Good afternoon. My name is Chris, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Facebook first quarter 2016 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. This call will be recorded. Thank you very much. Ms. Deborah Crawford, Facebook's Vice President of Investor Relations, you may begin.

Thank you, good afternoon and welcome to Facebook's first quarter 2016 earnings conference call. Joining me today to discuss our results are Mark Zuckerberg, CEO; Sheryl Sandberg, COO; and Dave Wehner, CFO. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in today's press release, our Annual Report on Form 10-K filed with the SEC. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During this call we may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. The press release and an accompanying investor presentation are available on our website at investor.fb.com. And now I'd like to turn the call over to Mark. Mark Elliot Zuckerberg - Founder, Chairman & Chief Executive Officer: Thanks, Deborah, and thanks, everyone, for joining today. We started 2016 off well. 1.65 billion people now use Facebook every month and 1.09 billion people use Facebook every day. In recent weeks, we're also consistently seeing more than 1 billion people using Facebook on mobile every day. We're also pleased with our business results. Total revenue this quarter grew by 52% year on year to $5.4 billion, and advertising revenue grew by 57% to $5.2 billion. I'll have more to say about these results in a minute, but first I want to talk about a proposal by our Board of Directors to reclassify Facebook stock. At F8, I talked about our mission…

Thanks, Sheryl, and good afternoon, everyone. We're off to a great start in 2016, led by the ongoing growth and engagement of our community and continued momentum in our ads business. In Q1 we generated $5.4 billion in total revenue and delivered over $1.8 billion in free cash flow. Let's begin with our community metrics. In March, 1.09 billion people used Facebook on an average day, up 16% compared to last year. This daily number represents 66% of the 1.65 billion people who visited Facebook in the month of March. Mobile continues to drive our growth. Over 1.5 billion people accessed Facebook for mobile devices in March, up 21% from last year. Before diving into our quarterly financial results, I wanted to highlight that beginning this quarter, I will focus my prepared remarks on our GAAP results, and all financial metrics are GAAP unless otherwise noted. The primary difference between our GAAP non-GAAP metrics is stock-based compensation [SBC]. Stock-based compensation plays an important role in how we compensate our employees, and therefore we view it as a real expense to the business. We will continue to provide a reconciliation of GAAP to non-GAAP financial metrics in our press release and earnings slides. All of our comparisons are on a year-over-year basis unless otherwise noted. Q1 total revenue was $5.4 billion, up 52% or 58% on a constant currency basis. Ad revenue in Q1 was $5.2 billion, up 57% or 63% on a constant currency basis. This marked a slight decline from the 66% constant currency ad growth rate we experienced in Q4. In Q1 this year, we benefited from an additional day due to the leap year, which contributed approximately two percentage points to our year-over-year ad revenue growth rate. North America and Asia-Pacific were our fastest-growing regions, with advertising…

Your first question comes from the line of Eric Sheridan with UBS. Your line is open.

Thank you so much. I wanted to come back to your comments on the small and medium-sized business opportunity at Facebook, maybe direct a few points to Sheryl to get some comment. I wanted to understand what some of the opportunities are to continue to demonstrate to those advertisers what the potential is for both Facebook and maybe even Instagram and Facebook Messenger long term as platforms to grow their businesses and also pointing out what some of the measurement tools and operating challenges are to bring people onto the platform. Thank you. Sheryl K. Sandberg - Chief Operating Officer & Director: Thank you for the question. SMBs, or SMUs as they're called in different places around the world, we think are a very core competitive advantage for us. It's prohibitively expensive for most small businesses to reach people digitally. Thirty-five percent of small businesses in the United States, which is often the most advanced market, don't have a web presence at all. And setting up a mobile app, getting people to find and download a mobile app, can be even more expensive. And so what's happening is that SMBs are turning to Facebook pages as their mobile solution. They're free, they're easy to set up, and they already know how to do them because almost all of them are already Facebook users in the first place. And so the onboarding has been incredibly important and incredibly effective. We announced last year that we have over 50 million small business pages active on a monthly basis. Eighty percent of those are active on mobile. We then work on helping them use our ad products and upsell them to our paid ad products as well, and we announced this quarter that we hit 3 million active advertisers on Facebook and 200,000…

