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Stories is the most interesting and important product at Facebook.
That's been obvious during Facebook's third-quarter earnings call today, an interesting and uncharacteristically transparent call with investors during which CEO Mark Zuckerberg name-dropped multiple competitors and admits that Facebook has had trouble building a business around some of its core features, like video and private messaging.
Stories, the ephemeral photo and video that Facebook copied from Snapchat, was mentioned continuously throughout the hour-long call – a total of 71 times, according to the call transcript.
Stories has been a huge hit inside Facebook's apps, especially Instagram and WhatsApp. Zuckerberg even says that they will share more or more than they will to Facebook or Instagram's feeds in the "not-too-distant future," making Stories one of the most dominant ways that people share photos and videos online.
"I just think this is the future," Zuckerberg said. "People want to share in ways that do not stick around permanently, and I want to be sure that we fully embrace this."
There is a problem with Facebook's obsession with Stories, though: The business is not there yet, which means that users turn their time and attention to Stories, and away from the feed, Facebook is scrambling to build a business that can capitalize on that shift in attention.
"This happened very quickly. This whole trend has been made by Zuckerberg said of the user adoption. On the front monetization, Zuckerberg was blunt. "We're earlier in developing our products for Stories," he said. "We do not make as much money from them as we do from feed ads."
Facebook has spoken about this before, but the interest in Stories has never been so high. Part of the reason is that Facebook has said that it is important for you to read that it is so important.
Despite selling ads inside the browser, inside its Marketplace, and inside its new video section, Watch, Stories seems to be the best way to make money.
In the meantime, expect Stories and its vertical video ad formats.
"Zuckerberg said," I'm optimistic that we'll get ads in Stories, we'll be bigger, because it's going to be bigger, "Zuckerberg said.
"I can not tell you just yet what's going to be like," he added.
Facebook wants you to know it has competitors
Zuckerberg rarely mentions Facebook's competitors. When he does, it's usually because Facebook is outperforming them, and he almost never calls them out by name.
That was not the case on today's earnings call. In the first few minutes of Zuckerberg's prepared remarks, he mentioned YouTube, Apple (specifically iMessage), Pinterest, Twitter and LinkedIn.
"While [Facebook’s video section] "Zuckerberg said, offering a rare people-centric experience," "said Zuckerberg, offering a rare admission that Facebook is not just competing with someone, but actually losing to that competitor.
Zuckerberg then talked about Facebook's strength as a messaging service – it owns WhatsApp and Facebook Messenger, with more than 1.4 billion users – before he name-dropped Apple.
"We're leading in most countries, but our biggest competitor is iMessage," Zuckerberg said. "In important countries like in the US where the iPhone is strong, Apple bundles iMessage as the default texting app and is still ahead."
What is going on? It is certainly possible that Zuckerberg is seeding the idea that Facebook is not dominating as everyone thinks in order to ward off potential antitrust concerns. It was not that long ago that Zuckerberg was asked by the Congress who did not have a good answer. A lot of people with the idea that, perhaps, Facebook has an internet monopoly.
As my train colleague Tony Romm pointed out on Twitter, Zuckerberg may be bracing for a change in congressional control. Whatever the reason, it was rare.
More Facebook video is on the way
You should expect to see more in your feed moving forward.
That's because Zuckerberg claims that Facebook has had to "rate-limit its growth" on the network because it was cut into other behaviors Facebook wanted to encourage, like "social interactions."
"We wanted to figure out that they can grow but they can also keep us interacting and doing what they tell us that they want to Facebook," Zuckerberg said. "And now I think we're starting to work through the formula that we're going to be able to take care of."
On one hand, it's weird that Zuckerberg and Facebook would be cut back on video distribution, considering how hard it was pushed video – both live and produced video – on its publishing partners over the years. (Though the company has said in the past it wants to cut back on passive video consumption.)
But the news is that, like Stories, Facebook has not built the kind of robust business around that it has its regular feed ads.
"Monetizes video significantly less well than people interacting in feed," Zuckerberg said. "As video grows, it will still be moving someplace other where we are probably making more money."
It is the second admission from Zuckerberg, along with Stories, that Facebook is not monetize well. You can expect these to come back if and when Facebook's revenue growth starts to become a problem down the line.
Facebook is not growing in its most valuable markets
Facebook's user base in its most valuable markets – the U.S., Canada and Europe – is no longer growing.
That is not a shock, but today's earnings call made it official. Facebook's U.S. audience has not grown up in the past two quarters, and the company reported its second straight hearing decline in Europe.
Facebook is massive in the U.S. and Europe, and eventually, the company was bound to run out of potential new users in those markets. But it still matters, because those markets are the most valuable to Facebook's business. Each user in the U.S. generated $ 27.61 in revenue for Facebook. Each user in the "Asia-Pacific" region generates just $ 2.67 in revenue.
India, Indonesia and the Philippines.
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