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What to expect from Facebook’s earnings report today

By Mike Murphy

Today, Facebook will announce its second-quarter earnings, and it’s possible that they will be as stellar as any other quarter the company has reported to date.

Since the company went public in 2012, Facebook’s revenue has increased—often between 40% and 60%—every single quarter, when compared to the same quarter a year earlier. Analysts are expecting this quarter to be no different: The consensus is that Facebook will generate around $9.2 billion this quarter, according to MarketWatch, well up from the $6.4 billion it generated in the second quarter last year.

Over the summer, Facebook announced that it had surpassed 2 billion users visiting the social network at least once a month—that’s roughly 54% of the total number of people in the world with access to the internet, based on current statistics. Facebook also said that 1.3 billion people check the site every day.

Given that we may soon get to a point where every person on the internet is on Facebook (and many of them checking it out every day), it’s unsurprising that Facebook would continue to generate such massive sums of advertising revenue, second only on the internet to Google. Facebook’s share of the digital advertising market is expected to increase slightly over the next few years, according to analysts.

The question will be where growth will come from: Facebook has been pushing video heavily recently (just look at your feed, and look at how many things you’re seeing are videos, probably of food) and those ads are costlier to advertisers than static images. It’s likely that video will continue to be a large driver of revenue growth for Facebook, but there are untapped areas too: more ads on Instagram, injections into Messenger, or WhatsApp are all avenues Facebook could potentially explore at some point in the near future. Facebook doesn’t really break out statistics on the financial health of any of its subsidiaries, but look for questions from analysts about the future of advertising beyond Facebook’s “big blue app,” as the company calls its main site.

While Facebook’s average revenue per user is trending upwards across the world, the overwhelming majority of its revenue still comes from North America—which is not where most of its new users are located. In the last quarter, Facebook saw a small positive sign for the health of its Asian business: While every other region’s revenue was down significantly when compared to the fourth quarter of 2016, Asian revenue stayed relatively flat. Look to see how the region performs, relative to the rest of the world, this quarter.

Like its advertising rival Alphabet, Facebook is working on a few zany projects that could change the world, like its massive internet-beaming drones, or the brain-computer interface project. Also like Alphabet, it doesn’t seem that anything other than Facebook’s advertising business is really generating much revenue—nearly 98% percent of its revenue reported last quarter came from advertising. Last year, Facebook appointed Regina Dugan, previously of Google’s ATAP research division, and the former director of DARPA, as head of of its “Building 8” research division. Look for any indication that Facebook will turn its side projects, including its Oculus virtual reality division, into meaningful businesses.

Perhaps everything won’t be as rosy as analysts expect: Facebook did say last year that its revenue growth would slow “meaningfully” in 2017. It’s been slowing for nearly a year now, even as the company has hired substantially over the same period, so perhaps this quarter Facebook will finally tell us it just can’t find any more places to effectively jam ads into our streams.

For now.

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