Your next question is from Brian Nowak with Morgan Stanley. Your line is open. Brian Nowak - Morgan Stanley & Co. LLC: Thanks for taking my questions. I have two. The first one, Sheryl, you talked about video and increasing the overall video consumption. Can you talk about where you are on traction with video advertising and the adoption of video ad units and the impact of video in the quarter? And then secondly, just breaking down the advertising by cohort, could you talk to points of strength or weakness across direct response versus branded advertisers in the quarter? Thanks. Sheryl K. Sandberg - Chief Operating Officer & Director: Sure, I'll take the second one first. Our growth was really broad-based, and we grew across all of our marketer segments this quarter. That's direct response, brands, SMBs, and developers. Our direct response business continues to be very strong. It's very ROI-focused, and we continue to invest and roll out products that help people. So for example, Lead Ads, where people can fill out forms on a mobile device, take their contact info from Facebook, we've rolled that out fully this quarter. And that enables people to use Facebook in a very direct to response way, and we'll continue to invest there. Video ads are really exciting. It's worth noting that video ads take place on another avenue, and receipts are not all of the revenue incrementals (28:55). But as consumer engagement with video has continued to grow, that creates more and more of an opportunity for video ads. Marketers have always loved video because it's a really compelling way to reach people. And now we can reach them on mobile all day with those kind of messages. Importantly, marketers have to adjust sometimes. While the 30-second ad does perform well in News Feed, we also see people understanding that some of the formats are different. Creating shorter ads, creating ads that can work even without sound, more personal ads has really mattered. One example is Toyota used Facebook for the launch of the RAV4 Hybrid with Saatchi in Los Angeles. They used a very broad video to drive brand awareness. They reached over 36 million people in a target demo within three days. Then, and this is where it gets even more interesting, they retargeted people who watched the video with over 500 personalized video ads which were optimized for Facebook and Instagram. So they were creating a direct response campaign to get people to take specific actions like requesting a quote and finding a specific dealer. We saw a 14-point lift in ad recall, a seven-point lift in message association. And right now, we're using the Lift tool to continue to measure their sales for the 30 and 60 days beyond the campaign to see what happens. And we're pretty excited about what that shows in terms of how video can be used in a really broad-based way but also a more personal way.

Your next question is from Douglas Anmuth with JPMorgan. Your line is open.

Thanks for taking the questions. I have a couple for Mark around Messenger. Mark, I was hoping you could talk to us about how you expect to shift user behavior within Messenger to get users to focus more on businesses versus more personal communications and how you'll make users aware of the capabilities within the platform. And then just secondly, as more bots come on board here and businesses are engaging with Messenger, how do you envision bots and humans working together in terms of providing more customer service? Thanks. Mark Elliot Zuckerberg - Founder, Chairman & Chief Executive Officer: Sure. So part of our playbook for building out these ecosystems at scale is we start with the person-to-person user base. So whether that's in messaging, it's people messaging their friends or groups and News Feed. Before that, it was people posting updates and seeing what was going on with their friends and the people that they care about. And then the next step is to create organic activity around public entities, so whether that's businesses, public figures like athletes and celebrities and types of folks that people want to interact with on these different platforms, and we did that on Facebook in News Feed group pages, and we're working on a number of different ways to do that in Messenger. One of those is bots. And one of the good things about bots that we've seen is that it can decrease the amount of time that you have to wait before you get a reply back from interacting with a message. So what we've seen – we've done some research on this. A lot of people every day in Facebook today are already messaging pages and businesses directly, and the businesses respond. But what we've actually also found is that through some of our AI research, we can look at the responses that businesses give to common questions and can confidently provide the right reply a lot of the time. And when we can do that, then that decreases the latency. And predictably, people want to do more of that activity. So that's one way that I think you're going to see bots work, between people who are actually driving the businesses directly will need to in some way train or answer questions for people, but we can build artificial intelligence that can learn from people how to automate a lot of that and make that experience a lot faster for people who want to interact with businesses and public figures. And of course then, after you start building out that segment of businesses and then public figures on the platform, then on top of that you have just a good amount of intent on these platforms to build a good business on top of that. That's stage three.

