going to have a disproportionate impact on app installs and thus our audience network. So that’s obviously a big challenge for app developers who are looking to grow their business in what is a difficult time. So, we think that challenge will remain when that implementation happens. But in terms also of whether there’s work that we can do to mitigate that impact. Businesses reach out to us all the time on how they can continue to run effective ads in the face of these platform changes. We’re looking at various options, but our best view is that there’s – there are going to be significant headwinds next year as a result of these changes, specifically on iOS 14.

[Operator:]

Your next question comes from the line of Michael Nathanson from MoffettNathanson.

[Michael Nathanson:]

Thanks. I have one for Mark and one for Sheryl. Mark, I want to take you back to Section 230 yesterday for a second. It seems like you’re the most comfortable CEO about making changes to the law. I wonder, what are the changes that you would propose? Does that PACT Act proposal in June resemble where we need to go? And what do you think the costs of these changes would be for Facebook? And then for Sheryl, can you talk about the acceleration of more business embracing Facebook to this crisis. Can you talk a bit about what verticals maybe had been lagging within their moves to Facebook and Instagram? And maybe how this crisis has accelerated certain verticals to spend more than they had before?

[Mark Zuckerberg:]

So, I can talk about the first one. So at this point, we have the benefit of seeing how different countries have adopted different types of regulation and getting to understand how that either makes the problems more effective for dealing with them or in some cases makes it harder and actually makes – creates worse results. So, the approaches that, that I think seem to have worked best by looking at what France and a few other countries have done, is basically one which focuses on creating a transparent process, where companies have to report how they’re doing moderation reporting on how much harmful content of different categories is visible the portion of the content on the service. And what percent of it, our content moderation systems can get to before people need to report it to us. And I think a system like that, that basically requires companies to meet certain thresholds or show improvement basically, aligns incentives in the right way to encourage companies to minimize the amount of that harmful content that people are seeing. But there are plenty of examples, where there are other regulatory regimes that I think point towards that are counterproductive, right, or basically require companies to do things that aren’t quite getting the most important aspect of the problem. And it was one example, in some countries, there were rules saying you have to get to certain content within a short period of time. And that I think is good on its face, but I think the reality is that’s a piece of content that’s going to not be seen by many people. Maybe, it’s not as urgent to deal with is, is one that is going to be problematic, but is going to be seen by a lot of people, you really want to get to that sooner. So, treating all content equally compared to just looking at the prevalence of how much bad stuff people are seeing I think it going to be less effective overall. So, it’s hard for me to speak to the cost to Facebook or other companies specifically, because this is pretty nuanced stuff and a lot of it will depend on specific language or details of how this lands. But I do think at this point, there are enough examples in other countries that you can kind of get a sense of what helps create more healthy ecosystem and what doesn’t?

[Sheryl Sandberg:]

So on verticals, our growth is very broad based, and it’s especially important for small-to-medium sized businesses. These businesses have faced huge challenges in the pandemic and they have needed to become digital often for the first time. So, the free tools we provide to get themselves online, online presence, mobile presence have been more and more important and personalized ads are more and more important. The use of data, which we can do in a very privacy protective way to let them buy the audiences they want are increasingly important. Big companies can afford to buy broad-based ad campaigns that hit countries or whole geographies. Small companies can’t, so survival and the economic growth and the increasing ability to stay afloat and a higher has really been driven across the board by SMBs. Now, some verticals have experienced more of this certainly, eCommerce is the leading example, but there are a lot of other businesses that have also lend themselves to online; education is growing nicely, retail; there are others like travel and auto that will have lagged during this, but are starting to rebound as well. I also, while we’re talking about verticals, want to take the opportunity to say that I think there is a bit of a misunderstanding about the size of political ads on our services. in Q3, combined political ads and government spending altogether was still low single-digit percentages of ad revenue in the U.S. and globally, and it’s not a top 10 vertical in the U.S. or globally as well.

[Operator:]

Your next question comes from the line of Mark Mahaney from RBC.

