
Facebook Q3 2016 Results - blawson
https://investor.fb.com/investor-news/press-release-details/2016/Facebook-Reports-Third-Quarter-2016-Results/default.aspx
======
NicoJuicy
Tried Facebook ads for Pokemon Go ( 2nd largest Facebook group in my country -
Belgium), had some success there ( 330.000 people reach / week for a month).
But it's not worth it for regular businesses. I started a webshop and Google
AdWords seems to be the way to go.

Side note, we did events. One Facebook group had 2x as many members and was
also spanning the Netherlands, they had 1/10th of our ticket sales. We were
the first to combine amusement parks with Pokémon Go ( and cheaper then normal
tickets, our revenue was a % on the ticket price)

Facebook seems to be an empty bucket. The ones who share your posts, share
everything from everyone, while you give things away for free. It's the only
way to receive a lot of likes, but those aren't the people you want and going
to buy your stuff.

You aren't anything with likes. Invest in newsletters and a decent email
campaign, that way you don't have to pay for the people that 'subscribed' to
you, to let them see posts.

Ps. Pokemon Go was 0,03 € / like. Normal businesses pay 1€ / like in my
experience. Don't go that road :)

Ps2. I don't do remarketing too. But that's personal preference, as i don't
want to stalk people. I want them to find me, when they are looking for me

Ps3. AdWords for me is 1€/ day, which is the minimum. And I'm quite happy with
it for my niche, which gives me 10 visitors and 1 purchase every 2 days (
pretty high margin)

Ps4. If you want to go on Facebook, remember you have to pay for: promoting
your post, promoting your page and promoting your website. So facebook passes
3 times at the cash register. Pokemon Go was all on max for several days,
which is 50€ x 3 per day! And in case you forgot, likes !== Customers and you
still have to write good content :)

~~~
unclebucknasty
Facebook's encouragement of businesses to build FB pages, then have _their
own_ customers like them on Facebook seemed like a win-win--a mutual
leveraging of cross-engagement.

But, Facebook's later flipping the switch to make those businesses pay to
reach their own customers was a completely underhanded bait-and-switch.

Still leaves a bad taste in my mouth all of these years later.

~~~
searine
Hard lesson for companies that you need to own your subscribers, not lease
them from twitter/facebook/instagram.

~~~
unclebucknasty
What's worse is that it's "buying" them (via hard-won marketing efforts),
giving them _to_ FB, then paying FB to lease them back.

But, of course, that wasn't the original deal--else no one would have signed
up for it.

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taylorbuley
I'm CTO at a local newspaper chain. I ran a seminar on how to digital
advertising, then ran $500 in advertising to promote the event -- all as a
test to see which advertising mediums I could use to get people to show up to
learn about advertising.

Here's the data and a summary:

[https://docs.google.com/spreadsheets/d/1DsJYUYETwQ7a-hISFPcC...](https://docs.google.com/spreadsheets/d/1DsJYUYETwQ7a-hISFPcCI7ojGtk2WtyGdxwQXSN6szQ/edit?usp=sharing)

[http://www.davisenterprise.com/special-projects/how-to-
waste...](http://www.davisenterprise.com/special-projects/how-to-waste-less-
money-doing-digital-advertising-next-time/)

~~~
babuskov
Paid $200+ for e-mail marketing? What does that actually mean? You bought
someone's mailing list?

~~~
robmcvey
Or paid for an email delivery service? (such as MailChimp)

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mbesto
Wanna know why tech companies get such high valuations?

Look at the operating margin and net income increase in just 1 year:
[https://twitter.com/mbesto/status/793921076820459520](https://twitter.com/mbesto/status/793921076820459520)

That makes investors absolutely drool.

~~~
wmeredith
Powerball ticket pools make people drool, too. Companies like this are called
unicorns for a reason-they don't exist (statistically speaking).

~~~
the_watcher
I'm curious - are you comparing Facebook, the company with nearly 5 years of
success as a public company based on strategic decisions, to someone who wins
a random chance lottery?

~~~
toennisforst
Because just like with lotteries, there are a lot of blanks, few small wins
and a tiny amount of never-work-again wins: Many startups don't net the
investor much, some make quite a bit after being acquired, and very few - such
as facebook - turn out to be really successfull.

