Good afternoon. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the Facebook Fourth Quarter and Full-Year 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there’ll 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 fourth quarter and full-year 2020 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 and in our quarterly report on Form 10-Q 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.

All right. Thanks everyone for joining us today. I hope you are all staying healthy and well. Our community and business had a strong end of the year. As COVID continued to keep many of us apart and at home, people and businesses continued relying on our services to stay in touch and create economic opportunities. 2.6 billion people now use one or more of our apps each day; and more than 200 million businesses, mostly small businesses use our free tools to reach customers. Those numbers give a sense of scale, but some of the stories we hear show the impact. Groups have formed where COVID long-haulers are helping each other through the scary experience where there’s not much else to turn to. Teachers are sending class assignments to students through WhatsApp. Local bookstores and coffee shops are using Instagram to let customers know they’re open for curbside pickup. We saw people come together to raise $1.8 billion for nonprofits and personal causes through our fundraising tools last year, including $175 million for COVID-related causes alone. I’m proud of the role that our services played in helping people support each other during what has been such a hard time. Now, I’ve spent a fair amount of time on recent earnings calls talking about our election integrity efforts. So, I’m not going to discuss them at length today, but I do want to call out that according to our estimates, we easily surpassed our goal to help 4 million people register to vote as part of the largest effort to distribute authoritative voting information in recent history. I want to thank everyone involved in our teams and outside, involved with that effort. So, today, I’m going to focus on our product work, and specifically I’m going to focus on four themes that I’m excited about for the year ahead: communities; private messaging; commerce tools for small businesses; and building the next computing platform. Let’s start with communities. Now, I think that helping people build communities is one of the most important things that we can do. Our social fabric is made of multiple different layers through which we get our social support. First, we have friends and family, and that’s the most personal layer. Then, we have communities we’re a part of where we feel a sense of purpose and belonging, explore interests, develop skills, grow as individuals, and then meet new people. Finally, there’s the safety net that society and government provide. In many parts of the world, there’s been an unfortunate decline in community participation over the last several decades. It’s that second layer, and this isn’t something that we can solve alone, but I think we can help. Now that we’ve helped billions of people stay connected with friends and family, helping everyone find and participate in communities that are meaningful to them has been our next goal. We even updated our mission a few years ago to reflect this, making it, give people the power to build community and bring the world closer together. Today, more than 600 million people are now members of a group on Facebook that they consider to be meaningful in their lives. This has grown steadily over time. I hear all the time from people who are in parenting groups that there are major resources to navigate raising kids or from people who found a group that shares the same health condition, and they can lean on that community for knowledge and support, or from people who’ve moved to a new place and joined local groups to meet people and get situated. Our product focus now is to develop this community infrastructure beyond feeds and message boards to help people build and run full self-sustaining community institutions. We’re building tools to help groups get things done together and provide support for people that span messaging, video chat, and even communities’ own websites. We’re exploring different ways to raise funds, including donations, merchandise, and membership fees to help group leaders support their communities’ operations and hire people for different roles that are needed to build sustainable communities for the long term. As we continue to focus on this, we need to make sure that the communities that people connect with are healthy and positive. That’s something that we’ve been focused on for a while now. One way, of course, that we do this is by taking down groups that break our rules against things like violence or hate speech. In September, we shared that we had removed more than 1 million groups in the last year alone. But there are also a lot of groups that we may not want to encourage people to join even if they don’t violate our policies. For example, we stopped recommending civic and political groups in the U.S. ahead of the elections. We’re continuing to fine tune how this works, but now we plan to keep civic and political groups out of recommendations for the long term, and we plan to extend that policy globally. This is a continuation of work we’ve been doing for a while to turn down the temperature and discourage divisive conversation and communities. Along these same lines, we’re also currently considering steps that we can take to reduce the amount of political content in News Feed as well. We’re still working through exactly what the best ways