When do we get a “want” button? Facebook’s first earnings call

Yesterday afternoon, Facebook held its first earnings call with Wall Street analysts to discuss its second quarter results. There’s plenty of discussion on the Internet about the actual results so I won’t rehash them here, but during the Q&A there were a few questions that alluded to Facebook’s future that I found interesting. As someone who spends a lot of time thinking about social commerce, I found the discussion between by Lauren Martin, equity analyst at Needham & Company, Mark Zuckerberg, and Sheryl Sandberg the most fascinating part of the conference call. I’ve posted a portion of the transcript for you to read but the point I found interesting is that Facebook is approaching each industry (advertising, gaming, music, media, and commerce) in a unique way that will require a nuanced approach in the business model and user experience. They key phrase that Mark highlights is how “more nuanced experiences will become social.”  It’s unclear exactly how this will translate to commerce but philosophically, I agree with his approach. Facebook, and the industry in general, will need to continue to experiment to uncover this nuanced approach to commerce in social.

(Transcript provided by SeekingAlpha)


Laura A. Martin – Needham & Company, LLC, Research Division

A couple for Mark. So Mark, we’ve been writing a lot about the optionality or the option value of the Facebook platform globally. And I guess, I’m really interested outside the visible revenue streams, which today are payments in advertising. Could you talk through how you’re thinking about commerce on this platform? And also video, because video is one of the most shared things, as you know. As we think about over the next 3 to 5 years other revenue streams, how do you think philosophically about what Facebook could become over a longer period of time in terms of revenue streams?

Mark Zuckerberg

Sure. Well, the basic approach that we have for now is we’re building out this platform and other companies can build on top of that. And you can view our business as an advertising and payments business or you could view it as there will be these companies that help to transform these industries, and we will get some portion of the value that comes from that, that we’re helping to provide, right? So in gaming, for example, we think that we’re helping to provide a lot of the value, so we end up getting a relatively high percentage of the revenue that comes into those companies. Whereas in something like music or some of the media companies that are now getting built using Open Graph, I think we aren’t providing quite as much of the percentage of the value as with games, so the overall amount of the revenue that comes to Facebook through, whether whatever the breakdown of ads and payments is, I think, will be somewhat less. But a lot of people will do that stuff, too. So I think the real way to think about this is that over time, more and more nuanced experiences will become social. So gaming is such a basic thing that people want to do with their friends, so even with a relatively basic platform, people could build that ecosystem out. Some of the media stuff required more nuance. I think commerce will require a little more and so on. But as these things get built out, I think we’ll build out the tools to both enable those products to get built and to be able to capture some percentage of the value that we’re helping to create. But I mean, I don’t really have any more plans that I’m going to share with you today about our product roadmap or anything like that.

Sheryl K. Sandberg

One thing to think about in the commerce area or in other areas like video is that our view of the world is things become increasingly social. And that takes time. Gaming was obviously first. But people are informed when they purchase things by their friends, and the commerce companies that are really adopting social are seeing good responses. Fab is one of them. Fab is very early on in its history, but it’s a truly social shopping experience. And they’re seeing near 20% to 40% of their traffic from Facebook on a daily basis, as well as a very good return on their investment on ads that their CEO has been talking about publicly. We look out at what people’s shopping behaviors are. And so much of them really — so much of their shopping behaviors really are social, that we think there’s a big opportunity for the social context that we offer to be a major part of how people discover products.

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