Social kingpin Facebook (NASDAQ:FB) is set to report third-quarter earnings tomorrow after the close. This will be the company's second earnings release after going public in May. The first one didn't go so well, with shares selling off by 17% as the social networker didn't live up to investors' expectations.
Can the company make up for it this time around?
Facebook recently announced it had finally crossed the billion-user threshold, although keep in mind some of those are inevitably fakes. That's a lot of people all over the world Facebooking each month, and now Facebook has to figure out how to translate those social butterflies into dollars and sense.
Analysts are homing in on $1.23 billion in revenue in the third quarter, and if everything goes according to plan, that would turn into earnings per share of $0.11. That would represent top line growth of 29% compared to the $954 million in sales a year ago. Back then Facebook had just 800 million monthly active users, or MAUs, so it has grown its user base by 25% since.
Search giant and ad rival Google (NASDAQ:GOOGL) recently posted a soft quarter (prematurely by accident), causing shares to tank suddenly as the company saw weaker-than-expected cost-per-click, potentially bad news for the broader online ad market. On the other hand, Microsoft (NASDAQ:MSFT) said its online ad revenue grew 15% last quarter due primarily to an increase in revenue per search.
All eyes will be on how Facebook is managing its transition to mobile ads. On the last conference call, CEO Mark Zuckerberg said mobile sponsored stories were up to a run rate of approximately $500,000 per day. Investors need to see if this figure has increased since then as Facebook continues to load potentially obnoxious ads into mobile news feeds.
The payments segment may be weak, considering its biggest payments partner Zynga (NASDAQ:ZNGA) just slashed its guidance on weak bookings growth. However, much of Zynga's weakness relates to its own transition away from Facebook dependence and onto mobile platforms, along with its botched acquisition of OMGPOP. Hopefully its woes won't weigh too heavily on Facebook's results, but they probably will to some extent, since Zynga has accounted for 10% of total revenue through the first half of the year.
Investors will have to wait for Facebook to file its 10-Q for a detailed breakdown of average revenue per user by geography in order to get a better sense of monetization. Last quarter, this happened five days after the earnings press release. Tomorrow's the day for Facebook to try to redeem itself.
Evan Niu, CFA, has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook, Google, and Microsoft and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Facebook, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.