to do this are. Of course, we’re still going to enable people to engage in political groups and discussions, if they want to. These can often be important and helpful, and there can be ways that people organize grassroots movements, speak out against injustice, or learn from people with different perspectives. We want these discussions to be able to keep happening, but one of the top pieces of feedback that we are hearing from our community right now is that people don’t want politics and fighting to take over their experience on our services. One theme for this year is that we’re going to continue to focus on helping millions more people participate in healthy communities, and we’re going to focus even more on being a force for bringing people closer together. Next, let’s talk about private messaging. As we’ve discussed before, while people enjoy connecting with friends and communities in the digital equivalent of a town square in apps like Facebook and Instagram, the fastest growing social experiences are about connecting privately in the digital equivalent of a living room in services like WhatsApp and Messenger. That’s why we kicked off a big effort a couple of years ago to re-imagine what a modern social platform would look like if you build it from the bottom up to be privacy-first, and we identified several core principles. A private social platform should be built around the most intimate interactions that we have, and that’s one-on-one conversation. The most important aspect of privacy and security is that your conversations should stay between you. That means that your conversations should always be end-to-end encrypted and they should disappear when you’re done with them. Safety and reducing spam matter too, which means that we should maintain a minimum amount of metadata to build sophisticated tools to stop bad actors using these services. You should have choice over what services you use. We should make messaging interoperable across our apps. Finally, we should only store people’s data in countries where we know we can keep it secure, and we should continue opposing data localization in countries with weak records on human rights or privacy. I think that these are the privacy principles that matter most to people. First and foremost, people care if their conversations stay private, but after that, people also care about safety and convenience too. From this perspective, WhatsApp and the direction that we’re heading in with Messenger are the best private social apps available. We have a lot of competitors who make claims about privacy that are often misleading. Apple recently released so-called Nutrition Labels, which focus largely on metadata that apps collect, rather than the privacy and security of people’s actual messages. However, iMessage stores non-end-to-end encrypted backups of your messages by default, unless you disable iCloud. So, Apple and governments have the ability to access most people’s messages. When it comes to what matters most—protecting people's messages—I think WhatsApp is clearly superior. I try to use these earnings calls to discuss aspects of business strategies that I think are important for investors to understand. I want to highlight that we increasingly see Apple as one of our biggest competitors. iMessage is a key linchpin of their ecosystem; it comes pre-installed on every iPhone and they’ve prioritized it with private APIs and permissions, which is why iMessage is the most used messaging service in the U.S. We are also seeing Apple’s business depend more on gaining share in apps and services against us and other developers. Apple has every incentive to use their dominant platform position to interfere with how our apps and other apps work, which they regularly do to favor their own. This impacts the growth of millions of businesses around the world, including with the upcoming iOS 14 changes, where many small businesses will no longer be able to reach their customers with targeted ads. Apple may claim they’re doing this to help people, but the moves clearly track their competitive interests. I think this dynamic is important for people to understand because we and others are going to be up against this for the foreseeable future. Our messaging services continue growing, but it is an uphill battle, and our services need to be better as private social platforms to succeed. To ensure that we remain the best, a couple of years ago, we kicked off a number of long-term efforts that have started shipping recently, and more of these projects around strengthening encryption, ephemerality, interoperability, and offering other tools will be shipping throughout this year. So, now, let’s talk about commerce. Our goal here is to give every individual, entrepreneur, and small business access to the same kinds of tools that historically only the big companies have had access to. We’ve always cared about this, but the pandemic has made it more urgent. It used to be that only large companies could afford to have analytics or targeted advertising capacity to reach their customers. It was expensive to build these capabilities and often required building teams and storing large amounts of data in-house—which most small businesses cannot do. One of the things that I’m most proud of is that we build the tools to help small businesses often for free. When you hear people say that we hold a lot of data, that’s because hundreds of millions of businesses that would otherwise have had to do this individually and would have had no easy way of doing so are now using our services to help them reach customers. When you hear people say that we’re connecting data from