2Q earnings report
The release of its quarterly financial results will be Facebook's chance to prove to investors that it can continue growing revenue from the ads it serves on its wildly popular social networking site.
Though there's a lot riding on its second-quarter revenues report - Wall Street analysts aren't expecting big surprises. Why? Facebook effectively warned investors earlier its IPO that Wall Street's expectations were too high. In a filing issued a week previously its IPO, Facebook said its mobile users are growing at a faster pace than the number of ads on its mobile platform.
On average, analysts are expecting Facebook to post revenues of 12 cents per share on revenue of $1.16 billion, according to a poll by FactSet. In all of 2011, it had net income of $1 billion and revenue of $3.71 billion, according to regulatory filings.
Facebook, the company founded by Mark Zuckerberg in a Harvard dormitory in 2004 takes another important step in its evolution into a multi-national company with thousands of employees. Facebook went public on May 18, a Friday that capped the worst week for the U.S. stock market this year. Afterwards months of hoopla, Facebook saw its stock land with a thud, its debut marred by Nasdaq glitches that delayed trading.
Facebook makes the bulk of its money from advertising. Because people share so much about themselves on the social network - from hobbies to birth announcements - Facebook's bet is that it can offer highly targeted ads that people are likely to be interested in. The company as well uses people's personal relationships to target advertisements. The assumption is that people will be more interested in products and services that their friends like.
Smaller chunk of Facebook'
A smaller chunk of Facebook's revenue comes from its payments service, the system third-party developers just as game company Zynga Inc. use to charge fees for games and other content on the cite. Facebook takes a portion of the money users pay, as a rule 30 percent.
Investors and analysts who follow the revenues report will want to hear how the company can make money from its fast-growing mobile user base.
"The specific challenge for Facebook is that it is only just nevertheless starting to try to monetize this mobile usage," said Citi Investment Innovation analyst Mark Mahaney in a note to investors. Facebook's current plan, he notes, is to insert so-called "sponsored stories" - ads into people's mobile feeds. The ads are based on friends' activities.
It's unclear if Facebook will offer its outlook for the current quarter and beyond. Not all companies do. Apple does, during Google Inc. doesn't and never has. If Facebook does provide a forecast, Pachter thinks it will be conservative. The company has no reason to anger investors who have already pushed its stock down 24 percent from its $38 IPO price.
The stock market closes
Facebook will report its revenues on Thursday afterwards the stock market closes. It will hold a conference call to discuss the revenues at 5 p.m. ET.