Facebook will report first-quarter earnings later today, after markets have closed on the US east coast. Here are some of the key questions investors will be watching.
1. Roaring revenue
Digital advertising dollars are expected to have continued to flow to Facebook, pushing revenue at the world’s social network up more than 50 per cent on a quarter-on-quarter basis. The average analyst estimate is for revenue of $5.3bn, up from $3.5bn in the same quarter the year before. Earnings are forecast to increase even faster, up 55 per cent, to non-GAAP earnings per share of 62 cents.
2. A clearer picture at Instagram
What has changed is where those ad dollars are being spent. Analysts are increasingly excited about the growing contribution to Facebook’s revenue by Instagram, the photography app that the company bought for $1bn four years ago. Instagram is now open to marketers around the world, who can use data from Facebook to target customers on the app.
3. Marketers flock to video
Another driver of revenue could be the explosion in video advertising, which Facebook has yet to break out as a separate revenue line. Globally, marketers are adopting video ads as a more compelling — and therefore more expensive — way of advertising online.
Facebook has prioritised video in its news feed, with more than 100m hours of videos watched a day.
4. Hefty costs
Alongside top-line growth, analysts will still be keeping an eye on expenses. Facebook is investing in everything from live video to virtual reality, along with the more boring everyday needs of a tech company such as office space and data centres.
Robert Peck, analyst at SunTrust Robinson Humphrey, said he would not be “fazed” if headline numbers on expenses remain high. So far the market has given Facebook a long leash to invest in very long-term projects such as drones to beam down internet connectivity from the sky.
5. Potential of chat
It is early days for Facebook Messenger’s chat bots, unveiled last month at F8, the company’s developer conference, and for WhatsApp’s plan to make money, announced with few specific details at the start of the year. But both are potentially huge revenue drivers. Investors will be watching for any sign of progress for how Facebook could be making money in years to come.
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