Your next question is from John Blackledge with Cowen & Company. Your line is open. John Blackledge - Cowen & Co. LLC: Great, thank you, two questions. So Facebook just opened up Instant Articles globally to all publishers. I'm just wondering what you see as a publisher's benefit in joining Instant Articles. And how we should think about the monetization impact in 2016? And then second question, the ad revenue in APAC was much better than we thought, just any more color on the drivers there. Thank you. Mark Elliot Zuckerberg - Founder, Chairman & Chief Executive Officer: So Instant Articles is all about the quality of the consumer experience. Right now for links that are not Instant Articles, it can be one of the slowest parts of the Facebook app. You're browsing through a News Feed, you tap on a link, if you're not on a good connection, the content isn't cached, it can take 10 or 20 seconds in some cases for that content to load. And people in our community, they don't know the difference about whether that content is coming from Facebook or a different place. They hold us accountable for making their experience quick, and we want to do everything we can to do that. So Instant Articles makes it so that any publisher around the world now can deliver a really great native experience instantly with no latency in loading it. And we're just seeing that people like to engage with that a lot more. So that's where we're most excited about there. Sheryl K. Sandberg - Chief Operating Officer & Director: The APAC question, it has been growing really well for several quarters now, and we're seeing a lot of great adoption as people learn to use the products. One part of the business that I think has been really strong and is worth noting is we're working with marketers in China to help with their export business. So Air China is a good example. They're a popular airline in China, but they don't really have – they're not really as well-known overseas. And before working with us, they really only invested in traditional media. They had a goal of promoting their new flight routes, including one from Mumbai to Beijing, and their new aircraft. So they launched a campaign with us in 15 countries globally. They used reach and frequency and Carousel and video ad targeting. And for example, they would target in the U.S. age 18 and above frequent international travelers living in cities where they had routes or Indian expats living in the U.S. to promote new routes to Mumbai. They reached 30 million people globally, more than 95% on mobile. And here's the best part, they had a 73% sales lift in the United States. So our APAC business is robust, and I think the global nature of our business is part of driving that.

The next question is from Heather Bellini with Goldman Sachs. Your line is open. Heather Bellini - Goldman Sachs & Co.: Great, thank you. I was just wondering if you could share with us. How do you see Instagram's ramp impacting Facebook's ad growth in 2016, or if there's any color you could share with us about how that's been ramping? And also, if you can, share with us how advertisers are viewing the platform. Are you finding that it's typically more additive to their Facebook spending, or are they funding it with existing Facebook budgets? Thank you. Sheryl K. Sandberg - Chief Operating Officer & Director: Facebook and Instagram are the two most important mobile ad platforms out there. In the short run, some of the spend is incremental and some isn't. There are people who will have a social budget or a digital budget. And as they move to Instagram, some of that will come from Facebook. In the medium to long run, we believe we compare very favorably with any other spend we can do because we have this very broad reach on both platforms plus the ability to target very specifically. So what you're seeing in our results right now are very strong growth for Facebook and very strong growth for Instagram. We hit 3 million advertisers for Facebook. We hit 200,000 for Instagram, and often the platforms really work together.

The next question is from Justin Post with Merrill Lynch. Your line is open.

