WHERE: CNBC's "Closing Bell"
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Facebook COO Sheryl Sandberg on CNBC's "Closing Bell" today. Video from the interview is available on CNBC.com.
All references must be sourced to CNBC.
KELLY EVANS: WELCOME BACK. LET'S TAKE A QUICK LOOK AT HOW FACEBOOK IS DOING AFTERHOURS. SHARES HAVE BEEN GYRATING. THEY WERE DOWN AND THEN SLIGHTLY POSITIVE, WHICH THEY CURRENTLY ARE AT THE MOMENT. WE ARE GOING TO HEAD BACK OUT TO LOS ANGELES WITH CNBC'S JULIA BOORSTIN JOINED IN A CNBC EXCLUSIVE ON THE PHONE BY FACEBOOK'S CHIEF OPERATING OFFICER SHERYL SANDBERG. JULIA, TAKE IT AWAY.
JULIA BOORSTIN: THANKS SO MUCH, KELLY. AND SHERYL, THANKS SO MUCH FOR JOINING US ON THE PHONE. WE REALLY APPRECIATE IT. BETTER THAN EXPECTED RESULTS ON THE TOP AND BOTTOM LINE. WHAT DROVE THE UPSIDE SURPRISE?
SHERYL SANDBERG: WELL, GREAT TO BE WITH YOU, JULIA. WE HAD A GREAT QUARTER AND I THINK IT'S CAPPING OFF A REALLY GOOD YEAR. AND IMPORTANTLY, THIS IS A QUARTER OF FIRSTS FOR US. OUR FIRST QUARTER OVER $3 BILLION IN REVENUE, OUR FIRST QUARTER OVER $2 BILLION IN MOBILE REVENUE. I THINK THE INVESTMENTS WE'VE MADE HAVE PAID OFF. WHEN YOU LOOK AT FACEBOOK OVER THE LAST COUPLE OF YEARS, WHAT YOU SEE IS A SHIFT TO MOBILE. AND WHAT WE'RE ALSO INVESTING IN IS OUR MOBILE ADVERTISING BUSINESS, AND I THINK WE'VE BUILT STRONGEST MOBILE AD PRODUCT OUT THERE AND AN ABILITY TO MEASURE AND THAT'S WHAT'S DRIVING THE RESULTS. IT'S INTERESTING BECAUSE CONSUMERS ARE SHIFTING THEIR TIME TO MOBILE AND THE MARKETING DOLLARS ARE FOLLOWING, BUT THEY'RE STILL FOLLOWING SLOWLY AND THAT'S WHAT WE AIM TO ACCELERATE GOING FORWARD.
BOORSTIN: CERTAINLY VERY IMPRESSIVE GROWTH, ESPECIALLY IN MOBILE, BUT IT'S SURPRISING TO ME AND A NUMBER OF OTHERS THAT THE STOCK ISN'T REALLY MOVING HIGHER AFTER HOURS. DO YOU THINK THAT'S BECAUSE OF THE 87% INCREASE IN COSTS AND EXPENSES IN THAT FOURTH QUARTER? THAT 87% SEEMS TO BE LARGER THAN MANY EXPECTED.
SANDBERG: I LEARNED A LONG TIME AGO NEVER TO COMMENT OR CONCENTRATE ON THE STOCK PRICE, BUT REALLY CONCENTRATE ON THE CORE BUSINESS. AND WHAT WE'RE FOCUSED ON IS FOLLOWING THE SHIFT TO MOBILE WITH CONSUMER TIME AND MAKING OUR MOBILE AD PRODUCTS WORK FOR CONSUMERS AND MARKETERS AND I THINK THAT'S WHAT YOU'RE SEEING IN OUR RESULTS THIS QUARTER AND THIS YEAR.
BOORSTIN: NOW, LAST QUARTER YOU GUIDED TO A 50% TO 70% GROWTH IN OPERATING EXPENSES IN 2015. CAN YOU GIVE US AN UPDATE ON WHAT KIND OF INCREASES IN OPERATING EXPENSES WE SHOULD EXPECT AND WHAT THAT MONEY WILL BE SPENT ON AS YOU LOOK TO GROW EVEN MORE?