Your phrasing suggests that you compare Facebook (now) with lottery as a
_system_. You should rather see Facebook as a lottery _ticket_ that turned out
to be the jackpot.

~~~
the_watcher
Every lottery ticket has the same odds of winning, no matter the "strategy"
employed in picking numbers, location of buying the ticket, etc. Facebook is
not in any way a analogue, unless you are arguing that its success was
entirely random, and would have stood an equal chance of happening if I had
started it at a community college, then put the headquarters in Alaska, which
is false.

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fumar
Facebook is the least transparent ecosystem. As a marketer, I find it hard to
invest dollars without being able to see or understand what percent of custom
audiences are exposed to ads. For example, one can upload a file (list of
emails) to a custom audience, lets say 1 M big, for FB to ingest. Voila your
audience is active for targeting, but how many of those emails (users) will be
targeted, who knows. FB's inventory is overpriced and untraceable.

~~~
jonknee
Untraceable? You should buy a print ad and try to figure out if it was
worthwhile!

~~~
fumar
If the digital landscape allows for transparent reporting to measure
marketing's incremental lift or ROI, then that becomes the baseline. Facebook
believes its inventory (users) are a cut above the rest, thus their opaque
model.

FB's advertising revenue is up 59% YOY, but that is not a clear signal growth
will continue at the same clip. I foresee, digital marketers pushing back as
marketing moves to a revenue generating business unit. Measurement becomes the
backbone of all digital initiatives, can't measure FB as granular as display.

Yes, you can't track traditional media's impact. At least not yet. Its the
reason why digital marketing overall has been growing at ~30% YoY.

~~~
jonknee
Facebook provides plenty of conversion tracking features, if you can't figure
out your ROI on FB advertising you're doing it wrong. There are obvious
reasons why they wouldn't want to provide reports on what email addresses were
marketed to (Google doesn't let you do that either...).

~~~
shostack
Figuring out cross channel attribution is far from an easy or solved problem
in terms of determining ROI for a high funnel channel like this.

------
ucha
How did they go from paying an effective tax rate of around 40% between Q3-14
to Q4-15 to an tax rate of 25% this quarter?

Notably, they had 2,557 MUSD in income in Q4-15 and paid 995 MUSD in taxes and
this quarter they have a larger income of 3,169 MUSD but pay less in taxes,
790 MUSD. [0]

[0]
[https://s21.q4cdn.com/399680738/files/doc_presentations/FB-Q...](https://s21.q4cdn.com/399680738/files/doc_presentations/FB-Q316-Earnings-
Slides.pdf) \- slide 22

~~~
jonknee
It's a pretty meaningless number, they don't really pay that much in taxes.
Their stock based compensation is artificially inflating it and that also
explains the wild differences between quarters.

[http://qz.com/142032/why-is-facebooks-tax-rate-so-much-
highe...](http://qz.com/142032/why-is-facebooks-tax-rate-so-much-higher-than-
its-competitors/)

> Facebook pays its staff with stock options, and thanks to a quirk of tax
> law, Facebook end up with large costs that can be deducted later. The
> company issues options to executives and records their a rough estimate of
> their value in its earnings report. When the options are exercised and the
> executives purchase the stock, it has often increased in value beyond that
> estimate—and the company can deduct that new, higher value, even though it
> didn’t cost it any real cash.

------
jbob2000
"Mobile advertising revenue represented approximately 84% of advertising
revenue for the third quarter of 2016, up from approximately 78% of
advertising revenue in the third quarter of 2015."

Is advertising dead on the desktop?

~~~
JBReefer
No one seems to have gotten it yet, but: Instagram.

You want to reach the cool kids, you must advertise on Instagram, and the only
serious way to use ig is the app.

~~~
spurgu
Instagram has ads?

~~~
JBReefer
Tons of them, in between posts, and they're fairly well targeted.

~~~
prawn
I manage three accounts and in the main one, I've never seen ads. Can't work
out why.

~~~
us0r
3 samples I just took (which actually made me realize i get a ton of ads cause
I didn't scroll very far for this):

[https://i.gyazo.com/5d48e7d926ad5e237536c9dfb99d6aa1.png](https://i.gyazo.com/5d48e7d926ad5e237536c9dfb99d6aa1.png)

[https://i.gyazo.com/0194219ec43f3ce6e386f9d5b2443bc3.jpg](https://i.gyazo.com/0194219ec43f3ce6e386f9d5b2443bc3.jpg)

[https://i.gyazo.com/e7904940fab2d6b610cbac5f83d119d8.png](https://i.gyazo.com/e7904940fab2d6b610cbac5f83d119d8.png)

The last one is a gif or video.

------
wen3
So Facebook is basically killing it in mobile without building phones and
phone operating systems. Google whats up with that?

