Patience is a rare investor virtue. Mark Zuckerberg thinks he has the track record to ask for it.
Facebook Inc. had just reported second-quarter revenue Wednesday that beat analysts’ estimates, and on a conference call some of the same analysts asked the chief executive about applications that could be making billions on their own -- WhatsApp, Instagram and Messenger. Zuckerberg didn’t seem eager to placate his questioners with promises, projections or even updated user numbers.
“We would ask for some patience on this to do this correctly,” he said of Facebook’s Messenger.
The focus for the three applications was still on expanding their communities, he said. Messenger has 700 million users, more than double the size of Twitter Inc., WhatsApp has 800 million and Instagram has more than 300 million. Instagram started to sell advertising, but it’s not going to have an impact on Facebook’s bottom line for a long time, Chief Operating Officer Sheryl Sandberg said.
“They didn’t offer up a whole lot of new details, but that’s the kind of luxury and time you get when your core business is doing very well,” said Nate Elliott, an analyst at Forrester Research. “They seem to be taking advantage.”
Zuckerberg’s investors may want results -- the stock fell 2.1 percent to $94.95 at Thursday’s close in New York -- but the social network’s billionaire founder has never been in much of a hurry. On Wednesday’s call he recalled 2006-2007, when Facebook was under pressure to add banner advertising, the main way websites profited back then. But Facebook took its time to develop ads that felt more natural, he said.
“What we decided was that over the long term, the ads and monetization would perform better if there was an organic interaction between people using the product and businesses,” Zuckerberg said.
Now Facebook is following a similar playbook. With Messenger, for example, the company is introducing ways for people to conduct customer-service conversations with businesses.
Zuckerberg has long been tempering investor expectations about the products. In October, he said that applications “don’t really get that interesting to turn into businesses until they have about a billion people using them.”
It was a humble brag that dug at a competitor. A few miles north of Facebook’s campus in Menlo Park, California, San Francisco-based Twitter was struggling past the 300 million user mark. Now, Twitter expects growth to stagnate for a while, its executives said Tuesday. Facebook, on the other hand, has a history of building or buying products with devoted user bases - - and making them lucrative.
Then there’s Oculus, the virtual-reality headset maker that Facebook owns. It’s central to Zuckerberg’s grand vision of the Internet’s future, and again, investors will have to wait for a potential payoff. Oculus expects to ship its first consumer product in early 2016. It’ll be an important event for Zuckerberg, who said immersive three-dimensional experiences will eventually replace video in online popularity. But on the call, Facebook executives declined to say how many Oculus units they thought would ship, how it might change Facebook’s cost structure, or whether it might have an app store.
Meanwhile, Facebook had its biggest quarter of hiring ever, with most of those employees brought in for research and development -- a longterm strategy for Zuckerberg that includes mastering artificial intelligence.
Facebook’s sales rose 39 percent to $4.04 billion in the quarter. That ought to buy Zuckerberg more time.