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This issue of "long-termism" selection Meta/Facebook 2021 Q4 financial report analysis + analyst conference call minutes, wind research overseas release, Liuhe business research and selection analysis and fine school, enjoy!
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Meta/Facebook 2021 Q4 earnings analysis
Source: Liuhe Business Research And Selection
Word count: 445 words
Meta/Facebook released its 2021 Q4 financial results on February 3, 2022. In 2021, the company had revenue of $117.93 billion (+37.2%), net income of $39.37 billion (+35.1%), gross margin of 80.8% and net profit margin of 33.4%. The company's Q4 2021 revenue was $33.67 billion (+19.9%), net profit was $10.29 billion (-8.3%), gross margin was 81.1%, and net profit margin was 30.5%.
In 2021, the Company's advertising revenue was $114.93 billion (+36.6%), or 97.5% of total revenue, and other business revenue was $3.00 billion (+66.8%), or 2.5% of total revenue.
In Q4 2021, the company's advertising revenue was $32.64 billion (+20.1%), accounting for 96.9% of total revenue, and other business revenue was $1.03 billion (+16.6%), accounting for 3.1% of total revenue.
As of December 2021, Facebook DAU 1.93 billion (+5%), MAU 2.91 billion (+4%); Facebook app family (Facebook, Instagram, etc.) DAU 2.82 billion (+8%), MAU 3.59 billion (+9%).
The company disclosed the financial data of its VR research laboratory FRL (Facebook Reality Labs) for the first time, and the company estimated that the meta-universe investment will reduce operating profit by about $10 billion in 2021, and FRL will not be profitable in the short term. FRL has been losing money for many years, contributing -US$4.50 billion, -US$6.62 billion (-47.1%) and -US$10.19 billion (-53.9%) from 2019 to 2021, respectively.
The company said that due to the impact of global supply chain disruptions, labor shortages, inflationary pressures, etc., the global advertising market in Q4 of 2021 is sluggish, and the budget of small and medium-sized advertisers is cut, and it is expected that the revenue of Q1 in 2022 will be 27 billion to 29 billion US dollars (+3% to 11%), and Apple's policy changes in 2022 will have a tens of billions of dollars in the company's advertising revenue. The company expects to spend $90 billion to $95 billion in 2022, primarily for technology and talent investments, and meta-universe infrastructure.
Meta/Facebook Q4 2021 Analyst Conference Call Minutes
Source: Fengyan Overseas, Liuhe Business Research Institute
Word count: 9,489 words
After Meta/Facebook released its 2021 Q4 financial report on February 3, 2022, an analyst conference call was held, and CEO Zuckerberg, COO Sheryl Sandberg, CFO David Wehner, etc. attended and answered analyst questions on the spot.
The following is the minutes of the conference call:
CEO Zuckerberg:
Q4 2021 is a solid quarter for our products and business, as well as a new and important phase of development for the company.
In October 2021, we announced Meta as the new company name, developing a new metacosmity vision. In the early stage, we shared the future company plan at the Connect conference, proposing that the metacosm is not only what we want to do, the metacosm will be built by creators and developers, with multiple characteristics such as interactivity, involving different aspects of the economic system.
As the metaverse concept heats up in the industry over the past few months, more and more companies share their metaverse plans and visions, showcasing their past experiences and future metacosmonic products.
We are very much looking forward to working with a wide range of partners to realize the metacosmity vision."
Today I'm going to discuss our seven main investment priorities for 2022, including short video application Reels, community, commerce, advertising, privacy, AI, and important metaverse strategy products.
Regarding the Q4 2021 results, our social products and community are still evolving, and all kinds of companies are looking for cooperation, and we hope that our products can reach more users.
There are two important changes that are having an impact on the business.
The first is the time competition for short video products. Nowadays, people have a lot of different product choices in terms of allocating time, such as TikTok, which is loved by users and the number of users is growing rapidly. In response to this type of user entertainment behavior change, we are focusing our long-term development on the short video application Reels, which we hope will be loved by young people, as mentioned in the last conference call.