[Mark Mahaney:]

A question for Sheryl. Sheryl, you talked about an acceleration in ad revenue associated with, I guess, the build out of social commerce. Could you double-click on that a little bit more and explain that and is it just that the – as the inventory becomes more transactionable, it’s more valuable and therefore marketers are willing to bid more for it. Just explain that link between the growth in commerce activity on the network and the acceleration – or the acceleration in ad revenue. Thank you.

[Sheryl Sandberg:]

I think the acceleration I was talking about is really an acceleration to businesses moving online. There were just a lot of businesses that before the pandemic were consistently offline businesses. They sold locally, they advertise locally. You walked into their store and bought. And what the – and this was already changing, right? Businesses were already going online, but we just have seen a massive acceleration in businesses doing things online, whether it’s finding customers, letting you know they’re open, selling, curbside pickup. When people couldn’t walk into stores all over the world, they had to reach customers a different way that acceleration has really powered our business. That’s why there are 200 million small businesses or businesses using our free tools, because a lot of these businesses had to get online for the very first time. That’s why we have 10 million advertisers. Because once you have an online presence, once you’re doing things to reach customers online and even delivering products, not in person, you see that – you see that acceleration. And so it is that overall acceleration on to online commerce. Some of our eCommerce tools that’s really I think increased the number of small businesses all over the world that are using our free tools and are advertising with us.

[Deborah Crawford:]

Operator, we’re going to take one last question.

[Operator:]

Your last question comes from the line of Youssef Squali from Truist Securities.

[Youssef Squali:]

Great. Thank you very much. One question for Mark and one for Dave. Mark, on the – online gaming is an opportunities and emerging opportunity for you. I was wondering how you get – how you see your position today, just as you compete with very entrenched players like Twitch and YouTube, what do you need to do to win longer term and is VR and AR and the work you’re doing potentially a competitive advantage over time. And then they’ve just given the amount of cash you guys have on the balance sheet, I think you’ve just added $5.9 billion in free cash flow this past quarter with a change in the administration and prospects for maybe higher capital gains and dividend taxes, change your way on how to manage or how you guys are managing your capital allocation and returned short-term? Thank you.

[Mark Zuckerberg:]

I can talk about gaming. So this is an area that I’m very excited about. I think it’s a big growth area and one that I enjoy a lot personally. It’s – so we’re doing a number of things here. And I think you’re right that the longer-term virtual and augmented reality projects do help here both in the near-term and the long-term, it’s also just a very exciting area of gaming, but most people are using gaming through our services through the Facebook gaming initiative that we have you know, people stream games using our live tools. People want to be able to build a community. I think our features and our just kind of social focus as a company means that we are better able to serve game streamers who want to build out a community across our service, that part is going quite well, and is growing quickly. We just launched our cloud initiative, which plugs into both the Facebook gaming work that we’re doing and the ads work that we do around helping game companies get new customers. It’s sort of not a completely different approach, it sort of plugs into the core things that we do. So you’re basically seeing gaming combined with video and the communities work that we’re doing in order to just kind of grow all of those at once. Over the longer-term, I think the VR piece will obviously come into that as well. Some of the cloud gaming stuff that we’re doing will of course be useful for VR as well. And we’re building a big community around that on Oculus. But this, I do think will be a very exciting growth opportunity and ability to offer a lot of innovation over the coming years.

[Dave Wehner:]

Yes, thanks Youssef. So on our capital allocation, our focus is in investing in growth and continuing to make sure that we make the investments to drive the long-term growth of the business that includes investing in our core product, as well as investing in some of our longer-term initiatives like Facebook Reality Labs. This past quarter, we made an important strategic investment in Jio platform, so that was a significant outlay of capital. We continue to have an active share repurchase program authorized by the board and we’ll certainly factor in any changes in the tax landscape, but I wouldn’t expect that to necessarily lead to a shift in our fundamental approach.

[Deborah Crawford:]

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

[Operator:]

Ladies and gentlemen, this concludes today’s conference call. Thank you for joining us, you may now disconnect your lines.