SANDBERG: WE DON'T GENERALLY GIVE OUT THAT KIND OF GUIDANCE AND WE'RE NOT DOING THAT THIS QUARTER, BUT I CAN CERTAINLY TALK ABOUT THE INVESTMENTS WE'RE MAKING. WE CONTINUE INVESTING IN CONSUMER PRODUCTS ACROSS THE BOARD SO THAT CONSUMERS CAN REMAIN ENGAGED. WE'RE REALLY HAPPY WITH OUR ENGAGEMENT PROGRESS TO DATE. WE'RE NOW UP TO 1.39 BILLION MONTHLY USERS AND OUR DAILY USERS ARE UP TO 64%. WITH OUR TIME SPENT PER USER GROWING 10% YEAR-OVER-YEAR. IN ORDER TO CONTINUE THAT KIND OF USER ENGAGEMENT, WE KNOW WE NEED TO BUILD GREAT PRODUCTS AND WE'RE INVESTING BEHIND OUR CONSUMER PRODUCTS. WE'RE ALSO INVESTING IN OUR ADS BUSINESS. INVESTING IN THE BUSINESS IN OUR AD PRODUCTS MAKING THEM WORK FOR MARKETERS AND CONSUMERS AND IN MEASUREMENT – MEASUREMENT AND TARGETING. WE THINK THAT OUR ADS ARE GOOD. WE THINK OUR AD PRODUCT IS THE BEST ON MOBILE, BUT WE STILL THINK WE CAN DO BETTER AT SHOWING THE RELEVANT AD, THE RIGHT MESSAGE TO THE RIGHT PERSON AT THE RIGHT TIME AND THAT'S A PRETTY BIG OPPORTUNITY WITH EVERYONE WALKING AROUND WITH THEIR MOBILE PHONE ALL DAY.
BOORSTIN: YOU'VE BEEN MAKING A BIG PUSH FOR VIDEO, VIDEO CONTENT AND ALSO VIDEO ADVERTISING. WHAT CAN YOU TELL US ABOUT HOW THAT'S GOING AND HOW MUCH OF YOUR AD REVENUE IS COMING FROM VIDEO AND WILL IN THE FUTURE?
SANDBERG: WE DON'T BREAK OUT REVENUE BY PRODUCT, BUT WE DO HAVE BIG VIDEO NEWS THIS QUARTER WHICH IS THAT WE JUST HIT 3 BILLION VIDEO VIEWS PER DAY ON FACEBOOK. WHICH MEANS THAT CONSUMER USE OF VIDEO IS EXPLODING. FROM THE ADVERTISING SIDE, THAT GIVES US AN OPPORTUNITY TO DO MORE MONETIZATION BECAUSE OUR AD PRODUCTS ALWAYS FOLLOW OUR CONSUMER PRODUCTS. WHEN CONSUMERS DO MORE VIDEO, WE HAVE THE ABILITY TO SHOW MORE VIDEO ADS. VIDEO ADS ARE REALLY EXCITING FOR MARKETERS BECAUSE IT IS A FORMAT THEY ARE USED TO AND THEY ARE VERY EMOTIONALLY RESONANT. SO WE ARE SEEING PRETTY BROAD ADOPTION OF VIDEO, WE ARE STILL GOING TO MOVE SLOWLY GOING FORWARD, BUT WE THINK THERE IS A LOT MORE WE CAN DO TO BRING VIDEO ADS TO PEOPLE ALL OVER THE WORLD.
BOORSTIN: HOW MUCH MORE HIGH MARGIN ARE VIDEO ADS THAN YOUR OTHER ADS?
SANDBERG: WELL, WE DON'T RELEASE MARGIN BY PRODUCT EITHER, BUT WE ARE EXCITED ABOUT WHAT VIDEO DOES IN TERMS OF ITS CONVERSION. CONVERSION FOR MARKETERS. WE ALSO THINK THE FORMAT ITSELF REALLY WORKS. YOU KNOW, IF YOU THINK BACK EVEN A YEAR AGO ON FACEBOOK, MOST PEOPLE DIDN'T SEE VIDEOS ON FACEBOOK. AND NOW, VIDEO IS AN INCREASINGLY ACCEPTED AND I THINK FUN PART OF NEWS FEED. AND THE SAME THING IS HAPPENING WITH VIDEO ADS. AND I THINK WE ARE SEEING MARKETERS BRING REAL CREATIVITY AND STORY TELLING TO THE FACEBOOK EXPERIENCE WITH VIDEO ADS.
