Mike Isaac

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Facebook Earnings, Part Deux: What to Expect When the Street Is Expecting

It’s round two for Facebook on the quarterly earnings block. What’s to expect? No surprises: We’ll be watching for all the same indicators as last time.

First, the Street will want to know the nitty-gritty of Facebook’s core business: Advertising. The company came in at $992 million last quarter, up 28 percent, and higher than many analysts were expecting.

Today’s expectations are mixed. Citi’s Mark Mahaney expects revenue growth to decelerate to 23 percent in the third quarter, with revenue somewhere in the range of $986 million. Other firms are more optimistic, estimating ad revenue to come in around the $1.1 billion mark. There has been no guidance from Facebook, so we’ll see.

Also a big indicator: Facebook’s monthly active user numbers (MAUs), and what the split is between mobile and Web views. Facebook recently announced some big milestones, hitting the one billion registered active user mark. And more than 600 million of those users view the site via a mobile device.

The issue here is Facebook’s perennial problem, a problem for much of the Web companies too — monetizing those mobile users. Facebook has begun to introduce its initial mobile ad products only over the past few months. Sponsored stories for mobile launched in June, while promoted mobile app ads just recently rolled out wide to all developers.

Facebook will be sure to remind us of this key point: Mobile ads are in their early days, so Wall Street needs to chill out and wait for revenue to grow over the long term. For what it’s worth, last quarter’s earnings saw an admirable $500,000 run rate for the sponsored stories product on mobile — not too shabby for a newly launched product.

While we’re on a similar longer-term point, Facebook’s other new money-making products are also still nascent and thus unproven. Indeed, Facebook’s Gifts e-commerce initiative showed up at the tail end of last month and is ramping up slowly with a U.S.-only start and an incremental rollout to domestic users.

It’s the same story for Facebook Exchange, a real-time bidding system for ad inventory based on retargeting. Facebook maintains that this will be huge (huge!) for the company. But, for now, it’s still under construction.

The wild card? How will Zynga’s terrible performance (and lowered yearly outlook) affect Facebook’s payments business?

Wedbush Securities’ Michael Pachter isn’t optimistic: “In our view, a slew of recent Zynga releases hurt monetization of its previously evergreen franchises as users spent more of their time on new games but less of their money.” That drop in Zynga game spending affects Facebook’s bottom line, although Pachter says there remains “some potential for payments gains from other game vendors.”

No telling until showtime, which starts at end of business today after the markets close. Stick around here for live coverage of the conference call with analysts where, hopefully, CEO and co-founder Mark Zuckerberg himself will explain his company’s latest balance sheet.


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There’s a lot of attention and PR around Marissa, but their product lineup just kind of blows.

— Om Malik on Bloomberg TV, talking about Yahoo, the September issue of Vogue Magazine, and our overdependence on Google