The second is that the company as a whole is transitioning to short video forms such as Reels. Due to external competition and the company's overall transition to short videos, and our focus on serving young people rather than optimizing overall user engagement, we will continue to face growth pressures in the short term. But I believe that working harder to support these trends for long-term gains is the right short-term trade-off.
We have made this type of shift in the mobile internet era, and while we are under pressure in the short term, we cater to long-term trends. While video product monetization has historically been slower, we believe that over time, short video monetization capabilities will be as optimistic as News Feed or Story Stories in the future, rather than like the video feature Watch. I'm optimistic about the future and believe that the short video app Reels will reach the level of monetization we need.
In short, our continued success comes from creating new products that people find valuable and like to use. In a highly competitive market, we focus on serving our users, creating their favorite products, and in accordance with this strategy, we continue to work hard and actively layout.
The first investment in 2022 will focus on the short video application Reels.
We believe short videos will play an increasingly important role in the way people consume content in the future, and Reels is our fastest-growing app to date.
Reels has become the largest source of user time growth in Instagram's product modules, and it's growing very fast on Facebook.
As we launch short video services around the world, continue to improve Reels creator tools, content popularity rankings, reels is expected to continue to grow rapidly in the future.
In the future, we will simplify the short video section in Instagram, stimulate more great ideas for short video content creators, provide more potential profit tools, and enable more users to interact with Reels, so that the Reels content ecology is richer and healthier.
The second investment focus in 2022 is the community, that is, the community of acquaintance social platforms and community interaction.
We currently operate the world's most popular instant messaging tool, allowing users to connect one-on-one or in small groups with friends, family, and colleagues.
We're seeing people increasingly wanting to share more things in messages that they might have previously posted to feeds.
We see apps like Slack that are popular within the product, and Discord or Telegram reflects this trend.
We'll help WhatsApp users better organize group chats and interact with communities, such as parent groups or neighborhood groups.
We also establish community chats on Facebook and Messenger, enabling users to communicate in real-time conversations within these groups and communities to enhance user stickiness.
The third investment focus in 2022 is business services, which are currently gaining momentum.
We estimate that more than 1 billion users use our business services every week, and we also work with companies like Uber and JioMart to help people get a taxi or get their groceries to their destination during the exchange process.
We are also building new tools to enable the purchase of goods or services online.
Improvements to these products will make the user experience more convenient and for businesses to manage employees.
We believe this will be an important business in the coming years, with good progress in broader commercial work.
Many of our corporate clients use the personalized advertising provided by this business to reach more new users and reach existing users.
In addition, users and businesses buy and sell through our products are seamlessly connected, resulting in continuous transactional purchases. This is an extension of the original personalized advertising product, and it is also the purpose of our shopping function Shops a year and a half ago, so that people can easily make purchases and transaction conversions after discovering new brands, without having to switch to the browser or re-enter their payment information, improving the user experience.
The fourth investment focus in 2022 is advertising.
With policy changes to Apple's iOS system and new regulations in Europe, there is less and less data that can be used to deliver personalized advertising. However, we believe that the supply and demand relationship in the advertising market has not changed, users still want to see meaningful advertising messages, provide recommendations for purchasing decisions, and corporate customers still want to reach the right users. We are rebuilding our advertising infrastructure to continue to deliver high-quality, personalized advertising.
The fifth and sixth investment priorities in 2022 will be infrastructure for all products.
The fifth investment focus in 2022 is the direction of user privacy.
We invest heavily in strengthening our privacy practices, including rebuilding our privacy programs and privacy review processes, improving product privacy, including end-to-end encrypted backups and messages on WhatsApp, and end-to-end encrypted voice and video calls on Messenger.
Over the next few years, we will build large-scale privacy infrastructure projects that build on deeper technology to deliver on our commitment to privacy and accelerate the development of our products in a changing environment.
The sixth investment focus in 2022 is the AI direction, and we are gradually finding that the return on investment in the AI field is higher than we expected.
