Facebook earnings

On Thursday, Facebook Inc (NASDAQ:FB) will undergo another first in its corporate history: it will report its inaugural quarterly earnings report as a public company. After the company’s disappointing May IPO, Wall Street and investors will go through the report with a fine-toothed comb.

Concerns linger over Facebook’s online advertising business and its mobile strategies. Will the report answer some of these questions?

But perhaps of greater interest will be the company’s revenue numbers. In the first quarter, Facebook Inc (NASDAQ:FB)’s revenue fell from the 2011’s fourth quarter while increasing from the previous year, reported the Wall Street Journal.

Since Facebook announced its first quarter numbers on April 23, questions have been rising about the site’s ads. In the days before going public, General Motors Company (NYSE:GM) caused a stir when it yanked $10 million in ads from the site after noting they didn’t drive consumers to purchase more automobiles.

Other challenges faced by the social networking site includes making money from advertising on its mobile site thanks due to its lack of opportunities. According to the Wall Street Journal, from Facebook’s worldwide 900 million users, more than half utilize the mobile site.

What to Look For in the Second Quarter Report

Analysts have estimated second-quarter revenue to come in $1.1 billion on $0.12 per share earnings. By achieving these numbers,  Facebook can show it can hit its self-imposed $100 billion valuation as noted in its IPO.

With this valuation figure, Facebook will see growth at a considerable pace, according to Citigroup analyst Mark Mahaney. He said via the Wall Street Journal, the company’s “business has been showing significant revenue-growth deceleration. The market valuation implies at least a stabilization of revenue growth this year and next year.”

Keep in mind, prior to its IPO, Facebook disclosed in a regulatory filing that its non-revenue producing mobile-user growth was larger than its ads’ growth. Bank analysts who underwrote the IPO had been told to modify their outlooks for revenue prospects from this  information; this wasn’t made available publicly and is one of the many factors that have led to questions about Facebook’s IPO for  individual investors.

Other numbers that will be closely scrutinized from the report is the frequency of users on the site. Facebook releases users’ numbers on a daily and monthly basis. Through the first quarter, Facebook had 901 million visitors monthly and 526 million visitors daily.

The analysts have given their two cents about this with Raymond James analyst Aaron Kessler estimating a 30 percent increase in Facebook daily active users in 2012 and in 2013, a 24 percent rise.

Morningstar analyst Rick Summer said of the numbers, “Any decline in [monthly active users] is a bigger concern because if people go 30 days without looking at [Facebook], that means Facebook isn’t part of your social fabric anymore.”

And then there’s always the question of Facebook’s Chief Executive Mark Zuckerberg: Will he participate on the earnings call?

This $64,000 question remains unanswered but many of the company’s financial responsibilities lie with Chief Operating Officer Sheryl Sandberg and Chief Financial Officer David Ebersman. It’s not unusual for CEOs to be absent from earnings calls, according to the Wall Street Journal, but for Zuckerberg, it’s important for him to be there on Thursday as reassuring presence to investors about the company’s long-term value–especially after the disappointing IPO.

Media Driving Negativity

Until the highly-anticipated report is released after the market’s close on Thursday, questions and speculation will continue. Fueling some of this is the business media.  Many global outlets have already taken a stab at earnings, expressing skepticism and concern.

But it’s only Monday so expect more to come in the next few days. Take a look via Business Insider .

  • The Daily Mail was the most direct, writing, “Facebook is expected to post losses when it declares its first quarterly earnings this week since going public.”
  • The New York Times said even with the first quarter revenues of $1 billion, questions continue if Facebook is still a “thing” with,   “Advertisers need more proof that actual advertising on Facebook offers a return on investment,” said Debra Aho Williamson, an analyst with the market research firm eMarketer. She added, “There is such disagreement over whether Facebook is the next big thing on the Internet or whether it’s going to fail miserably.”
  • Bloomberg, through a quote from Brauch Lev, New York University’s Stern School of Business, cited a worst case scenario for Thursday and wrote: “The worst thing that can be done on a conference call is to disregard the past — and just speak about castles in the air: ‘We expect this. We look forward to a great future. Just baseless optimism and hype is the worst thing, particularly when there is uncertainty, like in the case of Facebook.”