5 things to watch in Facebook's earnings report

Investors will look closely at mobile revenue as more and more users are on the go.

By Forbes Digital Apr 30, 2013 2:20PM
 Man with laptop copyright Image Source, SuperStockBy Tomio Geron 

Facebook (FB) is preparing to release first-quarter earnings after the markets close Wednesday.

The social network, which went public last year, has been busy rolling out new products. Recently it announced Facebook Home, a new service for Android that turns the devices into Facebook-focused phones.

Here are some metrics that investors and analysts will be watching closely. Earnings should be released just after 4pm EST Wednesday.

1. Wall Street expectations
Facebook is expected to post earnings of 13 cents per share on revenue of $1.44 billion, for growth of 30% and 36%, respectively from the year-ago period. Last quarter, Facebook reported earnings of 17 cents on revenue of $1.585 billion, beating expectations of 15 cents a share on revenue of $1.53 billion. Revenue was up 40% from $1.13 bilion in the year-ago period. In the prior quarter (Q3 2012), revenue was up 32% year-over-year.

For the second quarter of 2013, analysts expect earnings of 14 cents per share on revenue of $1.6 billion.

2. It's all about mobile -- again
Investors again will be closely watching the social network's mobile numbers, particularly its mobile advertising revenue. That's a key number as users increasingly access Facebook from mobile devices. Investors are looking to see how Facebook is monetizing on these devices.

Sterne Agee analyst Arvind Bhatia expects Facebook to post mobile ad revenue of $360 million in the quarter, which is up 18% sequentially. Bhatia estimates $4 million per day in mobile ad dollars, up from $3.4 million in the prior quarter. Still, Bhatia also believes that Wall Street may be disappointed with less than $380 million. For mobile users, Bhatia expects 65% of Facebook users have accessed Facebook from a mobile device, up from 64% last quarter.

In the prior (fourth) quarter, mobile monthly active users were 680 million, up 57% from the year ago period. Notably, mobile daily active users were larger than web daily active users for the first time in the fourth quarter. Mobile ad revenue was 23% of total ad revenue.

3. Seasonal monetization effects
Facebook monetization may drop in its Q1 results. But that's normal. Sterne Agee's Bhatia expects average revenue per user of $1.35, which would be up 11% year-over-year but down 12% from the prior quarter. That is a seasonal issue, as Facebook's Q1 ARPU declined 12% sequentially last year as well.

4. International continues to drive user growth
Facebook is still looking for growth, despite its 1 billion-plus users. Bhatia expects 1.093 billion monthly active users, which would be up 21% year-over-year and 4% sequentially. This is down from 25% year-over-year growth in the 4th quarter and 5% sequentially. For engagement, Bhatia expects 642 million daily active users, which would be up 22% year-over-year and 4% sequentially. That would also be down from 28% year-over-year growth and 6% sequential growth in the prior quarter. Both the monthly and daily active user numbers are driven more than 90% by international users.

5. Low payments expectations
Payments have been a question mark for Facebook, as social gaming companies such as Zynga have struggled recently. Facebook has added a Gifts service for sending gifts to friends but that is still new. Bhatia expects $180 million in payments revenue, which would be down 3% year-over-year.

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