lots of sources, that’s to help small businesses reach customers more efficiently. Big companies often do this themselves, but small businesses cannot, a lot of times. We do this for them. When you hear people argue that we shouldn’t be doing these things or that we should go back to the old days of untargeted television ads, I think that what they’re really arguing for is a regression where only the largest companies have this capacity, small businesses are severely disadvantaged, and competition is diminished. With our commerce tools, we’ve made it so that a business can set up a shop once, and they will immediately have an online storefront in both Facebook and Instagram, and eventually on WhatsApp and Messenger as well. We recently expanded Checkout to all U.S. businesses, making the process of buying a lot more seamless. As the lockdowns have continued, we have seen more small businesses and creators also use Paid Online Events as a way to make money. WhatsApp is also an important part of our strategy here. More than 175 million people message a WhatsApp business account every day, and we’re building new features to make it even easier to transact with businesses in the app. We introduced Carts which lets people grab catalogs, select multiple products, and send the order as a message to a business. The more people that interact with businesses, the better tools we’re going to need to provide for businesses to help them support their customers. Many businesses need more than a phone to manage their customer service. So, we’re building tools to let businesses store and manage their WhatsApp chats using our secure hosting infrastructure if they choose. We’re updating WhatsApp’s privacy policy in terms of service to reflect these optional experiences. This update does not change the privacy of anyone’s messages with friends and family. All of these messages are end-to-end encrypted, which means we can’t see or hear what you say, and we never will unless the person that you message chooses to share it. Business messages will only be hosted on our infrastructure if the business chooses to do so. We want everyone to know the lengths we go to protect your private messages. We are moving the date of this update back to give everyone time to understand what the update means. Finally, let’s discuss our work building the next computing platform. This is one of the areas that I’m most excited about as we head into 2021. If you look at the history of computing, every 15 years or so, a new major platform emerges that integrates technology more naturally and ubiquitously into our lives, starting with mainframes and PCs and browser-based computing and then mobile. I believe that the next logical step here is an immersive computing platform that delivers this magical sense of presence that you’re really there with another person or in another place. Our phones can’t deliver this and neither can any other technology that has come before it. This is going to unlock the types of social experiences that I dreamed about building since I was a kid, and it’s what we’re building towards at Facebook Reality Labs. We launched Quest 2 in October and it is on track to be the first mainstream virtual reality headset. We designed it so that anyone could jump in with the best and most immersive experience out there, and at a price that makes it accessible as many people as possible. I think Facebook has done more than any other company to help bring virtual reality to the mainstream. It's been great to see so many people embrace this, especially this year, during the pandemic. We’re seeing people use it to play games with friends when they can’t be together in person, do workouts in their living room, or meet with colleagues while they’re working from home. There are a lot of reasons the Quest 2 was one of the hot holiday gifts this year. We’re also seeing a growing ecosystem of developers building amazing new experiences for the platform. Right now, more than 60 Oculus developers are generating revenue in the millions, and that’s nearly twice as many as a few months ago. In previous quarters, I’ve talked about our long-term future goals when it comes to virtual reality, but I think this quarter’s results show that this future is here. Augmented reality glasses are going to be a key part of this vision too. We’re still working on some of the foundational technology to underpin these, and the ultimate product is still some years away. But this year, we’re excited to deliver a first glimpse of what it will be when we launch our first pair of smart glasses from Ray-Ban, in partnership with Luxottica. During the pandemic, we’ve also seen that Portal has proven to be a great way for people to stay connected, especially over the holiday, as families had to celebrate apart. This year, we’re focused on expanding the role of Portal and virtual reality presence into the workplace, bringing more features that can improve remote presence, collaboration, and productivity. 2021 has a lot of unknowns. We don’t know when vaccines are going to be widely available, when our teams will be back in the office, or when our lives are going to start feeling normal again. What I do know is that we are going to keep investing in and innovating on the big themes that I discussed here, in order to put more power in the hands of people and small businesses. I personally believe that technology can unlock progress and opportunity, and the full story of the internet has not yet been written. That’s why I’m hopeful for the year ahead and grateful that you’re all on this journey with us. And now, here is Sheryl to talk about our business.

