I wrote a few weeks ago about "Fixing the Game", by Roger Martin, which details how the public markets have become a game of Expectations versus Reality. He argues that, unless this changes, the capital markets are in trouble.
A lot of the Expectations Game is enabled by public companies giving quarterly and yearly guidance, leading to "gambling" behavior by investors. One of Martin's recommendations is to repeal safe harbor regulations, which would strongly discourage companies and executives from giving forward guidance.
Another (extreme) approach would be have companies post real time (unaudited) financial information. While very difficult for some types of business, doing so for an online advertising business is possible.
Real time financials would not only make forward guidance useless, it would remove the gambling behavior that is stimulated by quarterly earnings release.
More generally, I would postulate that the time between company updates is directly proportional to uncertainty and therefore, the longer the period between updates, the more extreme the Expectations behavior will be. If a company only gave yearly guidance, then 363 days into the year you, as an investor, would have very little knowledge, and the possible correction when the yearly results are released could be huge. If, on the other hand, the company reported every Friday, uncertainty is very low, so you are more likely to invest on the Real value of the company.
The point is this: we don't have to go all the way to "real time"; releasing financial results on a daily or weekly or monthly basis would have a huge impact on "Fixing the Game", as opposed to the quarterly schedule the market is currently on.
Like I started out, this is a thought experiment only, as implementing this would be very difficult for many types of businesses. Revenue recognition complexities, backlog, inventory, etc. etc. etc could make real time financials more misleading than quarterly results and actually result in more Expectations behavior, rather than less. I can imagine, however, that the lifecycle of ad buys is usually pretty short, so that companies like Facebook could report much more often without significantly more cost (of course, you would only want to audit quarterly; accounting firms are not cheap).
