Facebook Misses Market Growth Estimates, Shares Plunge 20%

Following the comment from the chief financial officer of Facebook that the revenue growth of the company would “continue to decelerate in the second half of 2018”, the shares of the company tumbled by more than 20 per cent during after hour trading. The company said that the fall in revenue growth would primarily be because of large investments to be made by the company in security and privacy.

Even though the company made a 42 per cent gains year-on-year in revenues at $13.2 billion for the second quarter, Wall Street’s estimates on revenues and user growth was missed by the company for the same period.

The company also reported a 11 per cent increase year over year increase at 2.23 billion for its monthly active users. the daily active users were also up at 1.47 billion. However, in the largest ad markets of the company – US and Europe, the growth was flat.

The company stocks fell even during an earnings call by the company because of Wall Street estimates on user growth at 1.49 billion and revenues at $13.3 billion were not reached by Facebook.

“We are investing so much in security that it will have a significant impact on our profitability,” said the CEO, Mark Zuckerberg, during the call. His comments were reflective of a pledge that was given by him in November 2017 in the company’s attempts to foreign interventions in domestic elections, hate speech and misinformation or fake news. “We are starting to see that this quarter.”

The chief financial officer, David Wehner, said: “Our total revenue growth rates will continue to decelerate in the second half of 2018, and we expect our revenue growth rates to decline by high single-digit percentages from prior quarters sequentially in both Q3 and Q4.”

There was a drop in Europe for the first time for the company in the number of daily and monthly active users at 279 million from 282 million and to 376 million from 377 million respectively. There was no growth for the same key parameters for Facebook in the US at 185 million and 241 million for daily and monthly users respectively. Despite this, the company managed to generate more revenues per user from these markets compared to what it had achieved in the previous quarter.

A new metric was also revealed by Zuckerberg – at least one of Facebook’s apps is used by 2.5 billion people every month, which includes Facebook, Instagram, WhatsApp or Messenger.

Describing Instagram as an “amazing success”, Zuckerberg also expressed hope about the possibility of the company making money from Instagram TV, a longform video format that the company had launched at the end of June.

The company sees potential for monetization of the interactions between businesses and customers that take place both Facebook Messenger and WhatsApp, said the chief operating officer, Sheryl Sandberg, but added that it still has to go a long way.

(Adapted from TheGuardian.com)

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Categories: Economy & Finance, Strategy, Sustainability, Uncategorized

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