One of the most closely watched earnings reports comes after the close Wednesday when Facebook Inc. (Nasdaq: FB) earnings for the second quarter are released.
Wall Street analysts expect the company to post earnings of $0.14 per share on revenue of $1.62 billion, up from $0.12 per share on $1.18 billion in revenue from the same quarter a year ago.
After scouring the numbers, the key question will be how well the company is monetizing its massive mobile user base.
But, with Google Inc. (Nasdaq: GOOG) and Yahoo! Inc. (Nasdaq: YHOO) both already explaining that mobile growth was indeed difficult in their last quarters, it's highly doubtful Facebook will buck the trend.
Since 2012, the social network leader has been taking aggressive steps to accelerate its mobile business in efforts to offset a steep and steady decline in desktop usage-its true cash cow. Facebook is paid less for mobile ads than it is paid for ads on PCs, but mobile is becoming a significantly bigger portion of Facebook's business.
Indeed, when Facebook debuted as a public company in May 2012, its mobile ad revenue was nonexistent. Since then, FB's mobile ad revenue has soared-to some 30%, or $374 million, in Q1 of 2013.
Helping here is that Facebook has heeded pleas from overwhelmed advertisers by cutting the number of ad products it offers and making its advertising products easier to use.
"One point we heard loud and clear is that we need to simplify our product offering," Fidji Simo, a Facebook project manager wrote on a blog site in June.
Mobile percentage is projected to show further gains in Q2. But because Facebook has some control of the mobile ad placement, many analysts will place substantial weight on the overall top-line ad revenue figure.
Mobile growth is crucial to this company's future...
"I'm more curious how total ad spend looks as desktop usage fades," Richard Greenfield, a BTIG analyst told the Wall Street Journal. "The key issue for me is their views toward the [second half] as they start to lap the start of mobile ads."
The company's conference call will surely address FB's future outlook, and will likely offer some insight on how specific ad products are faring, such as Facebook's app installed ads. These ads are prompted by the download of third party mobile applications and have become one of Facebook's more popular platforms.
Also of note will be any comments on the launch of its previously announced plans for 15-second videos for its photo sharing app, Instagram. Here, Facebook is heading into uncharted territory. To date, Instagram has remained ad free, to the delight of users.
While the social network giant has worked closely with a number of brands for the video ads, it has dragged its feet in launching this commercial type model. However, Facebook aims to make a big splash in the arena.
Facebook has also been pitching running video ads in its main news feed product, and interest has been robust. Yet, this product debut has been delayed, too.
Facebook Earnings: Members Count, Costs and Programs
Attracting and keeping smartphones and tablet users (FB members have been increasingly accessing the site from these mobile devices) has been a primary focus for Facebook. Last quarter, the company boasted 751 million mobile users, a 54% increase year-over-year. Investors will want to see the number climb further.
Concerns have mounted about decreasing youth engagement on Facebook as teens flock to other, hipper sites like Tumblr and WhatsApp.
Additionally, adults admit to spending less time on Facebook, turned off by the deluge of ads.
Lazard Capital collaborated with Clear Voice Research to survey more than 1,000 adults on their social media behavior. They found that those planning to spend less time on Facebook exceed those planning to spend more time by a factor of 2.2 times. The reason, respondents shared, is increased advertising has a negative effect on their experience.
Also of interest in the earnings call will be updates on Facebook's gift business, popular social games and Graph Search. And, of course, costs behind these segments.
Facebook stock was little changed ahead of the report, yet still sit some 40% below its year ago IPO price of $38.
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