BOORSTIN: ANOTHER NEW AREA FOR FACEBOOK IS INSTAGRAM – FOR ADS ON FACEBOOK WITH INSTAGRAM YOU HAVE BEEN SLOWLY ROLLING OUT ADS ON THE INSTAGRAM APP. WHAT CAN YOU TELL US ABOUT THE SUCCESS THERE? ARE YOU READY TO BREAK OUT THOSE RESULTS?
SANDBERG: WE ARE EXCITED ABOUT INSTAGRAM. STILL DON'T BREAK OUT REVENUE BY PRODUCT, BUT EXCITEMENT AND ENGAGEMENT AROUND INSTAGRAM IS REALLY GROWING. INSTAGRAM IS A REALLY SPECIAL COMMUNITY WITH VERY VISUALLY COMPELLING IMAGES THAT GET PEOPLE REALLY ENGAGED. WE HAD A REALLY INTERESTING CASE STUDY RECENTLY WITH MCDONALD'S IN AUSTRALIA THIS SUMMER. THEY DID AN INSTAGRAM AD CAMPAIGNED THEY CALLED SIGNS OF SUMMER. AND WHAT IS INTERESTING ABOUT IT IS THAT THEY WERE JUST PICTURES AND THEY HAD LITTLE TO NO BRANDING OR PRODUCT, BUT THEY JUST INCLUDED THE KIND OF ICONIC MCDONALD'S RED AND YELLOW COLORS. AND THAT SHOWED A 46% POINT LIFT IN AD RECALL AND A 4 POINT LIFT IN BRAND FAVORABILITY. AND THAT IS PRETTY INTERESTING BECAUSE IT SHOWS HOW THESE NEW FORMATS LIKE INSTAGRAM GIVE US NEW AND CREATIVE WAYS TO BUILD BRANDS IN WAYS THAT HAVEN'T BEEN DONE BEFORE. BUT EVEN THAT VERY SUBTLE BRANDING CAN REALLY WORK AND I THINK PEOPLE ARE EXCITED TO TAKE ADVANTAGE OF THAT OPPORTUNITY.
BOORSTIN: AND I KNOW WE ARE ALMOST OUT OF TIME HERE, BUT JUST A QUICK FINAL QUESTION. OBVIOUSLY, FACEBOOK IS INVESTING HEAVILY IN R&D AS WE SAW WITH YOUR CAPEX NUMBERS THIS QUARTER AND ALSO PROJECTIONS FOR THE YEAR. WHAT ARE THE FACTORS THAT ARE GOING TO BE DRIVING GROWTH IN 2015? WHAT ARE YOU INVESTING IN TO DRIVE GROWTH AND WILL WE SEE PERHAPS MORE APPS? EITHER ACQUISITIONS OR LAUNCHES LIKE YOU HAVE RECENTLY?
SANDBERG: YOU'LL SEE FROM US CONTINUED INVESTMENT IN OUR CONSUMER PRODUCTS. WE ARE INVESTING IN THE FACEBOOK BLUE APP, WE ARE INVESTING IN WHAT'S APP, WE ARE INVESTING IN MESSENGER, WE ARE INVESTING IN OCULUS, WE ARE INVESTING IN OUR FACEBOOK CREATIVE LAB. SMALLER PRODUCTS AT LOWER RATES. YOU'LL CONTINUE TO SEE US INVESTING IN ADS AND AD TECHNOLOGY. WE JUST RE-ROLLED OUT ATLAS, WHICH WE ARE PRETTY EXCITED ABOUT BECAUSE IT BRINGS REAL MEASUREMENT AND REAL RESULTS TO MARKETERS, AS WELL AS THINGS LIKE OUR FACEBOOK AUDIENCE NETWORK AND LIVE RAIL. AND YOU WILL SEE US CONTINUE TO INVEST IN GROWING OUR TEAMS AROUND THE WORLD BECAUSE WE HAVE MORE USERS, MORE PARTNERS, MORE MARKETERS TO WORK WITH AND WE ARE EXCITED TO DO ALL OF THAT.
BOORSTIN: CERTAINLY A BIG INVESTMENT YEAR FOR FACEBOOK. SHERYL SANDBERG, THANK YOU SO MUCH FOR JOINING US ON THE HEELS OF THESE BETTER THAN EXPECTED RESULTS AND AHEAD OF YOUR EARNINGS CALL, WHICH IS COMING UP IN ABOUT HALF AN HOUR. WE REALLY APPRECIATE YOU TAKING THE TIME TO TALK TO US.
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Paul Sakuma/AP