Thanks, Mark, and hi, everyone. Like Mark, I hope everyone is safe and healthy. This was a strong quarter for our business as the acceleration of online commerce we’ve seen during the pandemic continued into the holiday season. Our total revenue for Q4 was $28.1 billion, which is a 33% year-over-year increase, our fastest growth rate in over two years. After a really difficult year for so many businesses, this holiday period was important. While many businesses are still struggling, the good news is that Q4 was stronger than expected for retail. In the U.S., the National Retail Federation reported that sales in November and December went up 8% year-over-year and online sales were up 24%. This holiday period was also longer compared to previous years; advertisers started spending earlier and sustained that spend well beyond Black Friday and Cyber Monday. We saw robust performance across all regions as well as an improvement in brand advertising. The strength of our Q4 performance is a result of years of investments in free and paid tools to help businesses succeed online. Even before the pandemic, businesses were going digital, but COVID made this a necessity. Almost overnight, businesses had to create digital storefronts, figure out how to take online orders, and find new ways to reach their customers. For many small companies, these steps or even just setting up a website or a mobile app can be difficult and expensive. Our free and paid tools help solve these problems for businesses around the world. With so many businesses struggling when the pandemic hit, we asked our teams what do businesses need and how can we help? First, they need the tools to get their business up and running online. So, what can we do to make ours simpler and more effective? Can we build new tools to help them? Second, they need the digital skills and knowhow to succeed. So, how can we help more businesses with training and resources? And third, they need their voices to be heard. Can we use our scale to amplify their voices and tell their stories? We’ve been asking these questions throughout the last year and into Q4. On the first, we accelerated our work on tools to make it easier for people to find brands and products they love and for businesses to manage their online presence and connect with customers. Mark talked about some of the new tools we’ve launched like Shops and Paid Online Events. In the fall, we also rolled out Facebook Business Suite, a new interface to help businesses manage their pages or profiles across our apps. We also continued to invest in making our products as effective as possible so businesses can get more value for every dollar they spend. Personalized ads are privacy-safe and help businesses reach customers where they are, which has been more important than ever during the pandemic. One notable area of progress this past year was in Stories ads, which have become more effective for direct response advertisers. One business that used Stories ads is Carlota Flower Lab, a florist in Los Reyes, Mexico. Before COVID, they made 70% of their revenue from face-to-face workshops. When the pandemic hit, founder Paola Mendoza had to get creative. She used personalized ads on Instagram to reach new audiences and even found her first international customers with campaigns targeting California and Texas. One campaign for Dia de los Muertos in November led to a 24 times return on ad spend, helping Paola triple her annual revenue in 2020, despite COVID. On the second, resources and training, we did some big things in 2020. We created a business resource hub, a one-stop shop for resources and training for small businesses that we’ve continued to build out through the end of the year. We committed to reach 1 million members of the black community and 1 million members of the Latinx and Hispanic communities in the U.S. with free digital skills training through our Elevate program by 2023. We reimagined our Boost with Facebook events to reach businesses virtually, with 100 million people tuning in throughout the year. This included our 12-week Season of Support to help businesses across 16 countries prepare for the holidays. On the third, a great example of how we amplified the voices of our businesses in Q4 is our BuyBlack Friday campaign, one of my favorite campaigns ever. In the U.S., black-owned businesses closed at twice the rate of others after the start of the pandemic, so we wanted to help people shop with them over the holidays. We created ways for people to find black businesses in their local area, a gift guide featuring products from black businesses across the U.S., and even a BuyBlack Friday show on Facebook Live that was seen by 15 million people. One of the small businesses we featured is a vegan skincare brand called Redoux from New York City. Its founder Asia Grant appeared on the BuyBlack Friday show, and that became one of her most successful sales days ever. The campaign resulted in record revenue and web traffic for her, and she was even able to hire more people, something that’s so important given current unemployment rates. Business owners like Asia and Paola have worked hard to adapt and grow online, but lots of businesses will continue to struggle in 2021. We’re going to keep listening to them and building on what we did last year. That means improving our products and tools to help businesses seamlessly manage their online presence, advertise across our apps and communicate with customers through business messaging. It means making more training available through programs like She Means Business for women and Elevate for diverse communities. And it means finding more ways to amplify their voices, whether it’s sharing the stories of small businesses worried that Apple’s iOS 14 changes will hurt their ability to reach customers or showcasing small businesses in gift guides and products, and like businesses nearby. I want to close by saying how grateful I am to all the businesses around the world who work with us. Your partnership helps us build the tools you need to continue to grow and hire. As always, I’m grateful to our incredible teams who have done so much to help businesses survive this difficult year, including coming up with great ideas like BuyBlack Friday. I hope that 2021 is a better year for everyone. Now, here’s Dave.