Ai advances have enabled us to use less data while providing better advertising services to people, improving the relevance and overall content ranking of short video content, and playing an important role in commercial activities.
AI will play an important role in building the metaverse, and we just announced that the AI Supercomputer AI Research Super Cluster, which will complete this investment in the next half of 2022, will be the world's fastest supercomputer.
This will enable new AI models to learn from trillions of examples and understand hundreds of languages, which will be key to improving the user experience.
Going forward, the focus is on further expanding computing power and upgrading AI infrastructure through basic research and improvements to data center design, networking, storage, and software.
The seventh investment focus in 2022, and the most important investment area, is the metacosm.
We're focused on building the underlying hardware and software needed for an immersive Internet, and we hope that Metacosm will deliver a better digital social experience than any product today.
In terms of hardware, the Quest 2 product is very attractive, and the Quest store transaction size has exceeded $1 billion, helping VR developers grow their business.
On Christmas Day, December 25, 2021, Oculus topped the U.S. APP Store for the first time.
We strive to release a high-end VR glasses later in 2022 and strive to make progress on the first AR glasses.
On the software side, Horizon is the core product of our vision for building a metaversity, and Horizon has recently been opened to users in the U.S. and Canada.
We've seen a lot of talented content creators create great new generation immersive VR products, such as creating studios or meditation spaces that collaborate with producers.
In 2022, we plan to launch a mobile version of horizon metaverse social products, which will bring the virtual scene experience of the early metaverse to more existing mobile devices other than VR.
Although the deepest and most immersive virtual scene experience requires the access of a new generation of hardware devices, such as VR/AR products, to experience a more perfect virtual scene.
But users can also access the 3D version of the digital space through existing smart terminals, as well as Facebook or Instagram apps, and experience the prototype of the metacosm.
We believe that the social product matrix and meta-universe social products can meet the rich social needs of users.
Even if the user does not currently have a VR device, through the existing intelligent hardware terminal, they can experience meta-universe socialization with friends.
Avatars are one of the development directions of the metacosmectronic, allowing users to feel immersed. In December 2021, we launched the Meta Avatars SDK to all Unity developers on Quest, Rift, and Windows-based VR platforms, allowing developers to bring Avatars to their own VR experiences.
We've just released an update that allows users to further customize avatars to better express themselves in the metaverse. We'll also be rolling out digital apparel, starting with a partnership with the National Football League, where users can support their favorite teams.
You can use your avatar on Quest, Facebook, Instagram, Messenger, and it's the bridge between 2D social apps and 3D immersive VR experiences. We also need to make avatars expressive and realistic enough to fully represent the personal image and help users feel immersed.
Making meaningful progress in these seven areas will improve the services we currently provide, help to provide impetus for the social, immersive, and entertaining metaverse ecology, and the future user, enterprise, and creator ecosystems can flourish. There is still a long way to go to achieve that vision, and although the direction is clear, the road ahead still needs to be explored. But I'm happy with the momentum and progress I'm sure it's the right investment and 2022 is our company's first year in the metacosmum direction.
COO Sheryl Sandberg：
Meta/Facebook's Q4 2021 advertising revenue was $32.6 billion, up 20% year-over-year, marking the first time we generated more than $100 billion in annual revenue.
We achieved solid growth for the full year of 2021 and continued to grow in Q4. But in the past quarter, in addition to the competition Zuckerberg talked about and our move to the short video business, there are many dynamic factors that have adversely affected us.
2020 is coinciding with a period of strong demand, which benefited from strong growth in online commerce, followed by a slowdown.
Q4 2021 is the first period after Apple's iOS policy changes, which have an impact on all types of businesses, especially small businesses that rely on digital advertising for growth.
In addition, advertisers also revealed other reasons, such as the current global supply chain disruption, labor shortage, inflationary pressures, etc., resulting in a downturn in the advertising market, many industry reports have pointed out that users will complete shopping before the holidays, avoiding potential supply chain problems and transportation delays, which has led many advertisers to pay advertising costs in advance.
