Facebook's day of reckoning: Releases first earnings report as public company

It's showtime for Facebook. Call it the second act after its rocky initial public offering (IPO) two months ago. On Thursday, the company will take the spotlight once again for its first earnings report as a public company.

Facebook went public on May 18, a Friday that capped a disappointing week for the US stock market. After months of hoopla, Facebook saw its stock land with a thud, its debut marred by Nasdaq glitches that delayed trading.

Now, Facebook's fate hinges on its ability to convince businesses that the ads on its website and on its mobile application are effective.

To do that, the world's largest online social network needs to keep its nearly 1 billion users logging on as often - and for as long - as possible, interacting with each other as well as with brands.

The release of its quarterly financial results will be Facebook's chance to prove to investors that it can continue growing revenue from the ads it serves on its popular social networking site.


It comes a day after Zynga Inc, which contributed to 12 per cent of Facebook's revenue last year, reported disappointing earnings.

Facebook's stock slid in after-market trading on Wednesday, as did Zynga's.

Though there's a lot riding on Facebook's second-quarter earnings report, Wall Street analysts aren't expecting big surprises.

Why?

Facebook effectively warned investors before its IPO that Wall Street's expectations were too high. In a filing issued a week before its IPO, Facebook said its mobile users are growing at a faster pace than the number of ads on its mobile platform.

As a result of that disclosure and others, many analysts reduced their estimates for Facebook's projected revenue and earnings.

On average, analysts are expecting Facebook to post earnings of 12 cents per share on revenue of $1.16 billion, according to a poll by FactSet. In all of 2011, it had net income of $1 billion and revenue of $3.71 billion, according to regulatory filings.

Facebook makes the bulk of its money from advertising. Because people share so much about themselves on the social network - from hobbies to birth announcements - Facebook's bet is that it can offer highly targeted ads that people are likely to be interested in.

The company also uses people's personal relationships to target advertisements. The assumption is that people will be more interested in products and services that their friends like.

Besides revenue growth, what Facebook says about user numbers will be important. Not just how many people use the site, but how often and for how long.

Facebook has 901 million monthly active users and 526 million daily active users, according to its latest filings. Each month, 488 million users accessed Facebook using a mobile device.

with inputs from Associated Press