Thanks, Sheryl, and good afternoon, everyone. Q4 was a strong quarter, capping off a solid year for our business as full year 2020 revenue grew 22% to $86 billion. We have been encouraged to see improved demand for our ads during the second half of the year after facing significant headwinds at the onset of the pandemic. Our results reflect the ongoing strength in the digital economy and the value we’re providing to millions of businesses who use our services to reach consumers and generate sales. Let’s begin with our community metrics. In December, we estimate that approximately 2.6 billion people used at least one of our services on a daily basis and approximately 3.3 billion people used at least one on a monthly basis. Facebook daily active users reached 1.84 billion, up 11% or 188 million compared to last year. DAUs represented approximately 66% of the 2.8 billion monthly active users in December. MAUs grew 299 million or 12% compared to last year. Consistent with our outlook, U.S. and Canada DAU declined 1 million sequentially as usage continued to normalize from peak COVID levels experienced earlier in the year. Turning to the financials, all comparisons are on a year-over-year basis unless otherwise noted. Q4 total revenue was $28.1 billion, up 33% or 32% on a constant currency basis. We benefited from a currency tailwind, and had foreign exchange rates remained constant with Q4 of last year, total revenue would have been $339 million lower. Q4 ad revenue was $27.2 billion, up 31% or 30% on a constant currency basis. The growth in advertising revenue was largely driven by a strong holiday shopping season for retail, benefiting from the ongoing shift to online commerce. On a user geography basis, ad revenue was strongest in Europe, which grew 35% and benefited from currency tailwinds; U.S. and Canada grew 31%; Asia Pacific grew 29%. Rest of world growth improved to 25% but continues to be significantly impacted by currency headwinds. In Q4, the total number of ad impressions served across our services increased 25%, and the average price per ad increased 5%. Impression growth was driven by both Facebook and Instagram. The increase in the average price per ad was primarily driven by Facebook mobile feed as well as pricing improvement in Instagram Stories. Other revenue was $885 million, up 156% due to strong Quest 2 holiday sales. We’ve been encouraged by the positive reception of Quest 2 since its October launch. Turning now to expenses. Q4 total expenses were $15.3 billion, up 25% compared to last year. In terms of specific line items, cost of revenue increased 49%, driven primarily by hardware costs related to Quest 2 sales, core infrastructure investments, and payments to partners. R&D increased 34%, driven primarily by hiring and investments in core products as well as our consumer hardware efforts. Marketing and sales increased 8%, driven by hiring and marketing spend. Lastly, G&A expenses decreased 13% as we lapped charges related to the BIPA legal settlement recorded in the fourth quarter of 2019. In the past year, we added a record 13,600 net employees and reached our goal of adding 10,000 employees in tech and product roles. We ended the year with over 58,600 full-time employees, up 30% compared to last year. We continue to be pleased with our ability to recruit, onboard, and retain talent in this environment. Fourth quarter operating income was $12.8 billion, representing a 46% operating margin. Our tax rate was 14%. Net income was $11.2 billion or $3.88 per share. Capital expenditures were $4.8 billion, driven by investments in data centers, servers, office facilities, and network infrastructure. Free cash flow was $9.2 billion, and we ended the quarter with $62 billion in cash and marketable securities. For the full year, we repurchased $6.3 billion of our Class A common stock and had $8.6 billion remaining in our prior authorization as of December 31st. Today, we announced a $25 billion increase in our stock repurchase authorization. Turning now to the outlook. We continue to face significant uncertainty as we manage through a number of crosscurrents in 2021. We believe our business has benefited from two broad economic trends playing out during the pandemic. The first is the ongoing shift to online commerce; the second is the shift in consumer demand towards products and away from services. We believe these shifts provided a tailwind to our advertising business in the second half of 2020, given our strength in product verticals sold via online commerce and our lower exposure to service verticals like travel. Looking forward, a moderation or reversal in one or both of these trends could serve as a headwind to our advertising revenue growth. At the same time, in the first half of 2021, we will be lapping a period of growth that was negatively impacted by reduced advertising demand during the early stages of the pandemic. As a result, we expect year-over-year growth rates in total revenue to remain stable or modestly accelerate sequentially in the first and second quarters of 2021. In the second half of the year, we will lap periods of increasingly strong growth, which will significantly pressure year-over-year growth rates. We also expect to face more significant ad targeting headwinds in 2021. This includes the impact of platform changes, notably iOS 14, as well as the evolving regulatory landscape. While the timing of the iOS 14 changes remains uncertain, we expect to see an impact beginning late in the first quarter. There is also continuing uncertainty around the viability of transatlantic data transfers in light of recent European regulatory developments. Like other companies in our industry, we are closely monitoring the potential impact on our European operations as these developments progress. Turning now to expenses. We expect 2021 total expenses to be in the range of $68 billion to $73 billion, unchanged from our prior outlook. This is driven by investments in technical and product talent as well as continued growth in infrastructure costs. We continue to expect 2021 capital expenditures to be in the range of $21 billion to $23 billion, driven by data centers, servers, network infrastructure, and office facilities. Our outlook includes spending that was delayed from 2020 due to the impact of the pandemic on our construction efforts. Turning now to tax. We continue to expect our full year 2021 tax rates to be in the high teens. In closing, 2020 was a unique operating environment that introduced a number of unforeseen challenges. We’ve been pleased with our team’s ability to adapt to maintain the reliability of our services, deliver new products and experiences, and support the millions of businesses who use our platforms to reach consumers. With that, Mike, let’s open up the call for questions.

