Facebook may have beaten analyst expectations this quarter, but on Tuesday's earnings call, executives continued to warn investors that ad revenue growth could slow in the second half of the year as the company runs out of ad space in its main News Feed. As a result, executives said they are working to offset that loss with mobile video and ads in their messenger products.

Key takeaways:

  • Monetizing its mega messaging platforms is a major priority: Facebook CEO Mark Zuckerberg wants to move more quickly on monetizing Whatsapp and Messenger, but this is still in the experimentation phase. Zuckerberg says the apps need to build up usage and the organic interactions between people and businesses before the ad businesses will grow.
  • Mobile video will be a big driver of ad revenue: Zuckerberg said focusing on consumer habits will help drive the social media giant's video ad strategy, which will drive more revenue than Messenger ads. COO Sheryl Sandberg added that she hopes to work with advertisers on creating more mobile-native video, which she says will help drive better results.
  • Work on expanding ad breaks/mid-roll ads: Sheryl Sandberg said Facebook is really just "testing the ability" to input the ads with expanded publishing partners in the U.S. "It's really early."
  • Build on artificial intelligence: Mark Zuckerberg said AI will help the company make its user community safer and expose people to more diverse viewpoints, which is a part of Facebook's newly revised mission.

By the numbers:

  • Revenue: $9.3 billion vs. $9.2 billion expected (Up 43% from this time last year)
  • Earnings per share: $1.32 vs. $1.13 expected (Up 69% from this time last year)
  • Profit: $3.89 billion (Up 71% from this time last year)
  • Monthly active users: 2.1 billion on Facebook (Up 17% from this time last year)
  • Daily active users: 1.3 billion on Facebook (Up 17% from this time last year)
  • Mobile ad revenue: 87% of total ad revenue (Up from 84% this time last year.)
  • Advertisers on Facebook: 5 million
  • Advertisers on Instagram: 1 million

Kia's thought bubble: Facebook's narrative to investors this quarter is as expected: Expect slower ad growth, video will be the next big money-maker, ads are coming to messaging apps, and we're going to continue to make money for you.

Sara's thought bubble: Sheryl Sandberg continually stressed — as she has done in previous calls — the importance of measuring how ads lead to actual sales, not to brand awareness or other proxy metrics. This message has remained consistent, and is a driving force behind how Facebook will manage ad opportunities on new platforms, like Messenger.

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