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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.

Go deeper

2 hours ago - World

Scoop: Jake Sullivan discussed Saudi-Israel normalization with MBS

Photo illustration: Sarah Grillo/Axios. Photo: Jim Lo Scalzo/EPA/Bloomberg and Michael Brochstein/SOPA Images/LightRocket via Getty Images

White House national security adviser Jake Sullivan raised normalization with Israel during his recent meeting with Saudi Crown Prince Mohammed bin Salman, three U.S. and Arab sources tell Axios.

Why it matters: Saudi Arabia would be the biggest regional player to sign onto the "Abraham Accords" peace agreement with Israel, and such a major breakthrough would likely convince other Arab and Muslim countries to follow suit.

Tech's leaky world

Illustration: Annelise Capossela/Axios

Tech companies are learning what everyone in Washington already knows: Leaks of confidential info are inevitable, and "plumbing" operations to close them rarely work.

Why it matters: Most tech firms talk up the power of transparency but prefer to keep details of their operations secret from competitors and the public. Researchers, regulators and the media are increasingly relying on information provided by dissident employees and whistleblowers to see inside companies' workings.

Updated 2 hours ago - Politics & Policy

First look: Harris wants more union membership in fed workforce

Vice President Kamala Harris speaks at a virtual town hall with Sen. Tammy Duckworth (D-Ill.) on Oct. 14. Photo: Anna Moneymaker/Getty Images

Vice President Kamala Harris and Labor Secretary Marty Walsh will today announce new guidelines to encourage federal workers to join unions, according to a White House official.

Why it matters: The Biden administration wants to bolster the collective bargaining power of workers across the country – and they are starting at home, with changes in the federal workforce.