Your first question comes from the line of Brian Nowak from Morgan Stanley.

Thanks for taking my question. I have two. The first one, for either Mark or Sheryl, I appreciate the color on commerce. I was curious as for any encouraging, quantifiable signposts or learnings that you’ve seen so far in Instagram Shopping that sort of gives you confidence you’re making progress in building out this opportunity. The second one, Dave, I appreciate the comment on the forward outlook and the outlook commentary. I guess, the question is, you sort of talked about this shift to consumer expenditure toward products away from services that could potentially be a headwind in the back half as it reverses. I think last quarter, you mentioned you had 10 million advertisers. So, maybe talk to us about sort of some of the segments of advertisers you think you’re missing, and what initiatives do you have in place to sort of broaden the advertiser base to bring more services on the platform. Thanks.

I can take the first. With Instagram Shopping, we launched a new shop tab on Instagram in Q4, and this is built on other shopping efforts we’ve had. We see this as an overall part of our commerce effort. We’ve always been, I think, a great place for people to discover new products and services, but we are very interested in taking people all the way down that funnel from discovery to purchase, to finding products and services to checking out as well. Our shopping efforts are part of that. We’re seeing a nice uptick. It’s still early days, but we think businesses are having a good experience and people are having a good experience. As always, with our ad products and with our commerce products, we want to provide a great experience to the end user so that they can find the things they’re looking for.

Hey Brian, it’s Dave. Yes, the data that we’ve looked at indicates that when you consider data from the U.S. BEA, it showed that in Q3, while the services consumer spend was still down year over year, spending on goods surged to record levels, the highest in 15 years. We don’t have the results for Q4, but we expect that trend to have continued. If you look at the balance of our business, it tends to skew more towards products relative to the overall GDP or overall consumer spend in the U.S. We just think we’re overall exposed a little bit more to products. We continue to invest to improve our exposure and services like travel. Our expectation would be in 2021, we’ll continue to maintain a similar skew towards products as we’ve had in the past, and will continue to make investments to make our ad products more relevant for services as well.

Your next question comes from the line of Doug Anmuth from JP Morgan.

For Dave and Sheryl, we know you mentioned significant ad targeting headwinds, but has your view on IDFA changed at all over the past few months? Just curious how you’re thinking about Facebook’s ability now to offset some of the impact just through things like limited login mode and new APIs and other conversion tools and data. If you could also talk a little bit more about how you’re thinking about the impact across fan and then the core products, thanks.

Doug, I’ll take that. So, I don’t think our outlook has changed in any significant way on iOS 14. We continue to believe that that will be a headwind in the ads business. It’s not just limited to IDFA; we’re going to have to provide a prompt asking people for permission to use third-party data to deliver personalized ads. That’s going to be true whether you’re using IDFA or not, and we expect there to be high opt-out rates related to that, which has factored into our outlook. We expect that rollout sometime in late Q1. The timing is uncertain, and Apple hasn’t given clarity. In terms of mitigations, obviously, this is a platform-wide change, impacting everyone, and that will mitigate the impact to some extent. Over time, we hope to help businesses by providing more on-site conversion opportunities through initiatives like shops and also click-to-messaging ads. Regarding the audience network products, this change will significantly impact audience network on iOS.

Your next question comes from the line of Eric Sheridan from UBS.

Maybe two, if I can. Mark, just coming back to your comments, what do you see as some of the key investments either on the hardware side or the content and application side to unlock the opportunity based on what you recently saw with the success of Oculus in the holiday period, where there’s a piece of hardware obviously that’s sold through quite well? And how do you think about aligning investments against the opportunity in the coming years? Then, if it’s for Sheryl or Dave, could I follow up a little about the language you’re using about the back half of the year? Is there any sense you can give us quantitatively about how to think about some of the tougher comps you’ll see as we move through ‘21 versus identifying the degree or severity of different outcomes from some of the headwinds?