In terms of advertising, like other companies in the industry, Apple's iOS policy changes have also brought us many challenges. As we mentioned earlier, Apple brings two challenges to advertisers, one is that the accuracy of advertising targeting has decreased, increasing the cost of advertisers, and the other is that it has become more difficult to measure advertising effectiveness.
These challenges are complex and interrelated, but we are working to improve, such as making progress in bridging the gaps in under-information and introducing tools for measuring solutions that provide better analytics for advertisers. We expect resistance to achieving the overall goals of the advertising business will increase due to regulatory policy changes at Apple and throughout 2022.
Regarding the strategy of moving to short videos, I would like to emphasize that although we are undergoing a transformation, we are still optimistic in this regard. While Reels is currently less profitable compared to Feed and Stories, we expect a turning point to come soon. We've had a successful transition before, from PC to mobile and from Feed to Stories. The lessons gained from Stories monetization can be directly applied to the current Reels product monetization strategy. So we're not starting from scratch, and in the long run, the shift will be a success for us and our partners.
Regarding business, we launched a number of new tools in Q4 2021, such as ratings, reviews, community Q&A on product questions, and significantly improved the stability of checkout. We also introduced Shops capabilities to Groups, starting to test Live Shopping for creators, an early form of the immersive shopping experience in the metaverse.
Our business strategy focuses on three areas, including being the best way for advertisers to find customers and get a strong return on investment, making it easier for merchants to sell on our platform, and improving the customer experience. We still have a lot of work to do compared to other mobile and online shopping, but it's great to see more businesses and consumers using social and immersive shopping experiences such as product hashtags, Drops, Live Shopping.
A good example is Unilever's premium fabric care and home cleaning brand, which hopes to build brand awareness through a new line of products developed in collaboration with musician John Meyer. In November 2021, an exclusive 24-hour service on Instagram was launched to host a Live Shopping event where users could buy new products while they were talking about them immersively, a 1-hour event that generated more than $40,000 in sales.
In business information, the focus is on helping businesses and consumers connect. Our most important money-making tool is Click to Messaging ads, where you can click on ads in your Facebook or Instagram feed and then have a conversation with your business through Messenger, Instagram Direct, WhatsApp, and more. This is a great way for businesses to drive engagement.
We are finding strong consumer demand and want to use our communications applications for everyday services such as utilities, finance, education, tourism, and more. In Q4 2021, we expanded the types of information users receive from businesses and the formats in which they can interact. We will continue to invest in new tools that make it easier for people to get help and make purchases immediately through the chat feature. More than 150 million people worldwide now view items on WhatsApp every month, and new features like WhatsApp Collection make it easier for people to find what to buy.
As we head into 2022, the focus remains on building products that help people connect and drive business growth. We grow our business through long-term investments and continue to create real value for our partners. Over the next year, we will continue to invest in improving our clients' advertising performance, driving the development of short videos, and providing a better business experience for consumers and marketers on our platform.
CFO Dave Wehner：
1. The overall financial profile of the company
The company's full-year 2021 total revenue increased by 37% year-on-year to nearly $118 billion; Q4 2021 revenue was $33.7 billion, an increase of 20% to 21% year-on-year at constant exchange rates; and due to exchange rate changes, if the exchange rate remained unchanged in Q4 2021, the total revenue would increase by about $307 million.
The company's total expenditure in Q4 2021 was $21.1 billion, an increase of 38% year-on-year.
Operating costs, up 22% year-over-year, were driven by the cost of hardware at Reality Labs, Facebook's VR research lab, core infrastructure investments, and payments to partners.
R&D investment increased 35% year-over-year, primarily due to staff recruited to support software and Reality Labs, and increased operating costs for Reality Labs.
Marketing and selling expenses, up 34% year-over-year, were primarily driven by marketing spend and recruitment activities.
Administrative expenses increased by 107% year-on-year, mainly driven by legal-related costs and employee-related costs. We added 3,700 new employees in Q4 2021, mostly technical function staff. At the end of 2021, we had more than 71,900 full-time employees, an increase of 23% year-on-year.
