Facebook user numbers disappoint, stock nosedives

Facebook Falls After Missing Q2 Sales Estimates

Only months after a data privacy scandal, Facebook is seeing fewer frequent users than it expected.

Facebook's shares had earlier closed in NY at US$217.50, a record high, and had gained 23 per cent this year.

Zuckerberg called it an "amazing acquisition", saying Instagram grew twice as fast as it would have by being part of Facebook, without explaining his methodology.

Facebook announced its Q2 2018 financial results on Wednesday - and in a rare miss, it failed to hit Wall Street's expectations.

Facebook said that it brought in adjusted earnings of about $1.74 per share for the period, which was two cents ahead of the Wall Street consensus estimate of $1.72 per share, according to Thomson Reuters.

Growth in the number of users who logged in each day fell short, too, up 11 percent year-over-year at 1.47 billion but still less than the 1.49 billion anticipated.

According to the research firm eMarketer, Facebook is expected to hold an 18 per cent share of the US$273.29 billion worldwide digital ad market, behind Google's 31 per cent. Facebook sales increased 47 per cent, year over year, in both the third and fourth quarters, of 2017.

Still, the loss of users should not have shocked investors because Facebook has said for the past two quarters that it was starting to hit the zenith of user growth in its most mature markets like North America.

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Revenue increased 42 percent to $13.2 billion in the quarter.

"There is never a "right time" for a transition like this, but the team and the company boast incredible talent and will navigate this well", Stretch said on his Facebook page.

Ross Gerber, an analyst at Gerber Kawasaki, said the latest figures suggest that the tide may be turning for Facebook and other social networks.

With Europe, users may have opted out of using the social network when they were confronted with its new privacy consent agreements, Wieser says. And the chief financial officer, David Wehner, said revenue growth would substantially decline for the rest of the year, partly because Facebook planned to give people more options with their privacy settings, including letting them limit the kinds of ads they saw. Zuckerberg in January said he was going to adjust the news feed to make sure people spend more time on Facebook with meaningful content from their friends and family members - a move the company has said would decrease user engagement with the site. Advertising systems on WhatsApp and Messenger remain in the trial phase.

Wehner attributed the poor revenue expectations to several factors: currency headwinds, the R&D cost of building and promoting new experiences, and impacts on Facebook's business from new privacy regimens in Europe due to GDPR.

One bright spot for Facebook has been Instagram, the photo-sharing app it bought for $1 billion in 2012.

While Zuckerberg has vowed to address the problems through major changes to its business practices and investments in new resources, analysts that cover the stock have maintained a positive outlook, insisting that it would essentially be business as usual for Facebook's lucrative advertising operations. The company's head count has already risen 47 percent since previous year, to 30,275.

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