Thread by @borrowed_ideas

1/19 $META 4Q'21 Earnings

"although the direction is clear, our path ahead is not yet perfectly defined."

The word "headwind" or "headwinds" appeared 30 times on this call. Market listened. Stock is -23% AH.

2/19 It's the first time Meta has broken down topline into two segments: Family of Apps (FoA), and Reality Labs (FRL).

DAU +4%, MAU +5%
In Q4, # of ad impression +13% YoY; price per ad +6% YoY
For 2021, this was +10% and +24% respectively.

3/19 turns out Meta's core biz is even more profitable (~49% EBIT margin) than Google Services biz (~39% EBIT margin)

Unfortunately, there's no "other bets" in Meta. It's a Hail Mary for what the company wants it to be.

4/19 So if the bet's a failure, it's not just zero, but LOT less.

7 major investment priorities: Reels, community messaging, Commerce, ads, privacy, AI and, the Metaverse

5/19 Reels: "People have a lot of choices for how they want to spend their time, and apps like TikTok are growing very quickly, and this is why our focus on Reels is so important over the long term"

6/19 "Reels monetizes at a lower rate than Feeds and Story, but we expect this to improve over time. We made successful transitions before. The shift from web to mobile and then another shift from Feeds to Stories. We have a playbook here."

7/19 "in a steady state over time, we think that Reels should monetize closer to Feeds or Stories than other longer-form video"

Reels is already biggest contributor to engagement growth in IG, and growing very quickly on FB as well.

8/19 "thing that is somewhat unique here is that TikTok is so big as a competitor already and also continues to grow at quite a faster rate off of a very large base."

Want to hear a joke? $META is currently being litigated in the court for being a "monopoly". Go figure.

9/19 Community Messaging

"we're seeing people increasingly want to share more things and messages that they were previously maybe post into Feed."

10/19 Ads

Here is basically a Diarrhea of headwinds. Meta estimates topline impact from iOS changes is $10 Bn in 2022.

"we expect the overall targeting and measurement headwinds to moderately increase from Apple's changes and from regulatory
changes in Q1 and throughout 2022."

11/19 Two challenges: accuracy of ads/targeting, and measuring/attribution

"On targeting, it's very much a multiyear development journey to rebuild our ads optimization systems to drive performance while we're using less data."

See the attribution challenge in the image.

12/19 Dave Wehner went an extra mile on this call and pitched a spread trade for the poor shareholders: Long $GOOG, Short a basket of E-commerce stocks. 😂

13/19 "given that Apple continue to take billions of dollars a year from Google Search ads, the incentive clearly exists for this policy discrepancy to continue"

Even Dave is taking a dig at GOOG's TAC to AAPL. Unlikely TAC survives in the next 3-5 years. Something's gotta give.

14/19 Privacy

Bro, you can build the most privacy-focused apps in the world, and I'm telling you that's not how people will perceive you because it's not the lack of privacy that caused the problem. It's the inability to shape your narrative.

Oh and some cool AI stuff.

15/19 Metaverse

"We're working towards a release of a high-end virtual reality headset later this year and we continue to make progress developing Project Nazare, which is our first fully augmented reality glasses."

16/19 $19.2 Bn buyback in Q4 (10x last year's amount). Share count down ~3% YoY. Meta cannot win of course as investors are now angry why they bought back so many shares before weak guidance.

"Heads I win, Tails you lose"

17/19 Relax man, they have $48 Bn cash still on balance sheet. And unlike the average sage on twitter, they probably don't have the crystal ball of knowing that stock would trade <13x core biz operating earnings.

Speaking of outlook, 1Q'22 topline expected to grow +3-11% YoY

18/19 2022 expense predictably guided down to $90-95 Bn

"Family of Apps to continue to drive the majority of expense growth in 2022. Though we do expect Reality Labs operating loss to increase meaningfully in '22"

19/19 Tough L in this quarter. But the bet remains on Zuck (although he's not gonna receive any incremental flows from me in the near future).

I'll post $SPOT tomorrow morning.

All my twitter threads: mbi-deepdives.com/twitter-thread…

going through the transcript of follow-up calls. WhatsApp monetization is up and running, and click-to-messaging ads have been "a good source of growth".

from 10-K: "we experienced YOY declines in ad impressions delivered in the US & Canada. These trends adversely affected advertising revenue growth in the second half of 2021 and we expect will continue to affect our advertising revenue growth in the foreseeable future"