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Good News From a Tech Holding

A new partnership should broaden this social network's advertising platform.
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On Friday, Facebook FB and Google (GOOGL) announced a new partnership whereby Google's DoubleClick Bid Manager business will be added as a bidding partner on Facebook's ad exchange. This is a positive development, as it generally gives Facebook's exchange more credibility, more ad diversification and likely better pricing.

Google's DoubleClick is the largest demand-side platform, with 25%-30% market share, and it is used by several of the largest ad agencies in the world. The absence of DoubleClick on Facebook's exchange has been noted by several agencies, and its inclusion should be viewed positively by them for better engagement. By adding more bidders to the exchange, this partnership should improve the price (CPMs) and should likely improve the quality and diversity of ads and advertisers.

It's hard to quantify the revenue and earnings impact from the news, but we see this as another positive add-on feature at the company as management continues to look for ways to monetize its business.

Facebook reports earnings next Wednesday, Oct. 30, after the close. Expectations are high, since the stock up 104% since the company reported its second quarter. We've taken some gains along the way, locking in profits. Overall expectations are for revenue at $1.9 billion, with solid growth driven by a strong brand and robust spending on mobile app installations. While mobile is the focus, desktop comparisons are easier, and that should also help the bottom line. Expectations are for earnings per share of $0.18, EBITDA of $1.05 billion and 56.5% margins (flat quarter over quarter).

Investors will be listening for improvement in subscriber growth (daily active users and monthly active users), exchange traction and mobile monetization (mobile revenue in the second quarter accounted for 41% of total sales). Instagram and video timing will also be important data points to watch.

Regards,

Jim Cramer, Stephanie Link, and TheStreet Research Team

DISCLOSURE: At the time of publication, Action Alerts PLUSwas long FB.