The company's Q4 2021 operating profit was $12.6 billion, with an operating margin of 37% and a tax rate of 19%, net income of $10.3 billion, corresponding to $3.67 per share; capital expenditure of $5.5 billion, mainly from investments in data centers, servers, network infrastructure, office facilities; and free cash flow of $12.6 billion.
The Company repurchased $19.2 billion in Class A common stock in Q4 2021, and we held $48 billion in cash and securities at the end of the quarter.
2. Financial situation of each business
The company's total app family revenue in Q4 2021 was $32.8 billion, up 20% year-on-year, and advertising revenue was $32.6 billion, up 20% to 21% at constant exchange rates. In terms of geographical distribution, the fastest year-on-year growth in advertising revenue was in the Asia-Pacific region, at 31%; revenue in Europe, North America and other parts of the world increased by 20%, 15% and 28% year-on-year, respectively.
The company's Q4 2021 ad exposure Impression increased by 13% year-on-year, and the advertising pricing Preciding increased by 6% year-on-year.
In Q4 2021, global Impression growth benefited from increased advertising content and user growth, mainly driven by Asia Pacific and the rest of the world, and Impression in North America decreased by 6% year-on-year. As users turn to short video applications such as Reels, competition for user time intensifies, adversely affecting Impression growth.
The global Pricing growth rate in Q4 2021 has slowed down from Q3 2021 due to the higher base of Q4 2020 and the adverse impact of exchange rates. Pricing is also negatively affected by macroeconomic factors, measurement challenges, exchange rates, etc. faced by advertisers.
The company's 2021 Q4 app family operating profit was US$15.9 billion, with an operating margin of 48%.
We estimate that in December 2021, about 2.8 billion people will use at least one of our apps per day, and about 3.6 billion people will use at least one of our apps per month.
The company's total 2021 Q4 app family spending of $16.9 billion, up 35% year-over-year, was driven by increased costs related to law, employee-related expenses, marketing, infrastructure-related costs, and payments to partners.
Facebook DAU was 1.93 billion (+5%) in December 2021, an increase of 0.84 billion compared to December 2021; Facebook MAU was 2.91 billion (+4%) in December 2021, an increase of 115 million compared to December 2021; DAU accounted for about 66% of MAU.
In Asia Pacific and other parts of the world, the recovery of the epidemic in the early stage has driven user growth, but fierce competition in the market has had a negative impact on growth, especially for young users.
Q4 2021 Facebook VR Research Labs revenue of $877 million, up 22% year-on-year, mainly benefited from strong holiday Quest 2 sales; Reality Labs expenses of $4.2 billion, up 48% year-on-year, mainly due to employee-related costs, R&D investment, operating costs, and cost of sales; operating loss of $3.3 billion. Reality Labs operating loss of $10.2 billion for the full year 2021.
3. Guidance on future performance
We expect Q1 revenue to be $27 billion to $29 billion in 2022, up 3% to 11% year-on-year; Q1 revenue growth in 2022 will be affected by the decline in advertising market impression and pricing growth. Impression will be affected by increased competition for user time and users' transition to short video apps such as Reels; Pricing will be affected by changes in iOS and regulatory policies, advertiser budget cuts, foreign exchange risk, etc.
We expect total spending of $90 to $95 billion in 2022, adjusted from the previous forecast of $91 to $97 billion; the expected spending growth is driven by investment in technology and product talent and costs associated with meta-universe infrastructure.
Capital expenditures are expected to be $29 billion to $34 billion in 2022, driven primarily by investments in data centers, servers, network infrastructure, and office facilities; Reality Labs products and services do not currently require significant infrastructure capacity and will not be an important driver of capital expenditures in 2022.
With no changes to the U.S. tax code, we expect the full-year 2022 tax rate to be similar to the full-year 2021 tax rate.
Q&A Session:
Q1: How about the short video application Reels now? Are there any difficulties that prevent Reels from complementing the advertising product well in its existing mode? How will Ad Serving change in Q1 2022?
