Twitter Inc. and Facebook Inc.’s earnings reports this week will show whether the companies can wring profit from fresh efforts to attract advertisers and their marketing dollars.
Facebook has rolled out improved tools designed to help marketers reach users of its Instagram photo-sharing application and promote products via videos in its news feed. Twitter made key deals, acquiring a company that helps advertisers find potential customers across devices, while forging an alliance with Google Inc. that lets it serve ads more broadly via the Web-search company’s Doubleclick product.
The social-media companies, which both narrowly missed revenue projections in the first quarter, will be under greater pressure to top estimates after Google’s second-quarter results showed that more people were clicking on ads. Twitter’s main challenge is reigniting slowing user growth and getting more advertisers to boost their spending, while Facebook is working to deliver ads beyond its social network.
Facebook “should deliver an equally impressive quarter as Google did,” said James Cakmak, an analyst at Monness Crespi Hardt & Co. Twitter “should start to see the benefit of their deals. It’s going to be about their ability to monetize their inventory, and how much this Google relationship, especially with the Doubleclick partnership, helps them with their direct response campaigns that fell off a cliff in the first quarter,” he said.
Facebook, based in Menlo Park, California, is projected to report profit of 47 cents a share, according to the average of analysts’ estimates compiled by Bloomberg. Second-quarter revenue is seen jumping 37 percent to $3.98 billion. With 51 percent of sales coming from outside the U.S., the company may also report less income due to the impact of a stronger dollar, as it did in the first three months of the year.
Twitter, which isn’t yet profitable, is expected to boost second-quarter revenue 54 percent to $481.7 million. The company’s user expansion is slowing, hurting its ability to keep up its pace of sales growth. The San Francisco-based company, which warned that it doesn’t have much visibility into user growth, is instead asking investors to focus on how many people see Tweets even when they aren’t logged in.
Both social-media companies have said that bigger opportunities lie ahead. Facebook has yet to start making much money off of WhatsApp, the messaging application it bought for $22 billion last year, or Oculus, the virtual-reality headset maker that will introduce its first consumer product next year.
Twitter, which lets people post and share 140-character updates, has been telling investors since its November 2013 initial public offering that it will be updating its products to draw more casual users into the site, although the efforts haven’t yet shown results.