Will Facebook's Mobile Revenue Per User Continue To Drop In Q1?

When Facebook Inc FB reports its first quarter 2015 results on Wednesday, investors will look for user and revenue growth. The latter element could prove to be the most significant element.

"You want to see if they continue to grow mobile and whether their revenue per user continues to drop," Rob Enderle, principal analyst at Enderle Group, told Benzinga. "The mobile user has proven, thus far, to be less valuable than the traditional user and that's been a troubling trend for them."

Tech industry expert and analyst Jeff Kagan expects Facebook to continue to grow.

"Facebook has a big customer group," Kagan told Benzinga. "It's not a company that treats customers well, but they're still growing as a company. I expect that to continue."

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'They Need To Make Money'

Growth is one thing, but what about company profit? Facebook's gravy train could come to a screeching halt if the social networking empire doesn't show improvement in this regard.

"They need to make money," said Enderle. "The end result is, if the user numbers don't grow enough to overcome the revenue loss, then yeah, it becomes a problem. Revenue growth speaks to the valuation of the firm."

Enderle said that Twitter's small format "lends itself to mobile better."

"The problem with Facebook is it's a large-format medium," he added. "The end result is [that] it's not really set up for mobile as well as Twitter."

Ad-Based Success

Qwilt, a company that sells devices to network operators (which allow it to see what consumers watch), has seen an increase in video bandwidth on Facebook and Instagram. At first glance, it might appear that the two entities have figured out how to compete with YouTube, but that's not the case.

"Both of these platforms are short-form content," Dan Sahar, co-founder and VP of Product Marketing at Qwilt, told Benzinga. "The reason why they moved up in the ranking is because they started [introducing] more auto-play video on both of these platform."

Thus, the ads and videos play even if users don't actually want to see them.

"Plus, they're rolling video ads," Sahar added. "It's kind of like they flipped a switch and now you're getting a lot of this video traffic. I think the FB feed is really filled with videos, whereas in the past it was mostly photos."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.