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Facebook's share price fell 20% this week after the company's latest quarterly results revealed stagnant user growth in key markets and rising costs badociated with misinformation , electoral interference and confidentiality issues. The market value of the company and Mark Zuckerberg's fortune reached $ 16 billion after the announcement of the company's financial results for the second quarter of 2018, the company's first full quarter since the Cambridge Analytica scandal
The central problem seems to be the deceleration of revenue growth, fueled by the stagnation of the user base in Europe and the United States, where Facebook is making the bulk of its revenue advertising. During the earnings call, the company revealed that growth would continue to slow down throughout the second half of 2018, putting the company out of a long period of time. "Hyper growth" (more than 40% from one year to the next). 19659002] "We expect our revenue growth rates to decline by high single-digit percentages sequentially in the third and fourth quarters," said David Wehner, chief financial officer of the company. -growth to just growth. In this case it is a step down function. That's why you see more of an over-reaction, "said Gene Munster of Loup Ventures
Is this because of confidentiality issues identified in the Cambridge Analytica scandal?
To a certain extent. The platform investment in security on the platform, including the fight against election interference, misinformation and confidentiality issues is a major contributor to rising costs. Facebook's privacy practices were scrutinized after the Observer revealed in March that the Cambridge Analytica data company had obtained tens of millions of data without their permission.
However, the company increased its spending after the US presidential election. about the impact this would have on profitability since November 2017 – well before the key revelations of Cambridge Analytica in March of this year.
Lynnette Luna, Senior Analyst at GlobalData, described it as "a fusion of weird things at the same time". She noted that in addition to the slowing growth and bad publicity of the last 18 months, the European General Regulation on Data Protection has been an important factor, contributing to a drop of 3 million. users between the first and second quarter.
What is the biggest single-day drop in the market value of a business, rising from a record high of $ 619 billion Wednesday to just $ 501 billion in early trading ? Thursday.
However, the valuation of the company is even higher than it was after the US Federal Trade Commission confirmed that it was investigating its practices in the United States. protection of privacy after the revelations of Cambridge Analytica. , powered by the stagnation of the user base. "src =" https://i.guim.co.uk/img/media/c0212df2d2d90644e32c20896f4e1506d328e1c1/0_21_4522_2714/master/4522.jpg?w=300&q=55&auto=format&usm=12&fit=max&s=8380064faaeb521f5de3ef6f9b8a5d86 "/>
The main problem for Facebook seems to be the deceleration of revenue growth, fueled by the stagnation of the user base. Photo: Alamy Photo
What does this mean for Facebook employees?
A problem little discussed for Facebook is the impact of falling stock prices on employees. Most Facebook employees get a significant share of their total stock compensation. Until now, despite a series of scandals after the 2016 elections, the company has steadily grown, allowing the company to retain its staff.
"If the perception is that the price of the stock will not be such a positive force for their total compensation, this could have a profound impact on Facebook," said the investor and virulent critic of Facebook, Roger McNamee. McNamee said the high price of the company's stock has prompted employees to "ignore" some of the company's problems, including questions about its role in changing the elections, the proliferation of the company. misinformation and hate speech on the platform. The Philippines.
"If the stock was the drug that allows them to do that and the employees stop trusting the stock, you have a chance for Susan Fowler," he says of the woman who triggered a revolt. to Uber after the publication of an essay highlighting the badism prevalent in the company
Is this the beginning of the end of Facebook?
Absolutely not. Even though user numbers on the social network are stagnating in Europe and the United States, the company still managed to get more revenue from each user.
In addition, the company has plenty of monetization opportunities with Instagram (thanks to the recent launch of IGTV), Marketplace, Messenger and get businesses to pay to interact with customers via WhatsApp.
"Expect to see greater importance on the growth of Facebook's family of platforms rather than Facebook," said Luna. [ad_2]
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