What to Look for in Facebook's Earnings

Facebook stock may be trading down ahead of its first earnings report as a public company on Thursday, but the company’s market cap is still north of $60 billion, implying expectations of major growth potential.

Juan Mabromata | AFP | Getty Images

The pressure is on for Facebook to show that it can make more money off its nearly one billion users. That means 1) improving the quality of its ads, 2) making money from its nearly half billion mobile users, 3) ramping up users and revenue internationally, where there’s more room for growth and 4) diversifying revenue streams away from web ads and Zynga , with more payments, app sales, commerce, etc.

Numbers to focus on:

When the company reports after the bell a couple of key numbers will be in the spotlight, beyond the obvious revenue and earnings. Advertising revenue is key — and the rate of growth versus a year ago — because for the past year revenue growth has been slowing.

(Related: The Next Way Facebook May Upset Wall Street)

Even more important than daily active users is the number of monthly active users — it’s a key indicator of how relevant the service is. Before its IPO, Facebook reported that mobile users are growing fast, outpacing its advertising growth. That number is sure to continue to rise. The question is: What will the company about its ability to start making money off those users?

It’s unclear whether Facebook will issue guidance, but any sort out outlook for the rest of the year is key—will growth start to accelerate again? What are projections for making money on mobile users? Expectations for growing revenue from payments and app sales? Will the company enable the sale of physical goods on its site?

Impact of big changes:

While investors and analysts have been focused on Facebook’s stock price, management has been responding to pressure to diversify, and grow mobile revenue in particular.

Facebook only started showing ads to mobile users in March, and in June made a number of changes to jumpstart this business. The most significant being the fact that marketers can just buy mobile ads, instead of having to buy an entire premium ad package. Various studies show that Facebook’s mobile ads are much more effective than its web offerings; we’ll see what the company says about that.

The company’s launch of an App Center could also generate new revenue: Facebook opened the door for developers to sell apps and even offer apps via subscription. Whatever revenue developers earn, Facebook will take a cut.

Facebook has also laid the groundwork to generate more revenue from payments — beyond Zynga’s virtual good sales. Facebook streamlined the payments process, getting rid of its ‘credits’ currency. Facebook also enabled easy payments from within its mobile app.

It’s important to keep in mind that most of these changes were made in June, too recent to have any meaningful impact on the quarter. But we could hear guidance about how these changes will impact revenue from mobile, payments, and apps in the second half of the year.

Zynga matters:

It’s worth paying close attention to Zynga’s weaker, disappointing results.

Zynga’s plummeting stock is dragging on Facebook for two very good reasons. First, Facebook derives a meaningful amount of revenue from Zynga, which pays Facebook 30 percent of its revenue from virtual goods purchased for Zynga games on the social network. In the first quarter of 2012, a full 11 percent of Facebook’s revenue came from its take of Zynga’s virtual good sales.

Zynga’s results speak to the overall shift of users from the web to mobile devices. Because Facebook is just now beginning to make money on mobile, this shift could put pressure on Facebook’s bread and butter — web ads. The social network is certainly investing to snag this fast-growing mobile user base, but it’s unclear how fast the company will be able to catch up with users.

-By CNBC's Julia Boorstin

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