Facebook’s shares tumble as growth disappoints
Facebook shares tumbled by more than 20 per cent on Wednesday after the social media network’s revenue and user growth fell short of investor expectations.
The firm, which is facing backlash for its handling of fake news and privacy, said it had 2.23 billion monthly active users at the end of June.
This was up 11 per cent on June 2017, the slowest growth in more than two years.
Facebook said it expected revenue gains to slow, as people make use of new options to limit advertising and less profitable overseas markets drive growth.
The firm also plans to spend billions to improve the way it monitors content, tracks advertisers and treats user data – areas where it has faced regulator scrutiny.
The firm, which owns Instagram and WhatsApp, is also investing in new features, such as virtual reality and video.
Shares in Facebook initially fell about 12 per cent in after-hours trade in New York, but losses accelerated as the firm outlined its spending plans.
“They gave a very disappointing outlook for the second half of the year and 2019 and that’s going to significantly weigh on the stock in the near term,” he said.
On the whole, people are apparently not deserting Facebook. Monthly active users – ie those who interact at least once a month – were steady in the US, down ever-so-slightly in Europe, and up everywhere else.
But for a company used to growing those numbers handsomely throughout the year, a lack of meaningful growth will cause concern, if not panic.
Sadly the company doesn’t break down its Europe numbers into anything more granular – which means we can’t see the effect the Cambridge Analytica scandal had on British users.
Analysts tell me they consider Cambridge Analytica a “blip” in Facebook’s history, though another quarter like this one would be even more impactful than what we saw during Wednesday’s after hours trading.
During its earnings call, Facebook warned investors to brace themselves: it doesn’t expect revenue growth to improve for at least the rest of this year.
Facebook profits in the quarter were $5.1bn, up 31 per cent from the same period in 2017.
User growth has flattened in the US and Canada, key markets for the company due to the high prices ads there command.