Facebook's (FB +1.81%) third quarter proved to be an interesting one. Despite surging revenue and profit growth, the stock sold off about 6% on worries about the social network's big spending plans in 2017. But key takeaways from Facebook's quarterly update don't end with these two themes. Facebook management laid out some other tidbits worth a close look during the company's conference call following its earnings release.
Facebook CEO Mark Zuckerberg (right). Image source: Facebook.
Here are three important items covered during the call.
Here's what Facebook's messaging businesses will look like
Messenger. Image source: Facebook.
Facebook's $22 billion purchase of cross-platform messaging app WhatsApp in 2014 raised more than a few eyebrows. With the app only generating about $10 million in annual sales at the time, it wasn't clear how Facebook would ever make money from the deal.
But two years later, Facebook's monetization for internet messaging is surfacing.
During the earnings call, CEO Mark Zuckerberg didn't hold back when describing the company's plan for monetizing WhatsApp and Messenger. Built-in transactions, Zuckerberg explained, are likely to play a major role:
In terms of transactions, one of the big things that we see happening in messaging long term is that it's a great channel for people to interact with a business one on one and either do transactions in a private space or get support, or for businesses to reach out with very personally tailored messages and have an ongoing engagement with a person.
So that's something that we're very excited about building and that is going to be the business that we hope to build on Messenger and WhatsApp over time.
Messenger is giving revenue an indirect boost
While Facebook's Messenger is still in the company's second phase of turning social products into businesses (facilitating growth in organic interactions between users and businesses while refraining from monetization), it's already putting Messenger to work to improve News Feed ad products -- a move that indirectly helps Facebook's ad revenue.
Zuckerberg explained how Facebook is doing this:
The one thing that I would say in terms of making money through Messenger is we're already driving results for businesses by letting them advertise in News Feed to open up threads in Messenger, which is different from the long-term vision that we have here around creating interactions that start in Messenger. ... But in the near term what we found is a lot of businesses are creating ads in News Feed and then they can follow up and do transactions with people in Messenger. And I think that that's going to be pretty meaningful over the next few years.
Facebook continues to resonate with small businesses
Facebook chief operating officer Sheryl Sandberg says the company continues to view local businesses as "a really big opportunity."
The opportunity, Sandberg says, is evident in the company's large base of small businesses that are increasingly using Facebook and Instagram. Today, 60 million small businesses have Facebook pages, and 1.5 million have Instagram business profiles, Sandberg said.
Why does Facebook appeal to small businesses? Sandberg says small businesses are attracted to Facebook as a platform for a mobile site.
And so what's happening is that people are really using the Facebook business pages, and increasingly the Instagram business profiles, as their mobile presence. And we think that's what's working.
To capitalize on this opportunity, Facebook plans to build digital products catering to in-store visits, as well as introduce ad products aimed to convert in-store visitors over to advertising.
While these are some of the most useful insights from the company's earnings call, investors may benefit from checking out the entire call. A link to an audio recording of the call, as well as a full transcript, is available on the company's investor relations page.
