The one thing that's sure to convince investors that Facebook is a "buy" is the promise of accelerating revenue. The company has taken steps to grow and diversify its revenue — rolling out mobile ads, introducing new, more effective, "social" ads, and offering the ability for developers to sell apps, from which Facebook will take a cut.
These changes can't boost the bottom line overnight, but in the meantime, there are a few moves the company could make to help investor confidence. I spoke to experts on Wall Street, Silicon Valley and Madison Avenue. Here are some ideas.
1) Speed Up Ad Roll Outs (That requires ramping hiring, fast)
CEO Mark Zuckerberg and COO Sheryl Sandberg went into some detail on the earnings call about how effective the new social ad format, "sponsored stories," are.
The problem: Half of Facebook's ads aren't at all social, and sponsored stories are just starting to roll out. Brands and their ad agencies don’t inherently know how to use this new format.
Facebook needs a massive team of people to meet with advertisers and their Madison Avenue representatives to teach them how to make these ads effective. That entails explaining how to tailor content so it’ll work as a social ads, and how to buy the format — which occasions and product best lend themselves to this kind of social communication.
One challenge: Ad buyers and the folks crafting the ads (the “creative” side) usually work separately. Facebook needs to meet with both of them and get them to talk to each other to understand what publishing and content strategy can work together.
One Madison Avenue veteran noted that transitioning both groups, buyers and “creatives,” to a new format requires a ton of training — it can’t happen overnight and can’t be learned on its own. Facebook needs to pick up the pace of hiring and get people into those offices.
Facebook's new ad exchange is a very promising way to make its ads far more effective and valuable. The problem: It's just in limited beta testing, with no word on when it'll roll out to all ad buyers. The company continued to add brands to the beta test, but that’s not enough. Even if it's not ready to go broad yet, announcing a launch date would likely inspire some confidence.
2) Consider Acquisitions in Video and Mobile
Facebook hosts millions of videos and has a massive number of mobile users. It's not making money on those videos, other than the role they play keeping users engaged. And it just recently started running mobile ads. Facebook has tons of cash, so it makes sense for Facebook to consider acquisitions in either space. (Considering Facebook's own unstable stock, it's unlikely to be able to use its shares for an acquisition, but it has the cash.)
It could buy a mobile ad network, or a startup to serve video ads on the home videos and clips that play on the site. Such an acquisition — at a reasonable price — would send a clear message to Wall Street that Facebook is taking steps to make money off all part of its traffic.
3) Diversify. Diversify. Diversify
Facebook's rollout of mobile ads is often referred to as a panacea — after all, it's that mobile growth that's outpacing revenue growth.
The problem here is that Facebook really only has one type of mobile ad —sponsored stories. No matter how effective sponsored stories are now, there's risk in placing all Facebook's mobile bets in this one format. What if consumers get bored or overwhelmed by sponsored stories in their news feed? The company should focus on inventing — and announcing — other mobile ad formats to reassure investors it's hedging against that possibility.
Facebook's payments revenue is immensely reliant on Zynga . The more Zynga struggles — as it did this past quarter — the more Facebook will falter. The company needs to help build up another payments partner, and considering social gaming’s recent struggles, it should focus outside the game space.
Facebook directs users to Spotify. Why not invest resources to help a Spotify, or even a Netflix or Hulu sell subscriptions on top of Facebook’s platform, with the social network taking a cut? And the potential to layer retail on top of the site — say with a Fab.com — could be huge, and Facebook could take a small percentage.
—By CNBC's Julia Boorstin
Questions? Comments? MediaMoney@cnbc.com