I can take the first one. When we started working on virtual and augmented reality, we laid out a path where we knew that virtual reality would be practical to build first. We view that it’s all part of one continuous ecosystem for spatial, immersive computing, and presence. The key things we’re trying to do with VR now, I believe, Quest 2 is the first mainstream virtual reality product that is doing quite well, and I’m really proud of what we’ve achieved there. The goal is to keep shipping content and titles, working with developers, and shipping new capabilities to the device. Last year, we shipped the ability to do hand tracking, which no one expected. It made the device better and increased its value. We’re continuing to work on new hardware as well. The new hardware will fit the same platform; content that works on Quest 2 should be forward-compatible, building a larger installed base around virtual reality headsets. At the same time, we’re building towards a future with foundational technology investments to provide augmented reality glasses that will support a lot of the same content, taking advantage of many foundational investments we’ve made. This continues to be a long-term investment. I think it’s important both for the vision of what we want to do and strategically to have control over our destiny regarding the operating systems and platforms that all our services operate on.

Yes, Eric, it’s Dave. Coming back to your question, we had a strong Q4 this year driven by pandemic-related shifts, which are factors for growth in the current quarter. A couple of factors that drove it. We’ve seen strengths from both small and medium-sized businesses come back in strength, and the majority of our advertisers following in Q4. We’re looking forward; we’ll be facing tougher comparisons in the back half of the year, specifically a lot of the pandemic factors might revert and lead to additional challenges in growth trajectory overall.

Your next question comes from the line of Justin Post from Bank of America.

Great, thank you. I guess, I’ll ask about regulation. I know it’s a tough topic. First, Mark, in your prepared remarks, you elevated a little bit of competition with Apple. Is there anything going on with iOS 14 besides IDFA that maybe puts you in more direct competition with Apple? Secondly, obviously, the FTC filed their case since the last earnings call; maybe just open forum. Any thoughts on that that you’re able to share?

In terms of the competition with Apple specifically, I laid out three or four product focus areas. With the exception of the work we’re doing on communities, which I think is quite separate from theirs, the other three areas have significant competitive overlap with Apple's. In messaging, iMessage is the most popular service in the U.S. because they pre-install it and give their app several advantages that other apps don’t have. In commerce and supporting small businesses, you have some of the iOS 14 changes that we think are going to be very problematic, especially for small businesses. Longer-term, as we move towards building the next computing platform, we expect to see Apple as more of a competitor there as well. We face many competitors; there are a lot in the core social app work that we do.

Well, there’s a question about the FTC. We don’t have anything we necessarily are commenting on at this point.

Nothing on the case. On regulation overall, I think it would be helpful for us and the internet sector overall to have clearer rules and expectations on social issues, especially around how content should be handled or how elections should be managed, and what privacy norms governments want in place. These questions have trade-offs. Content and elections have trade-offs between free expression and safety and all social equities, which are very important. It’s difficult for a private company to balance those well. We believe it’s much better to have clearer guidance and rules for the internet, and that is something we will advocate for moving forward.

Your last question comes from the line of John Blackledge from Cowen.

Great. Thanks. Two questions. Mark, on community, could you provide further details on layering more services for Facebook groups, and expectation for uptake of those new services? Could community evolve as a meaningful monetization driver in the coming years? And then, on IDFA, maybe for Dave or Sheryl, how do you think advertisers are prepared for the changes? Will the long-tail advertisers be more impacted than the larger, more sophisticated advertisers? Thanks.

I can speak to the first point. For the business, we don’t look at communities separately from friends and family. They are both types of content that show up in news feeds that people interact with. I suspect it’s probably already a meaningful driver of the business and the value people get from our services today. Providing a spectrum of different types of communities on Facebook is important. Right now, there's a backbone to connect groups, there's a feed, and a method of messaging. I believe we can help these communities organize more effectively online, giving them the tools for messaging, video chat, etc. If we help organizations build community institutions online, that could be a very big contribution.

To your second question, we think it’s important and take it seriously. Small businesses are reliant on personalized ads, using data to reach customers interested in their products and services. Big businesses can buy ads targeting the entire country, but small businesses cannot. They are worried they won’t be able to advertise effectively with any personalized ads disappearing. We predict that small businesses could lose 60% of website sales without personalized ads. This change will impact not just advertisers but also developers and businesses relying on free services.

Great. Thank you, everybody, 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 your lines.