Thanks, a question for Mark. There have been some concerns about traffic to publishers and sharing levels on Facebook. I just wondered if you could talk about core Facebook engagement. What's really working? Are you concerned at all about that? And then when you think about the ad loads, are you comfortable with where they're at, is there still a lot of room to go? And then maybe last one, if you were to ever leave Facebook, what would happen to your voting shares? Thank you. Mark Elliot Zuckerberg - Founder, Chairman & Chief Executive Officer: All right, let's talk about engagement first. So overall sharing is up across Facebook, and people are spending more time on Facebook and the whole family of apps. And that is not just the case for the aggregate of the growing community, but it's actually also the case on a per-person basis as well in terms of people sharing more and spending more time individually. Now one of the things that we see is that the way that we are sharing is always changing, and some of this is because of underlying technical transition. So on desktop, for example, it's easier to type, so we saw more text posts. On mobile, it's easier to take videos, so we see more videos. On desktop, people would have more commonly uploaded an album of photos that they took from their digital camera and downloaded onto their computer; whereas on mobile, the more common behavior is to take a single photo or a couple and just post those. So there are all these transitions. And that's our job, is to make it so that we build great tools that people – everyone around the world can share anything that they want with everyone. Now the other thing…

Sure. I guess, also, Justin, you had a question on ad load, so I'll do both the ad load and the question on the reclassification. So on ad load, it's definitely up from where we were couple of years ago. I think it's really worth emphasizing that what has enabled us to do that is just improving the quality and the relevance of the ads that we have, and that's enabled us to show more of them without harming the user experience at all. So that's been really key. Over time, we would expect that ad load growth will be a less significant factor driving overall revenue growth, but we remain confident that we've got opportunities to continue to grow supply through the continued growth in people and engagement on Facebook as well as on our other apps such as Instagram. On the question regarding what would happen to Mark's shares if he were to leave Facebook, I'd just refer that the new multi-class capital structure is generally dependent on Mark continuing to maintain an active leadership role at Facebook. And if you go into the proxy materials, it goes into more detail on how different things would play out under various other scenarios. So I would just refer you to those.

Your next question is from Ben Schachter with Macquarie. Your line is open. Benjamin Schachter - Macquarie Capital (USA), Inc.: Mark, when you're thinking about acquisitions broadly, in what area do you think Facebook needs to buy versus build? Basically, where you need external help? And then on VR, just a few quick questions, any update on the shipping delay, how many units shipped in the quarter and expectations for the year? And then also on VR, understanding I know it's very, very early, but beyond games and entertainment, what verticals do you expect to be first to utilize VR and AR? Thanks. Mark Elliot Zuckerberg - Founder, Chairman & Chief Executive Officer: So on the acquisition philosophy, I've talked about how I think the social ecosystem will play out on a number of these calls. The basic theory that we have is that there are a small number of services that are going to be ubiquitous utilities that 1 billion or 2 billion or more people are going to want to use. So that's core basic messaging, the core functionality around having your real identity and connecting with all of your real friends and family online. Those are things that we just think are just going to be ubiquitous. So we want to build those. At the same time, we also think that there are going to be many, many good businesses and different other social use cases where there are people doing good work and building different companies that we feel no need to own those things. So I think that people come up from time to time and suggest, should we buy this company or that. And what we look at are what are the things that we think are going to be ubiquitous tools, and who…

Then, Ben, you asked about shipping units. We did begin shipping units in the quarter. This is very small still. VR is still very early. It's not going to have a material impact on revenue in 2016, and I gave more color on that in my prepared remarks.

Your next question is from Mark May with Citi. Your line is open.

Thanks a lot, first one for Sheryl, I think. I'm wondering if you could update us on the progress you're seeing with FAN [Facebook Audience Network]. You gave some metrics in Q4. It seemed like that advertisers were really adopting that platform and seeing a lot of additional reach. Maybe if you could, tell us how that's going. And then I think a couple more; on the tax rate, we saw it step down quite a bit in Q1, but you're guiding for flat sequentially. Should we think about that as a run rate, or are you still attempting to manage your tax rate down even further than where you saw it in Q1 and where you're expecting for Q2? And then on the OpEx guide, 41% non-GAAP growth in Q1, obviously below your range but you maintained the range. Why is that? Is that just purely a function of the comps as you head into the year, or are there some specific investment plans that you have? Thanks.

