Nelson Mandela: A life in pictures
Nelson Mandela and his wife Winnie in this undated file picture.
NEW YORK (AP) — It’s showtime for Facebook. Call it the second act after its rocky initial public offering two months ago. On Thursday, the company will take the spotlight once again to announce its first earnings report as a public company.
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 wildly popular social networking site.
Though there’s a lot riding on its 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, the company founded by Mark Zuckerberg in a Harvard dormitory in 2004 takes another important step in its evolution into a multi-national company with thousands of employees. Facebook went public on May 18, a Friday that capped the worst week for the U.S. stock market this year. After months of hoopla, Facebook saw its stock land with a thud, its debut marred by Nasdaq glitches that delayed trading.
Company-watchers will be scrutinizing the way in which it conducts its first public financial release. Will Zuckerberg host the entire conference call with analysts— or simply say a few words before letting company’s financial team explain how the quarter unfolded? Among the call’s other likely participants: Chief Operating Officer Sheryl Sandberg and finance chief David Ebersman.
Wedbush analyst Michael Pachter believes it’s unlikely Facebook will miss Wall Street’s estimates. He added that the banks that led Facebook’s IPO likely advised the company to beat expectations for its first public quarter, something that became more achievable once estimates declined.
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.
A smaller chunk of Facebook’s revenue comes from its payments service, the system third-party developers such as game company Zynga Inc. use to charge fees for games and other content on the cite. Facebook takes a portion of the money users pay, usually 30 percent.
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.
Investors and analysts who follow the earnings report will want to hear how the company can make money from its fast-growing mobile user base.
“The specific challenge for Facebook is that it is only just now starting to try to monetize this mobile usage,” said Citi Investment Research analyst Mark Mahaney in a note to investors. Facebook’s current plan, he notes, is to insert so-called “sponsored stories” — ads into people’s mobile feeds. The ads are based on friends’ activities.
“But it is very unclear how this will play out, how users will react to changes to what has been an ad-free mobile experience to date, and whether these ads will be effective on mobile devices,” the analyst wrote.
It’s unclear if Facebook will offer its outlook for the current quarter and beyond. Not all companies do. Apple does, while Google Inc. doesn’t and never has. If Facebook does provide a forecast, Pachter thinks it will be conservative. The company has no reason to anger investors who have already pushed its stock down 24 percent from its $38 IPO price.
Facebook will report its earnings on Thursday after the stock market closes. It will hold a conference call to discuss the earnings at 5 p.m. ET.
On Wednesday, the Menlo Park, Calif.-based company’s stock closed up 89 cents at $29.34. The stock has traded between $25.52 and $45 since going public. It has not risen above $38 since its first trading day.
Nelson Mandela and his wife Winnie in this undated file picture.
Mandela is accompanied by his former wife Winnie, moments after his release from prison February 11, 1990 after serving 27 years in jail. (Reuters)
In this February, 1990 photo, shortly after his release from 27 years in prison, Nelson Mandela, gives the black power salute to the 120,000 supporters packing Soccer City stadium in Soweto, near Johannesburg. (AP Photo)
Nelson Mandela showed his passport in February 19, 1990, shortly after his release from prison. The South African government authorized an application for himself and his wife Winnie - (Juda Ngwenya / Reuters)
In this July 27, 1991 photo, Cuban President Fidel Castro, and Nelson Mandela gesture during the celebration of the "Day of the Revolution" in Matanzas, Cuba. (AP Photo)
In this July 4, 1993 photo, President Bill Clinton and Nelson Mandela listen during Fourth of July ceremonies in Philadelphia during which Clinton presented the Philadelphia Liberty Medal to the African National Congress president and South African President F.W. de Klerk. (AP Photo/Greg Gibson)
President of the African National Congress Nelson Mandela acknowledges cheers from the crowd as he prepares to unveil the ANC's official election platform in 1994. (AP Photo/David Brauchli)
African National Congress (ANC) leader Nelson Mandela greeted residents of Mmabatho in March 1994, during a visit after the nominal homeland came under South African control following the ousting of the former President Lucas Mangope. (Reuters/Howard Burditt)
South African President Nelson Mandela smiles with actor Sidney Poitier at a press conference in Cape Town in 1996. Poitier played Mandela in the film "One Man, One Vote" (AP Photo / Sasa Kralj)
South African President Nelson Mandela waves to crowds as he sits next to Queen Elizabeth II in a an open carriage on the way to Buckingham Palace.(AP/Louisa Buller)
Chairman of the Constitutional Assembly Cyril Ramaphosa, left, holds up a copy of the country's constitution which was signed by President Nelson Mandela, in December 1996. (AP Photo / Adil Bradlow / POOL)
Nelson Mandela at a news conference in Johannesburg in February 2000. (AP Photo / Denis Farrell)
South African rugby captain Francois Pienaar, right, received the Rugby World Cup trophy from President Nelson Mandela also wearing a South African rugby shirt, after South Africa defeated New Zealand in the Rugby World Cup , in 1995. (AP Photo / Ross Setford)