It wasn’t that long ago that Wall Street had little faith in Facebook’s mobile future.
What a difference a year makes.
Facebook reports its first-quarter earnings tomorrow, with analysts expecting a profit per share of 24 cents and $2.36 billion in revenue. That’s up big from the year-ago quarter, when Facebook was still just beginning to bolster its mobile business.
But while the Street has slowly warmed up to Facebook’s prospects, the social giant isn’t out of the woods yet. Here’s what to look for after the bell on Wednesday afternoon.
Mobile Ad Prices
Facebook’s mobile advertising business is in better shape than anyone could have thought. More than half of the company’s advertising revenue now comes from mobile devices, a near complete turnaround from where the company was when it went public in 2012.
The question now is how much Facebook is charging for those mobile ads. Google missed its earnings estimates last week, and took a drubbing for its declining advertising prices on smartphones; despite a 26 percent overall increase in volume, the average price for a Google mobile ad fell nine percent last quarter.
It looks like those prices will be trending up, according to Nanigans, a Facebook social ad strategy partner. That’s in part due to Facebook’s continued insistence at not increasing the amount of ad inventory inside the News Feed, far and away Facebook’s most valuable advertising real estate.
That also may result from Facebook’s decision to tamp down the reach of companies’ Facebook Pages — the spaces on Facebook where brands could market themselves via posts without having to pay to promote them. Now brands are seeing far less reach on those unpaid posts, which may be causing many to start buying more ads, thereby driving up prices.
I’ll be curious to see if anyone broaches the subject of video ads, a new product that Facebook is just beginning to test in its News Feed. Advertisers have been champing at the bit to see them roll out widely. Keep an ear out for COO Sheryl Sandberg’s comments on this.
Ad rates are important, but only if you’ve got people coming back to the site regularly.
What are Facebook’s daily and monthly active user numbers going to be? At last count, MAUs topped 1.23 billion, with 757 million of those people coming to the site on a daily basis. And as of December 31, about 945 million people visited Facebook on a monthly basis via mobile device — up nearly 40 percent from the previous year.
Analysts expect those numbers will all continue to rise. Keep an eye on the growth curve, though — Stern Agee’s Arvind Bhatia expects year-on-year increases of 3 percent, 3 percent and 7 percent in all of those numbers, respectively.
Where’s the Growth Going to Come From?
If Facebook isn’t increasing ad load in the News Feed — which CFO David Ebersman has clearly pointed out — where’s the continued revenue growth going to come from?
I hope we hear a bit more about Instagram’s monetization prospects, a topic that hasn’t been touched since business lead Emily White left to become COO of Snapchat late last year. Is the photo-sharing app still actively experimenting with brand advertisements in the feed?
I’d love to hear more about Facebook’s games and payments business, which is often overlooked come earnings season. It still represents a mere fraction of Facebook’s revenue compared to advertising, but it would be nice to know whether or not it’s a growing business.