Thursday will be an important day for Facebook, when the company releases its first earnings numbers since going public.
“The stakes could not be higher,” suggests The New York Times. “Facebook made its initial public offering in May with an eye-poppingly high valuation, but its share price has stagnated since then. Advertising, largely in the United States, accounts for the bulk of its revenue, and the company is under intense pressure to show that it is growing fast enough to justify its high value.”
“Since the public offering, Wall Street has tempered its expectations for Facebook’s advertising revenue, and shares closed Friday at $28.76, down from their initial price of $38,” notes the article.
Facebook’s greatest asset is the personal data it collects from its 900 million users. However, Google takes in about $40 billion in annual revenue from advertising — 10 times Facebook’s current advertising numbers.
“Advertisers need more proof that actual advertising on Facebook offers a return on investment,” explains eMarketer analyst Debra Aho Williamson. “There is such disagreement over whether Facebook is the next big thing on the Internet or whether it’s going to fail miserably.”
The behavior-tracking Facebook Exchange and targeted banner advertisements on gaming site Zynga are among the social network’s latest efforts in this space.
“Orbitz, the travel company, is among the advertisers that are trying Facebook Exchange,” explains NYT. “If it sees a consumer looking for, say, a business hotel in New York, Orbitz can place an advertisement for New York hotels on that user’s Facebook page, with the hope that the user will return to the travel site and make the booking.”
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