Will Facebook results surprise or disappoint?

The social network needs to reassure investors with the first earnings report since its troubled IPO.

By Wall St. Cheat Sheet Jul 3, 2012 11:49AM

Facebook (FB) will report earnings for the first time since its IPO on July 26, according to a brief note posted to its investor relations page. The earnings call is scheduled for 2 p.m. Pacific time. No news yet on whether CEO Mark Zuckerberg will participate, or whether more business-focused executives like COO Sheryl Sandberg and CFO David Ebersman will be the ones fielding questions.


The social-networking company drew $1.058 billion in first-quarter revenue this year, with a net income of $205 million. As the company struggles to prove itself following its public debut, it will need to show both those numbers to have increased, as well as a marked improvement in its mobile revenue -- an area it has struggled to monetize on -- if it is to reassure shareholders of its value. Facebook only began showing ads on mobile at the end of February, but has struggled to monetize the increasingly popular medium.


Recent data first published by TechCrunch showed that Sponsored Stories ads in the news feed have the potential to make Facebook's mobile platform a significant revenue stream. Facebook's biggest advertising API partners showed users were 13 times more likely to click mobile Sponsored Stories than its desktop ads, and they earn the social network 11 times more each.


Facebook has been trying to slowly ramp up the presence of these new ads so as not to shock long-time mobile users whose experience has been ad-free for years. The goal will be to find the maximum number of ads it can show before discouraging people from using the platform.


Though they won't be reflected in Facebook's upcoming earnings report, TechCrunch believes Facebook Exchange, hyper-local ad targeting, and off-site Facebook ads should prove lucrative in the future. Facebook Exchange is a retargeting system that lets third-party websites drop cookies on visitors and then target them with ads on Facebook for products they've already been considering. Though not yet confirmed, Facebook is also reportedly working on more accurate local ad targeting that could show users ads related to nearby businesses -- hyper-local ad targeting. 


Finally, Facebook recently began showing ads on Zynga's (ZNGA) new website in a revenue-sharing agreement that could ultimately lead to a lucrative ad network on more third-party sites.


But investors and analysts will have to wait to see how those features pan out. For the upcoming earnings, they'll have to look instead at whether Facebook has been able to at least maintain a steady pace of growth despite the increasing number of users accessing the social network using mobile apps.


Emily Knapp is an editor at Wall St. Cheat Sheet. As of this writing, she did not own a position in any of the aforementioned stocks.


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