Sure, Mark. I can start with the detailed ones, the tax rate and the OpEx guide. So on the tax rate, the rate came in better than guidance in terms of the tax rate, but it's consistent with the long-term trend that I'd indicated. We do expect that that rate will be approximately the rate that will continue for the rest of the year. So for purposes of 2016 modeling, I would use the Q1 rate. On the OpEx guide, Q1 came in slightly below our annual expense growth guidance, but we do expect that investments in areas like video and Oculus will impact the remainder of the year more substantially, so that's why we're maintaining the annual OpEx growth guidance that we have. And then, Sheryl, did you want to speak about Audience Network? Sheryl K. Sandberg - Chief Operating Officer & Director: Yes, Audience Network is important to us because we're making a strategic investment in ad tech, helping advertisers and publishers grow, so it's on and off Facebook. We think we're uniquely placed to bring people-based marketing to scale and solve the measurement problem, and the Audience Network is a place we're really focused because we feel like we're delivering value for advertisers and publishers, so we're investing behind the growth we've seen. We've seen a growth of native ads. Eighty-three percent of the overall inventory on the platform is native, and over 50% of our publishers are only using native ads. We have some great examples of Audience Networks really improving people's results. A recent one is eBay Vivanuncios, which is an online real estate destination working in Latin America and Mexico. When they were using a combination of Facebook, Instagram, and the Audience Network, they saw 57% lower cost per install with placement optimization and 59% more volume versus running on Facebook alone, which led to 6% incremental revenue. So compared to November a year before, the number of their app installs increased by 115%. So what we're seeing is the results we're able to deliver on Facebook and Instagram, a lot of our marketing partners want more. And our ability to do that is why we're investing in the Audience Network.

The next question is from Colin Sebastian with Robert W. Baird. Your line is open. Benjamin C. Gaither - Robert W. Baird & Co., Inc. (Broker): Hi, this is actually Ben on for Colin. This one is for Mark. You had already talked about the AI and machine learning applications with respect to Messenger and bots, but I was wondering what are some of the more nascent initiatives where you're applying machine learning, or maybe where we might see those investments manifest themselves in the user experience over the next few years? Mark Elliot Zuckerberg - Founder, Chairman & Chief Executive Officer: So the biggest thing that we're focused on with artificial intelligence is building computer services that have better perception than people, so the basic human senses like seeing, hearing, language, core things that we do. I think it's possible to get to the point in the next five to 10 years where we have computer systems that are better than people at each of those things. That doesn't mean that the computers will be thinking or be generally better, but that is useful for a number of things. So for example, I talked about earlier, we are building this Moments app, so that way you can take photos on your phone. And if you use this app, our face recognition can look at the photos that you take and suggest that you might want to share photos that you took with a friend in them with that person. So that way, all the photos that might be of you and your friends' camera rolls, they can share with you. Another example is just spam filtering and just making sure that we can actually read the content and understand what's interesting to you or not and not show that.…

The next question is from Ken Sena with Evercore. Your line is open.

Hi. I have a high-level, longer-term question. For brands, we're seeing where promotion, transaction, and support capabilities for businesses are all deepening within Facebook. Therefore, should we be thinking about a longer-term transition from a platform that's basically all ad to something where more marketplace capability is offered, given that buyers and sellers are so known and so connected? And if so, can we think about Facebook starting to monetize maybe on a transaction basis or even through various customer support capabilities via the messaging tools, AI, et cetera, that you're beginning to offer businesses? So maybe if you could just provide a little bit of color on how you see that evolution, that would be great. Thank you. Sheryl K. Sandberg - Chief Operating Officer & Director: You're right that people are increasingly using Facebook to discover products and services, and we're testing some ways like the Marketplace to make this easier. We're also testing some incremental features on pages, which enable businesses to drive purchases on a page or direct people directly to their website. These are really early, but we've had some positive feedback. Our focus, however, continues to be on our ad products because we think we can take people all the way from the top of the funnel, where they can really get a brand awareness or product awareness, and go all the way down to purchase, not necessarily because the purchase is happening on Facebook, but because we can work on the measurement systems to understand how the advertising, both at the top and lower down in the funnel is influencing those purchases. We've been really excited by what we've seen in the commerce vertical of our ad products. So products like dynamic product ads, Carousel ads are working really well for us. This quarter we launched Canvas ads, which are very fast-loading, immersive mobile ads. They're easy to build. You can use the self-service tool. You don't have to write any code. They are native format, so they decrease that initial drop-off you see when people click off to another site. It's very early days, but the average viewing time is over 30 seconds, which shows how immersive that is. I'll share one example of how ads are driving a small business on Facebook through ads, which is a company called Sparkle in Pink. They're a Utah-based SMB. They're selling girls' clothing. They did a Slideshow ad that included a Shop Now button, which enables you to take action on their site. They were able to increase sales by 9% a month. And more exciting for us, this was six times more efficient in terms of acquisition than any other digital media channel. And that shows how you can use our ad products to go all the way from awareness, measuring through to a sale and show how important our ads can be to commerce on our platform.