A1: Reels is going through a lot like Stories before, and we're mainly focused on user experience, making short videos more effective on Instagram and Facebook.
Short videos are the main growth driver of Instagram and are quickly becoming the main growth driver of Facebook, and we are seeing good results.
Our main goal is to do a good user experience, and over time, we feel that short videos are a model that is very effective for advertising.
We feel that our experience with Stories can be replicated well on Reels, and we are confident that Reels monetization will get better and better.
But at the moment, Reels advertising volume is still relatively small, and from the perspective of growth and monetization, there may be a slowdown in growth and monetization.
The company saw the impact of Apple's iOS policy changes on revenue in Q4 2021, which is in line with our Q3 2021 forecast.
Entering Q1 2022, since Q1 2021 does not have this impact, it will be more difficult to increase Q1 year-on-year in 2022.
We believe that iOS policy changes will have an overall $10 billion impact on our 2022, which will have a great impact on growth. This impact is multifaceted, e-commerce in Q4 2021 experienced a real slowdown, e-commerce is the most affected area of iOS policy changes, and games are also challenged.
We believe that Apple's iOS policy changes, at the data level, have a great impact on us. Google search for ad commerce will get more benefits than we get. Now that Apple is taking $1 billion a year from Google search ads, apple's restrictions have a good chance of continuing.
Q2: How much is Reels used? What's new we're doing with advertising?
A2: Users like the short video application Reels, the user time is growing rapidly, Reels short video is also the main source of Instagram user use growth, but also the largest source of Facebook user use growth.
What is the difference between this change and the previous one?
First of all, similarly, this is not the first time such a huge pattern evolution has occurred, from desktop feeds to mobile feeds, from feeds to Stories to reels now, our advertising system and business need to undergo a certain degree of transformation of the new model.
When the use of old apps begins to be replaced by new apps, it will inevitably cause a slowdown in short-term revenue. But for us, it is not a big problem, and it may be a little unclear in the short term, but in the long run we are optimistic.
The difference in this change is that the Reels team has done a great job at the executive level and the product is growing very fast.
TikTok, as a strong competitor, is also growing rapidly. So it will take longer for us to catch up with TikTok, and while we're already accelerating growth, competitor TikTok is also growing at a rapid compound. Overall, Reels user usage is high, so we are optimistic about the future, user usage will continue to grow, of course, we have a lot to do.
When we discussed how to reduce the losses caused by Apple's iOS policy changes, there were two key challenges.
1. Precise delivery level: It takes many years of development to reshape our advertising optimization system and improve advertising performance with less data.
To achieve our goals, we're investing in advertising automation, allowing advertisers to find the right users through machine learning, with less effort, but it takes a long time.
2. Measurement level: There are 2 main areas affected by Apple's iOS policy changes.
The first is underreporting, where advertisers worry that their ad placements don't really meet the actual ROI.
At that level, we have made real progress and believe that the problem will be resolved in the coming years.
I would like to remind that this problem is easier to solve for the data of large companies, and the data of small companies will be difficult, which means that solving the data problems of small companies will take a lot of time, and it means that Apple's changes will cause more damage to small businesses.
The second is data latency, where there is a delay in the advertising platform receiving less granular conversion data.
Advertisers and we say that this makes real-time decision-making very difficult, but it's very important during holidays.
People usually spend more during the holidays, so advertisers monitor advertising performance in real time and change ad delivery by using data in hours rather than days.
That's the challenge we face during the holidays.
Q3: What does a large number of short videos mean for Facebook? Income pressure?
A3: For Facebook, content from friends is always an important part of the experience.
So whether it's in a group or a community, or a public content or different content from Reels, it's all about what you find with your friends.
At present, we are seeing that the content that users see in Feeds is shifting to public domain content little by little, and some people may resonate with this trend.
But now, many users are sending their previously possible content in a feed to friends via Chats, either one-on-one or through group chats.
That's why I've made community messaging my main investment. What we see in Feeds and a lot of it that really engages form the basis of the conversation, both in chat and in the changing trends of these Feed apps. So whether it's Facebook or Instagram, this type of content should be what we see in feeds.
