July 26: Facebook’s Day of Reckoning

Facebook has seen its share price drop precariously since it went public in May. It stands near its all time low at around $28, depressed mostly by concerns that its advertising business may not be as lucrative as it was initially projected to be, and that its socially targeted ads may not be as effective as Google’s search based ones.

On July 26, it will report its earnings for Q2 2012, its first since its IPO. That should give us some indication as to where it’s headed in the coming years.

While Google delivers ads based on what users search for (explicit intent), Facebook targets ads using the tons of social data it has on each user — preferences, likes, shares, etc.

In the last year, Facebook has focused exclusively on its ad business — demonstrating ROI for advertisers, rolling out more effective advertising units, and finding ways to monetize its massive mobile audience.

It is apparently planning to launch a real-time ad bidding exchange for users, and may also enable advertisers to publish ads on its partner websites, outside its walled garden.

It also plans to focus on its Payments offering, which could see it generate a significant amount of revenue going forward, if it manages to displace the top players in the online payments and transactions space by leveraging its 900 million strong active user base.

While Facebook is expected to reach more than a billion users by the end of the year, most of the growth will come from developing countries, which hardly generate much revenue for Facebook. Monetizing them should pose another set of challenges for the social networking giant.

via NYT

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