~~~
Analemma_
It's the stream; Facebook has a stream and Google does not.

After various experiments, I think people have figured out that the #1 way to
make money on mobile is to have a stream of information that people willingly
spend lots of time in. You just inject ads into that stream and bingo: profit.
It's much harder for Google to win big here because while they have a very
useful tool, people don't linger in it. They usually use it to get in, get
what they need, and get out.

~~~
nemothekid
> _I think people have figured out that the #1 way to make money on mobile is
> to have a stream of information that people willingly spend lots of time in_

Twitter says hi

~~~
the_watcher
Twitter has generally done decently well on revenue per user (although that
has performed worse recently as they've reduced their sales force). Twitter's
problem, more than anything else, has always been increasing active users.

------
PuffinBlue
That operating margin seems...impressive.

Well, hopefully it's not just me, but doesn't 45% seem like they're
extraordinarily profitable?

~~~
jbob2000
It's pretty good, but not unheard of. Many banks and insurance companies hover
around that number.

~~~
eigenvalue
That's not really comparable because banks and insurers require a huge amount
of capital to earn those margins. For example, JP Morgan (a pretty well-run
and profitable bank) made a ~32% operating margin in fiscal 2015. But JP
Morgan's return on tangible equity (a measure of net profitability relative to
capital used) was only ~13%. Facebook, on the other hand, had a return on
tangible equity of 25% in the last quarter. And as time goes by, that return
on tangible equity should increase quite a bit for Facebook, while it is
highly unlikely to improve all that much for JP Morgan because of competition
in the banking industry.

~~~
adventured
Visa is the only financial company I know of with that kind of margin + profit
scale. They're nearly capable of 50% net income margins (and $9b in operating
income on $13.8b in sales). Also like Facebook they have relatively few
employees compared to their immense profit.

------
ejcx
Will anyone explain why the stock is down quite a bit in extended house? The
numbers look very strong to my non-finance background...

~~~
kgwgk
"Facebook shares declined as much as 7.8 percent Wednesday after two sobering
comments on its conference call. First, Chief Financial Officer David Wehner
said revenue growth rates will come down “meaningfully” next year, because the
company won’t keep increasing the percentage of ads that Facebook users see in
their news feed. Second, capital expenditures will rise “substantially” in
2017 as the social network works to recruit the best engineers and build data
centers, he said."

[https://www.bloomberg.com/news/articles/2016-11-02/facebook-...](https://www.bloomberg.com/news/articles/2016-11-02/facebook-
generates-record-revenue-on-growth-of-mobile-video-ads)

------
giarc
Stock is down 1.8% at time of this comment... Did 166% net income jump not
meet expectations?

~~~
jonknee
It was down 1.8% at the end of regular trading today (before the earnings
call). It is down an additional 6.7% currently after bouncing around a bit--
the conference call is not going well!

You can see a chart of the after hours action by hitting "e" on the Google
Finance chart (you may have to click on the chart first):

[https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&...](https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1478123030266&chddm=391&chls=IntervalBasedLine&q=NASDAQ:FB&ntsp=0&ei=E14aWJnID6TKigKzxq64Bg)

~~~
ndesaulniers
"Facebook Reports $7 Billion Revenue, Beats Market Estimates"
[http://www.inc.com/associated-press/facebook-third-
quarter-e...](http://www.inc.com/associated-press/facebook-third-quarter-
earnings-revenue-beat-market-expectations.html)

stock down 7% after hours. WTF

edit: ah, see:
[https://news.ycombinator.com/item?id=12859949](https://news.ycombinator.com/item?id=12859949)

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kennethh
Traditional media companies are really feeling the pain now, and it is
probably going to be even worse for them when the advertisers turn even more
of their money to google and facebook.

------
jpalomaki
Might be interesting for Facebook to move from charging for ads to start
getting their cut of successful sale. If they would crack this, there might be
positive loop effect. Getting to know if users actually purchased something
would give FB more data, which would allow better targeting.

Implementation of course is not trivial. One way to make this work would be
for Facebook to run the platform where purchase and payment takes place, like
Amazon Marketplace.

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maverick_iceman
Are they including tablet numbers in mobile?

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radicaldreamer
I think we've seen Facebook all-time-highs.

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debt
lol snapchat is starting to sting

