Cheat sheet for Facebook’s first report card as a public company

Facebook Inc.will get its first report card as a public company Thursday and its second chance to make a good impression on investors. Here’s what to listen for on the company’s conference call with analysts:

WHO’S TALKING: Will the hoodie be in the house? It’s unclear whether Facebook Chief Executive Mark Zuckerberg will lead the conference call with analysts or simply say a few words. But we’re betting he won’t be MIA. The 28-year-old Facebook founder has been pummeled for dispatching other executives to road shows (and wearing a hoodie and jeans instead of a suit when he did show up) and saying he’s more concerned with building great products than building a great business. If he talks on the call, every word will be parsed. Investors want to hear that he’s serious about making money and delivering strong growth in revenue and profit each quarter. Likely to do most of the talking: Chief Operating Officer Sheryl Sandberg and Chief Financial Officer David Ebersman.

POPULARITY CONTEST: Internet users are a fickle bunch, and investors will want to hear that Facebook is still in a growth spurt around the globe and that users are logging in as often and for as long (if not longer). As of its last count, Facebook said it had 901 million monthly active users and 526 million daily active users. Each month, 488 million users accessed Facebook from mobile devices. One of Facebook’s headaches: declining per user revenue growth rate. Loads of folks are still signing up for Facebook but they hail from places that don’t ring up as much advertising revenue.


WANNA BUY AN AD WITH THAT STATUS UPDATE? Facebook makes the bulk of its money from advertising, so it’s under pressure to show that it can continue to deliver growing returns on its popular website and on mobile devices. In the first quarter, Facebook’s revenues declined from the previous quarter. Just days before the company went public, General Motors said it would stop buying ads on Facebook because it didn’t believe the ads helped sell cars. Studies on the effectiveness of Facebook advertising are all over the map. Analysts say Facebook needs to show that its ads are working. And they want details on the performance of new ad formats the company recently rolled out such as Facebook Exchange, which tracks Facebook users on the Web to show them ads on Facebook.

HOW MOBILE IS MOBILE? More than half of Facebook’s users access the site from smartphones or tablets, yet Zuckerberg said recently that figuring out a way to make Facebook more appealing on mobile devices is his biggest challenge. Yes, Facebook’s mobile apps are in need of some serious love. And investors also want to hear how the company is progressing in its plans to make money from the smallest screen of all. (It launched mobile ads in February). And what about the oft-rumored Facebook phone?

WILL FACEBOOK LET ANALYSTS GAZE INTO ITS CRYSTAL BALL? It’s unclear whether Facebook will offer revenue projections for the current quarter or for the year. Expect Wall Street analysts and investors to be grumpy if Facebook does not.

ZYNGA WILD CARD: Facebook shares got clobbered in after-hours trading Wednesday after Zynga, the biggest purveyor of games on Facebook, reported second-quarter profit that missed analysts’ estimates and slashed forecasts for the year. In the first quarter, Facebook estimated that Zynga, which makes games such as FarmVille, produced as much as 15% of its revenue. Facebook gets a cut of payments that users make to buy virtual goods in Zynga games and from advertising. Zynga said the Facebook website was a “more challenging environment.”

FACEBOOK SHARES TSUNAMI FORECAST FOR AUGUST AND BEYOND: Facebook shares are set to flood the market as the first “lock-up” period for insiders ends in August. As is typical with many tech IPOs, insiders and employees who own shares are allowed to sell those shares in about three months after the IPO when the “lock-up” period expires. They can sell even more as time marches on, and that could put even more pressure on the stock, which is already in a major slump.

BILLION-DOLLAR ACCOUNTING CHARGE? The company is expected to incur a mammoth one-time charge as it lifts restrictions on employee stock related to its IPO. The company has warned that could result in almost $1 billion in added expenses, nearly as much as the $1.2 billion in revenue it’s expected to report in the second quarter.

THOSE FACEBOOK EXECS ARE GETTING SPEND-HAPPY: Facebook has been on a spending spree, growing its workforce and lavishing money on research and development. Costs represented 15% of revenue in the first quarter, up from 8% in the same quarter last year. Facebook has braced investors to expect R&D; expenses to continue to increase and potentially cut into profit margins. Investors are going to want to see some results for all that money.

ANY MONEY-MAKING TRICKS UP FACEBOOK’S SLEEVE? It’s a popular parlor game in Silicon Valley: How else will Facebook make money other than advertising? The hottest rumor: that Facebook’s “like” button may soon get a new friend, the “want” button. And that kind of button could push the social network’s revenue. As Piper Jaffray & Co. analyst Gene Munster pointed out, a “want” button brings Facebook closer to what Google has when users type “an explicit commerce related search query.” And it would give Facebook even more information about the products its users and their friends covet. Analysts say it’s unlikely that Facebook is ready to talk about the button or its push into commerce.


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