Your next question is from Ross Sandler with Deutsche Bank. Your line is open.

Great, so I guess a question for Mark or Sheryl. So at F8, you showcased a bunch of new features for Messenger, including ads to promote your business inside of Messenger. So how should we think about the timing of those ad units coming on in Messenger? And can you use the same ad stack in the Facebook Power Editor that's used on core Facebook and Instagram to get ads up on Messenger? Can you walk us through that? And then the second question on messaging, so with WhatsApp crossing 1 billion users recently, how do you view the product roadmap today on WhatsApp versus what you showcased recently with Messenger? Is it a year behind, or is it further back than that? Any color there would be helpful. Thanks. Sheryl K. Sandberg - Chief Operating Officer & Director: For Messenger and WhatsApp, our focus right now continues to be on growth and engagement. We are not rolling out any monetization products on WhatsApp right now, but we did start that process at F8 on Messenger. And what we're doing is following the organic activity that's happening on the Messenger platform. Businesses and consumers are using Messenger to connect to each other in a more personal, more immediate way. And we rolled out a platform beta, which gives new opportunities to build compelling experiences. Bots, very early but giving the opportunity for more personal interactions between businesses and mobile. The 10 received APIs (56:26), so that businesses could send immediate responses to common questions, including engaging images and call to action as well as texts. In terms of the timing, this is really early. We have a lot of opportunity to invest in advertising across our different platforms. And so we want to make sure we get this right as we focus on continued engagement. You're right that over time, when we make these investments, we are going to be able to rely on some of the core aspects of the ads infrastructure. Certainly, our long base of advertisers, some of the things we understand about how ads perform and the functionality will be an important part of the product offerings in the future, but those are not immediate by any stretch of the imagination.

Operator, we have time for one last question.

Your last question is from Anthony DiClemente with Nomura. Your line is open.

Thanks a lot. I have one for Sheryl and one for Mark. Sheryl, there are many out there who might assume that this leg of excellent growth that Facebook is realizing might have come at the expense of TV advertising, but the TV ad world seems to be quite resilient here. And you actually talked a lot in your prepared remarks about how marketers benefit from running digital and TV campaigns in parallel. So I wonder if you could just comment on where your share gains are coming from, in your view. And then, Mark, on Live video, I realize it's a small part of overall video, but I wonder. Do you think multiple platforms can succeed in live streaming over time given the size of the market longer term, or do you think it's more of a network effect business where a vast majority of the traffic and economics will ultimately accrue to the leader in the live streaming space? Thank you. Sheryl K. Sandberg - Chief Operating Officer & Director: We think our growth has been very broad-based, but dollars are shifting from all types of media formats to where consumers are spending their time. We tell our clients that we want to be the best dollar and the best minute they spend, and we want them to measure value. I don't think this means that all of our growth comes at the expense of any one channel, but it's broad-based. And often, TV and Facebook and Instagram can work really well together. I'll give a fun example from the Super Bowl. T-Mobile wanted to use their Super Bowl campaign to increase their brand awareness and increase their reach. So before the game, they targeted their 30-second Super Bowl ad that featured Drake to people with NFL and…

Thank you for joining us today. We appreciate your time and we look forward to speaking with you again.

Ladies and gentlemen, this concludes today's conference call. Thank you for joining us. You may now disconnect.