Even social media behemoth Facebook isn’t impervious to a PR crisis.
The platform’s executives have been struggling to regain trust and repair its reputation in the wake of its Cambridge Analytica scandal. On Wednesday, it was dealt a huge blow that cost the company $119 billion—and its co-founder and chief executive, Mark Zuckerberg, $17 billion.
… On an earnings call with investors, Facebook reported that its revenue grew by 42 percent over the same time last year, reaching $13.2 billion for the quarter—a number that was lower than the $13.3 billion analysts expected. The slight miss may have been what sent Facebook’s stock plunging more than 23 percent after the call in after-hours trading, but more likely it’s what’s going on with some of the social network’s metrics.
The collapse of Facebook’s share price is the biggest ever one-day drop in a company’s market value. Shares fell to $176, valuing the company at $510bn, a drop of $119bn from a record high of nearly $630bn on Wednesday.
… David Wehner, Facebook’s chief financial officer, said on Wednesday that the company’s decision to give its users “more choices around data privacy” following the Cambridge Analytica scandal “may have an impact on our revenue growth”.
“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,” he said. “Looking beyond 2018, we anticipate that total expense growth will exceed revenue growth in 2019.”
Facebook is still making money, and it has plans to make more, through advertising offerings, virtual reality products and other services.
“Despite stagnant user growth in its biggest markets, Facebook continues to rake in billions in ad revenue—mostly on mobile,” Slate reported. “Mobile ad sales accounted for 91 percent of the company’s ad revenue this quarter.”
However, the plans don’t make up for the significant drop in growth, which netted Facebook its biggest source of money.
… Hannah Kuchler writes that analysts are scrambling to remake their models for a world where Facebook revenue grows in the 20 per cents, not the 40 per cents. Facebook expects margins to slip from 44 per cent this quarter to the mid-30s in two years. “It was jaw-dropping guidance,” said Daniel Ives, an analyst at GBH Insights. “It was a tough pill to swallow for the bulls.”
If Facebook manages to make it through this year’s election season without another major scandal and can demonstrate its value to users with new offerings like Facebook Watch, the company may well see upward movement in user growth again. Facebook is certainly investing in more manpower, reporting a 30,275 headcount as of June 30, which is an increase of 47 percent over the same time last year.
However, Facebook might be nearing saturation with several user markets—and some groups, such as teens, are turning to other platforms such as Instagram and Snapchat. (Though Facebook owns Instagram, that platform’s growth and revenue aren’t counted in Facebook’s forecasts.)
… [T]he company’s bigger problem is that the main social network— the invention that made it a corporate behemoth—simply can’t grow much more. And the new dollars Facebook will mint in the next few years will have to come from businesses that are less certain, like ads in chat applications, virtual reality, television-like video content and social media updates that disappear.
That’s not to say that Facebook doesn’t have room to expand its user base. Even with concerns over Facebook’s WhatsApp spreading fake news in India, the country is providing the platform with a large user pool—one from which Facebook can continue to grow.
… India continues to be the backbone for [Facebook’s] growth, Zuckerberg said. The social media platform’s global user base increased to 1.47 billion, up 11% compared to last year, “led by growth in India, Indonesia, and the Philippines,” he added.
Active users in India are up 27% in the past six months alone (+50 million), compared to growth of 12% (+26 million) in the US over the same period.
Despite these strong gains, social media penetration in India remains relatively low, with just 19% of the country’s total population using Facebook in June. That compares to 73% penetration in the US, and a global average of around 42%.
However, the potential users projection in India far from compensates for Facebook’s woes. The platform has an uphill battle to regain user growth and investor confidence.
What do you think of the announcement and stock price fall, PR Daily readers?