The Only Three Things To Look For In Facebook's Earnings Report This Afternoon

Sheryl Sandberg Ignition 2What are you talking about, 19% growth is great!

Facebook will announce quarterly earnings for the first time as a public company this afternoon, reporting its second quarter financials.We’re going to cover them live.

Here’s what to look for:

Ad Revenues. Year-over-year quarterly growth of Facebook revenues has been slowing since the first quarter of 2011.

In other words, revenue growth has continued, but it’s been losing momentum.

The most important and biggest part of Facebook’s revenues are its ad revenues.

Facebook launched of bunch of new products during Q2, such as Sponsored Stories.

Did they help the business pick up steam?

The Wall Street consensus is that Facebook will report quarterly advertising revenues of $921 million, 6% growth over Q1 and 19% growth over 2011Q2.

Ignore that number.

19% ad revenue growth would be more deceleration – and it’s a pretty pathetic number for a growth-stage company like Facebook. Google, which has a much larger business and has been public since 2004, grew 21% year-over-year this past quarter.

19% is out there because Wall Street analysts have set the bar very low to provide Facebook a great chance for an “upside surprise.”

If Facebook ad revenue growth doesn’t beat 19% comfortably – somewhere in the mid-to-high 20s – you know that the business has deteriorated even further since they reset guidance during the roadshow.

Mobile. Facebook scared the pants off a lot of investors ahead of its IPO, warning them that its users were migrating to mobile, where it was having a harder time making money off of them. This was in part because Facebook wasn’t even trying to make money off of mobile users until this year. Has it made any progress on that front? We’ve heard a lot of noise that Facebook mobile ads are actually more effective than Facebook Web-ads. Will we get confirmation from the company?

Outlook. How do Facebook executives think the company will perform in Q3 and Q4? Do they foresee a return to accelerating growth?

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