Facebook is finally reaping the effects of its data scandal involving British political consulting firm Cambridge Analytica. But as the social media giant had anticipated and based on its position in online advertising, Facebook’s stock tumbling wave could only last for a moment.
Following the company’s release of its latest quarterly earnings this week, which revealed stagnating user growth in its key markets coupled with the rising costs of handling privacy issues, escalation of half-truths and election interference, Facebook on Thursday suffered a historic 19% stock depreciation, which erased more than $120 billion of its market value.
Facebook stock closed at $176.26 on Thursday, marking one of the largest ever losses in stock value suffered by a US-traded company. However, Investors began losing their balance since Wednesday when the stock first plunged as much as 24% before going to 18.96% loss after Thursday sales.
Financial stumbles are rare for Facebook. Despite fierce criticism from the company's changing content policies and rules for advertisers and as well as its failure to protect users' private information, Facebook’s financial performance had paddled an enviable growth which saw Mark Zuckerberg overtook Warren Buffett on the list of world's richest persons earlier this month.
Why is Facebook’s stock falling?
The problem came from a slowdown in the company’s revenue growth caused by sluggish user growth in the US and Europe, where Facebook generates its largest advertising revenue. Also, while announcing its last earning, Facebook revealed that it would continue to experience poor growth until around October 2018.
Facebook said it experienced 11% decline in daily active users globally, recording a total of 1.47 billion as of June, with the largest revenue region managing to hit 464 million: 279 million in Europe and 185 million active daily users in the US and Canada.
Facebook is holding one of the world’s most valuable data set
In the last quarter, Facebook made a 42%increase in revenue, generating $13.2 billion against analysts’ the projected $13.3 billion. The tech giant’s projected stagnation in user growth does not spell a complete doom to its profit-making strategies. The social media network has no grave competitor in its position as a company holding one of the world’s most valuable data set for online marketing. Facebook holds a stunning quota of mobile advertising alongside Google.
For the past few months, Facebook has demonstrated plans to reshape its revenue model in a bid to break into a new horizon of advertising. It has recently mentioned plans to invest in video content and other bets such as virtual reality and artificial intelligence. Facebook is a company that generates revenue from three other social platforms: WhatsApp, Instagram, and Messenger, which pride over 1 billion users, giving Facebook about 2.5 billion monthly users – slightly more than two-thirds of the world’s Internet-connected population. These are facts would fail to dispute a pending bounce back by the tech giant.
“Facebook, which reported sales growth averaging 50 percent the past 10 quarters, may just be lowering the bar so it can win back confidence in future quarters.” Analyst Gene Munster of Loup Ventures wrote, according to Bloomberg’s report. “The company has a track record of resetting revenue growth and expense expectations only to turn around and exceed those expectations the following quarter.”