It has been a troubling year for Facebook and things took an even worse turn yesterday when the company announced its earnings for Q2 2018.
That’s not to say Facebook isn’t making money as the firm announced revenue of $13 billion – a 42 percent increase year-on-year – but that figure only tells one side of the story.
Revenue growth slowed by 7 percentage points in Q2 compared to Q1 and far worse, user numbers aren’t looking too healthy.
Facebook’s real value is in its users and when you look closely at those figures you can see that it has hit a wall of sorts. In the US and Canada, daily active users (DAUs) remained unchanged from Q1 2018 to Q2 2018 at 185 million, the same can be seen for monthly active users in the region.
The real kicker was seen in Europe where Facebook lost three million DAUs. As you might’ve guessed, the reason for that is the General Data Protection Regulations (GDPR).
“GDPR was an important moment for our industry. We did see a decline in monthly actives in Europe — down by about 1 million people as a result,” Facebook chief executive officer Mark Zuckerberg said during an earnings call.
Elsewhere in the world Facebook is still growing but Europe, the US and Canada are starting to pay fewer and fewer dividends.
What really seemed to spook investors, however, is word from Facebook higher-ups that profitability will be negatively impacted moving forward.
“Looking ahead, we will continue to invest heavily in security and privacy because we have a responsibility to keep people safe. But as I’ve said on past calls, we’re investing so much in security that it will significantly impact our profitability,” Zuckerberg said.
Chief financial officer David Wehner reiterated that revenue growth would slow down, saying that the fact brands are monetising Stories could be a adversely affecting earnings.
“There are several factors contributing to that deceleration. For example, we expect currency to be a slight headwind in the second half vs. the tailwinds we have experienced over the last several quarters. We plan to grow and promote certain engaging experiences like Stories that currently have lower levels of monetization. We are also giving people who use our services more choices around data privacy which may have an impact on our revenue growth,” said Wehner.
Following these revelations TechCrunch reports Facebook lost $120 billion in market cap after its share price fell 20 percent in after-hours trading.
The social network is between a rock and a hard place at the moment. On the one hand you have investors that want Facebook to be profitable, on the other users who want a better privacy and less fake news which costs money and in the middle, Zuck et al.
Things are starting to look worrisome at Facebook and it’s now seemingly on a timer. Should Q3 be as bad as Facebook is making it out to be we feel a miracle will be needed to turn things around at the firm.
[Source – Facebook][Image – CC BY SA 2.0 Esther Vargas]