There are two scenarios for income pressure:
The impact comes from Apple's iOS 15 policy changes, but these are far less significant than the iOS 14.5 policy changes, which have a more serious impact on the business from the second half of 2021. So I think this impact will be very noticeable in the first half of 2022.
There are further regulatory headwinds, including restrictions on the use of data by Internet service providers in Europe.
I think we're working to mitigate these effects, and the biggest impact will be in the first half of 2022, but in contrast, there is more resistance without the iOS 14.5 policy changes in the same period of 2021.
Q4: How can Reels better integrate into Facebook and Instagram? How would you rate Reality Lab's losses?
A4: Reels has more creators sharing a variety of different types of content, and in the future, users will see more Reels content on Facebook and Instagram.
While Reels currently has a lower relative monetization rate than Feeds, we believe there is huge potential for growth in overall user engagement over time.
We believe that in a steady state of the future, Reels monetization should be higher than other long video apps, closer to Feeds or Stories.
We will achieve real growth as soon as possible, although short-term growth is slower than we would like.
Since we do not break down expenses by sector, we expect accelerated personnel growth in 2022 to be the largest source of expense growth, mainly in terms of technology and products, supporting the seven key investment directions mentioned earlier.
We expect the app family to continue to drive most of the spending growth in 2022, while we expect Reality Labs operating losses to increase significantly in 2022.
Q5: How do you conclude that the advertising business mentioned earlier is under pressure of $10 billion?
A5: We are only estimating the overall impact of iOS policy changes on the 2022 revenue forecast, and we cannot accurately give the revenue involved, this is just an estimate.
But we think this is a very big pressure on the advertising business and needs to be overcome with our efforts.
Clearly, we are working to mitigate these effects and continue to make ads relevant and effective to users.
Q6: What are the difficulties in user growth? When will we see apps like Instagram merging with VR/AR?
A6: The overall growth of users is affected by fierce market competition, especially for young users.
In Q4 2021, the rest of the world suffered resistance due to a slight rebound in the United States and Canada MAU and DAU due to high penetration rates. India is a bit of an exception, and the data looks like it's because of the pricing of advertising, which has led to a slowdown in growth.
I talked about avatars in my opening remarks, and currently users' avatars can be displayed on Facebook, Instagram, Messenger, Quest, and we're going to expand further.
Our goal for 2022 is for users to not only experience the horizons virtual world in immersive VR, but also in 2D screens, with the possibility for users to access from Facebook, Instagram or different apps. Over time, I think you'll see Horizons seamlessly connected across our entire product matrix.
Q7: What is the difference between Reels and other short video services? What are the further changes to the advertising spend budgets of SMEs?
A7: There are some basic formats in social media, such as Feeds and Stories, and short videos like Reels have different characteristics in different network or community contexts.
For example, the discussions you might have in a Twitter or Pinterest feed are different from the discussions you have on Facebook or Instagram.
So even if creators choose to forward content on different platforms, there will be a completely different user ecology.
Some of the Reels seen on Facebook and Instagram are hard to see on TikTok, but the short video space as a whole has maintained rapid growth.
With the early 2000s, text became the main way for people to share and consume content online, until photos became the main content after having a camera on their mobile phones, and now that video has truly become a main content carrier, it has become more natural and more attractive. That's why I think the more immersive content around VR/AR will be the next generation of the internet after video.
But to be sure, humans currently spend a lot more time on short videos than in other apps, reflecting the success of apps like TikTok. Different short video platforms still have certain differences due to the platform environment and the content about users' friends.
With regard to SMEs, iOS policy changes will certainly hurt all advertisers and hurt SMEs even more.
We're making more progress on big customers than we're on SME customers, and personalized advertising is more important to SMBs because they need to reach a very small target audience.
In the long run, SMEs can benefit from our advertising system, so we will continue to ensure that SMEs can use it.
We are also working to get SMEs to adopt some of our business tools and other solutions, such as business information tools.
Q8: What is the room for short video content and matching algorithms to improve? Where is the room for advertising business growth?
