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Facebook Inc. plunged up to 20% Thursday after months of scandal and criticism finally hit society where it hurts: growth.
The financial performance of goliath social media had previously seemed immune to fierce criticism of its content policies, its inability to protect private data and its changing rules for advertisers. But Facebook on Wednesday announced second-quarter business and user growth figures lower than badysts' forecasts, leaving investors in shock.
The company's shares fell by more than $ 120 billion market value. This is the largest ever loss in value in a day for a US-listed company. The stock trades at $ 179.92 at 9:41 am in New York
The company told Wall Street that the numbers will not improve this year. Chief Financial Officer David Wehner said that revenue growth rates would decline in the third and fourth quarters. Analysts who follow Facebook have been ridiculed, often asking at a teleconference with executives for more information on how the company's financial future had changed so dramatically.
"I think a lot of investors are struggling to reconcile this deceleration., An badyst at Jefferies LLC, told Facebook executives, asking for a little more clarity on the reasoning." It seems like Magnitude is beyond all that we have seen, especially across a number of technologies (companies) we cover. "
Before the results, Facebook had 44 purchase notice, two sales and two catches Some badysts have tempered their prospects Thursday
For Facebook, financial stumbling blocks are rare.The last time the company missed its estimates, the first quarter of 2015 was exceeded. results followed a period when data confidentiality issues were severely examined, Mark Zuckerberg, CEO, testifying before the US Congress, 19659002] The quarter was also marked by the implemented by Europe new stringent data laws, which, according to Facebook, has reduced the number of daily visitors to this region. The company has been bombarded by public criticism over its content policies, particularly in countries like Myanmar and Sri Lanka where misinformation has led to violence. And he continued to suffer the fallout from investigations into the Russian manipulation of the platform during the 2016 US presidential election.
All of these problems face a hard truth for the company: Facebook, the social network with 2.23 billion active monthly users, can not grow forever. "The core Facebook platform is in decline," said Brian Wieser, badyst at Pivotal Research Group.
Facebook reported 1.47 billion daily active users in June, compared with 1.48 billion average badysts' estimates compiled by Bloomberg. The company's user base has reached its largest market, the United States and Canada, with 185 million daily users, while it has decreased by 1% in Europe to reach 279 million daily users. Overall, average daily users increased by 11% over the same period a year earlier.
Revenues increased 42% to $ 13.2 billion in the quarter. Analysts forecast $ 13.3 billion. The social network still holds one of the most valuable data sets in the world on what interests people and makes this audience easily accessible to advertisers. The company remains in a dominant position in mobile advertising alongside Google Alphabet Inc.
"As we have written extensively, the advertising industry – and digital advertising no less – has limits to growth, which we believe is limiting Facebook's revenue opportunity, "said Wieser in a note after the profits. "Deceleration such as guided leadership suggests that as the company continues to grow rapidly, the days of 30% + growth are numbered."
Wehner gave three different reasons why business revenue growth would decline: increased investment in new types of content sharing, such as the disappearance of videos, and increased privacy control by users – a direct response to critics of the company
After the entry into force of the general regulation on data protection to check their privacy settings and make sure they wanted to share certain types of data. Facebook is deploying a version of these protections in the rest of the world. If users choose to share less data with Facebook, this could adversely affect the company's advertising targeting capabilities, making them less attractive to searchers. marketing.
In Europe, politics has played a role in North America, which is the most lucrative advertising market of the company. Facebook has disrupted some business by putting new rules in place to get all political advertisers to check their identities. The company may have stopped more advertising purchases than expected by applying a broad definition of what is considered "political."
After the earnings report, executives explored the potential of Facebook's other properties. fuel growth. The company owns three other properties with more than one billion users: WhatsApp, Messenger and Instagram. Together, the entire Facebook product suite has 2.5 billion unique monthly users, the company unveiled for the first time.
Among the most recent companies, the Instagram business model is the most mature and has likely contributed significantly to the quarter's business figure. said. Zuckerberg called it "amazing acquisition," claiming that Instagram grew twice as fast as if it had been part of Facebook, without explaining its methodology. The company does not burst Instagram revenues.
Facebook announced that it would increase its spending to invest in video content and on new bets like artificial intelligence and virtual reality. The company is also rapidly expanding its real estate across the globe to host a wave of hiring, which includes thousands of new workers to help fight the manipulation of foreign elections on the site. The company had 30,275 employees as of June 30, an increase of 47% year-over-year.
Prior to the announcement of the results, Facebook's shares had closed at $ 217.50 in New York and had gained 23% this year.
The company's revenue forecast was "unprecedented," said Loup Ventures badyst Gene Munster in a note to investors. But Facebook, which has recorded average sales growth of 50% over the last 10 quarters, may well lower the bar to regain confidence in the coming quarters
"The company has a history of growing around and exceed these expectations in the next quarter, "wrote Munster.
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