Mike Isaac

Recent Posts by Mike Isaac

As Facebook Earnings Approach, Questions on Mobile Still Linger

facebook_stock_certificateIt’s round three for Facebook’s quarterly earnings, but all eyes will still be on the same key areas of the company’s business: Social ads, payments and, of course, mobile, mobile, mobile.

Despite Facebook’s early, rocky days on the Nasdaq, analysts continue to be bullish on the stock, with estimates for Facebook’s revenue to measure in at around $1.52 billion, along with an EPS of 15 cents. That would be a 34 percent jump in revenues from last quarter if the company makes its numbers.

That Street optimism factors in a few things. For one, Facebook will ride out the seasonal boost in ad placement from the holiday quarter of 2012 (the time of year when all the ad departments spend the rest of their budgets across outlets).

More than that, Facebook has had time to let a few of its relatively newer ad products perform. Namely its “sponsored results” product, which returns paid placements from the drop-down search bar when users look for things inside of Facebook (something I imagine will only develop over time as Graph Search begins to mature).

There’s also the mobile app install ads which, when clicked, redirect users to the App Store for a download. Some early reports from developers I’ve spoken to who are using the paid service are generally positive, claiming a decent conversion rate.

But what everyone should really be curious about is that magic number — ad revenue derived from mobile. Last quarter, Facebook saw 14 percent of its overall ad revenue coming from its mobile sites and apps. Some hailed it as a tidal shift for the company, which has struggled to overhaul its entire business internally, as consumers increasingly flock from desktop PC access to visiting Web sites via mobile browsers and through applications on smartphones.

facebook_ios_appStill, Facebook needs far more than 14 percent of its ad revenue coming from mobile if the company hopes to convince investors that it truly is a “mobile first” innovator.

Also keep in mind Facebook’s payments business, a small yet significant part of the entire mobile plan to watch. Analysts expect the company’s payments biz to remain relatively flat, due to Zynga’s decline in demand for virtual goods in the gaming business, as well as the overall shift to mobile devices industrywide. That is to say, it’s much easier to monetize mobile payments if you’re a Google or an Apple, by taking in payments in app downloads. Facebook doesn’t have that opportunity.

I’m curious, though, if we’ll get a taste of how Gifts has performed in the short time it has been available to all U.S. users. I’ve heard anecdotes that Facebook still needs to iron out the kinks in its inventory process when dealing with some of its partners, which could be a big problem if and when the business actually scales globally. But that’s all presuming that people actually buy Facebook Gifts.

Curious to see if Facebook makes its numbers? My colleague Peter Kafka and I will have live coverage of Facebook’s Q4 call at 2 pm PT on Wednesday.

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