A8: We see a lot of potential for the future of Reels, it's very adaptable and growing at an amazing rate.
Because we're facing TikTok, a much bigger competitor, it will take a while to catch up with it.
But fundamentally, we think Reels has more potential.
We can build better tools for creators and provide them with better monetization pathways.
Our advantage over our competitors is the efficiency of monetization and a more effective advertising system.
At present, the revenue scale of Reels has reached a certain volume, and it is expected to start the growth flywheel and begin to grow rapidly.
There is still a long way to go to become the largest company in the space, and it will be monetized at a lower rate, at least in the coming quarters, which is also reflected in the full year 2022 results guidance.
But I stress once again that the products we launch are popular with users, and we want to launch them as quickly and as well as possible.
Regarding advertising, we are introducing new tools to help businesses continue to use tools such as Apple's SKAd Network, APIs, and our aggregate event measurement and transformation modeling to measure ad delivery.
In the long run, we need to develop privacy-enhancing technologies that minimize the personal information we need to use about users.
But I do want to point out that with a lot of the ad targeting and measurement tools we have right now, millions of advertisers can continue to run ads and improve their performance, and we believe there's a lot of room for improvement in the system.
Q9: The main factors in the decline in profit margin? How do short videos consider traffic sharing?
A9: Administrative expenses in Q4 2021 are growing rapidly, part of which are legal-related expenses, which is the main factor in the decline in profit margins.
We will invest heavily in Reels, messaging, commerce, advertising, etc. in 2022, which is expected to be a major factor in the decline in profit margins.
Regarding traffic sharing, as the volume of users grows, this obviously affects spending, so this is also reflected in the full-year 2022 guidance, which is also part of our investment in Reels.
Zuckerberg and Facebook Overview:
Mark Zuckerberg was born in 1984 to a Jewish family in White Plains, New York, to a dentist father and a psychiatrist mother. In 2002, Zuckerberg graduated from Exeter High School and entered Harvard to study psychology and computational science; in September 2003, he developed a program called CourseMatch, which allows users to refer to the logic of other students' course selection; in October 2003, he developed facemash, a website for judging beauty appearance, where users can choose the best looking person in a pile of photos.
In February 2004, Zuckerberg and his undergraduate roommates created the social networking site Facebook, which was so popular that Zuckerberg dropped out of Harvard to start a business; in June 2004, Zuckerberg and his partners moved the company to Silicon Valley, California, to focus on entrepreneurship, and received a $500,000 angel investment from peter Thiel, co-founder of PayPal.
At the beginning of facebook, it was limited to Harvard students, and then it was gradually opened to other university students and members of the community; in May 2008, Facebook surpassed rival Myspace (one of the world's largest social networking sites) for the first time with more than 120 million unique users worldwide; in February 2010, Facebook surpassed Yahoo to become the world's third-largest traffic site; in May 2012, Facebook was listed on the NASDAQ exchange in the United States; on June 28, 2021, Facebook became the fifth technology giant in the U.S. stock market with a market value of more than $1 trillion, followed by Apple , Microsoft, Amazon, Google.
Facebook builds a matrix of social products to create a social network with a global reach. Following the launch of the social networking site Facebook in February 2004, Facebook released the desktop chat app Facebook Messenger in March 2012; in April 2012, Facebook acquired photo-sharing app service Instagram at a valuation of $1 billion; and in February 2014, Facebook acquired whatsApp, a cross-platform mobile messaging app, at a valuation of $19 billion.
Facebook has the best chance of becoming a system-level builder of the metacosm. As a super social empire with nearly 3 billion monthly active users around the world, Facebook has a comprehensive layout in hardware terminal products, operating systems, app stores, platforms, and social networks in the field of headset VR/AR. Facebook spent $2 billion to acquire Oculus as early as 2014, and now the VR product has iterated to Quest 2, priced at only $300, with nearly 10 million active users, the follow-up Quest 3, Quest 4 will be cheaper, better experience, the user level will be further amplified; but also actively work on AR.
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