Facebook Crashing: Company Loses $150 Billion as User Growth Slows

Marcus Newton
July 27, 2018

Facebook missed quarterly revenue expectations for the first time in years as shares of the social media giant dropped 8 percent in after-hours trading Wednesday.

Revenue in the second quarter totaled $13.23 billion, shy of the $13.33 billion analysts expected, raising worries that the political and social backlash against the company is affecting its bottom line.

Declining user growth, growing privacy awareness, and dwindling advertising profitability all seem to indicate trouble for the company in the future.

The commentary in the wake of Facebook's second quarter results has generally been pretty brutal, with most of the takes focused on reality setting in.

Facebook has no end in sight for scrutiny and oversight, with regulators, prosecutors, and other public and private parties in multiple countries examining the company's actions, those of nation states allegedly manipulating news and advertising, and that of firms like Cambridge Analytica, which obtained massive amounts of information that many Facebook users likely considered private. About this being, you know, the moment core Facebook starts finally paying the piper, the byproduct of months of rolling scandals - Cambridge Analytica, Infowars, losing cool points to Instagram, you name it.

Facebook shares and the personal fortune of Mark Zuckerberg took massive hits as the social network felt the impact of a growth slowdown and the fallout of recent privacy scandals.

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Facebook has also faced public image problems because of the way Russian Federation used the site to try to influence the 2016 US presidential election. The legislation, known as the General Data Protection Regulation, cost Facebook about 1 million users in Europe, he said.

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As part of its second quarter of 2018 earnings announcement on Wednesday, the company trumpeted a huge jump in both year-over-year revenue (42 percent) and profit (31 percent).

Gene Munster, a venture capitalist at Loup Ventures, said in an email that Facebook is "entering a new period" where declining user growth will translate to slower revenue growth.

Ben Bajarin, an analyst at Creative Strategies, calls this "new territory" for Facebook. Worldwide daily user growth for Facebook's namesake service slid for its sixth straight quarter, bringing it to almost 1.5 billion users in the second quarter.

In contrast to Facebook, Amazon on Thursday in the USA reported a record profit and forecast plowing past analyst estimates. Amazon.com Inc fell 2.8 percent ahead of its own results report later on Thursday. Misinformation on WhatsApp contributing to mob killings in India have added to the pressure on Facebook to re-evaluate how its services maintain security and decorum.

Other reports by MaliBehiribAe

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