What investors want: user engagement. Facebook's daily average users has steadily risen as a percentage of the total monthly audience, reaching 58% in Q1, per Citigroup. Such off-the-charts engagement is also a big part of what makes it attractive as a real-time bidding platform, since frequent returns create fresh retargeting opportunities. "Perhaps the biggest fundamental risk to Facebook would be declining engagement levels by its users," Citigroup analyst Mark Mahaney stated in a research note this week.
What advertisers want: ad engagement. Time on Facebook is one thing, ad engagement another. Facebook may have a good story to tell about this, as ad buyers make use of new tools available to promote organic posts both in the newsfeed and on timelines. In a Q2 update this morning, Adobe reports that user activity (comments, likes, and shares) on brand posts grew 60% over the prior quarter and 338% year over year.
What investors want: higher prices. TBG Digital last week reported that Facebook CPMs have jumped nearly 60 percent in the last year. The main drivers are more clients for Sponsored Stories ads and higher prices for mobile ads starting in Q2 2012, when the lift was measured. Investors will be pleased if earnings bear this out.
What advertisers want: lower prices. An area where analysts and ad buyers starkly disagree. Flat or slightly down CPMs would be a good thing for Madison Avenue; when prices rise it becomes harder for agencies and social platform companies to convince clients to pay higher margins for the value they bring to Facebook campaigns. This is an area of some misperception among analysts and media watchers. As Google's Nikesh Arora said during that company's Q2 earnings last week, after repeated questions about falling Google CPCs: "Any time there was a change in CPC which is more attractive for the advertiser, that allows the advertiser get a bit of ROI." That, in turn, is good for Google. The same applies to Facebook.
What investors want: audience growth. The lifeblood of the ad buyer and an indicator of media property health. They may be disappointed, in the U.S. at least. A recent comScore report suggests Facebook's June user base in the U.S. shrank 1% year-over-year. (Nielsen disagrees, reporting a small gain so far in Q2, notes Pivotal Research's Brian Wieser)
What advertisers want: same. More important internationally than in the U.S., global adoption is a key indicator that will help steer the budgets of multinational brands.
What investors want: monetization. Just over half of Facebook's approximately 900 million global users access the site via mobile devices. Says Citi's Mahaney, "The specific challenge for Facebook is that it is only just now starting to try to monetize this Mobile usage… It is very unclear how this will play out, how users will react to changes to what has been an ad-free mobile experience to date, and whether these ads will be effective on mobile devices."
What advertisers want: segmentation. During Q2 Facebook rolled out mobile-only targeting for sponsored stories. It was an important step, but for some, just the tip of the iceberg. As MediaWhiz President told AdExchanger at the time, "The more we can drill down into…data that’s already available through their interface, that’s going to increase conversion rates."
What Else Advertisers Want
Here are a few other areas where marketers would love to see more movement from Facebook. They may be disappointed during the earnings call.
More RTB inventory. Sources tell AdExchanger, and Facebook confirms, the volume of inventory in the nascent Facebook Exchange is extremely low. As bid queries-per-second increase, so to will ad buyers' opportunities to experiment with programmatic buying on the platform. They key question: When will Facebook Exchange move from "alpha" to beta, and to general release?
Tracking improvements. Facebook has steadily opened the door to third party ad tracking, most recently adding attribution firm Adometry to its certified tracking partner list. However third party impression tracking is still restricted to directly sold premium ads. With Facbook opening premium inventory up to self-serve and Ads API channels, there is an opportunity for Facebook to also roll out third party measurement more widely. As Jared Belsky, EVP at 360i, tells AdExchanger. "One of the big problems we have right now is helping to prove the value Facebook drives. What I'm looking for is more tools, more ways to help clients demosntate and drive value."
Creative Options. Facebook's well-known restrictions on ad creative were reportedly a key reason General Motors walked away from the company on the eve of its May IPO. A sudden embrace of larger formats and rich media capabilities is exceedingly unlikely, but a brand can dream.