Published: Thu, July 26, 2018
Finance | By Gustavo Carr

Facebook shares slump as user growth cools

Facebook shares slump as user growth cools

Facebook is rolling out a version of those protections to the rest of the world.If users choose to share less data with Facebook, that could hamper the company's ad-targeting abilities, making it less attractive to marketers.

"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, referencing a commitment he first announced in November 2017 in an effort to clamp down on foreign election interference, misinformation and hate speech. In addition, Facebook said its daily active users rose 11 percent from a year earlier to 1.47 billion, compared with 13 percent growth in the previous quarter.

The company earned $5.1 billion, or $1.74 per share, up 31 percent and above analysts' estimates of $1.71.

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

Facebook also suffered a rare regional decrease in the number of users, as its base of daily users in Europe fell from 282 million at the end of March to 279 million at the end of June.

Facebook Inc saw the first signs of user disenchantment in the midst of public scandals over privacy and content, with second-quarter revenue and average daily visitors missing analysts' projections.

Total expenses in the second quarter surged to $7.4bn (£5.6bn), up 50% from a year ago. The company's shares also took a sharp hit in the days following the revelation that Cambridge Analytica had illegitimately gained access to the personal data of tens of millions of the company's users. "GDPR is an added head wind, albeit containable", he said.

Pivotal Research Group analyst Brian Wieser, who has a sell rating on the stock, says there are limits to growth in digital advertising, even for Facebook.

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Wehner gave three different reasons why the company's revenue growth would decline: currency headwinds, greater investments in new kinds of content-sharing, like disappearing videos, and greater user control over privacy - a direct response to criticism the company has fielded.

Shares sank 17.8 percent to $178.77 in after-hours trading after closing at $217.50.

Facebook's after-hours decline was $133 billion, according to Dow Jones data gurus. That same number fell in Europe, where the company has had to comply with a strict new privacy law, known as GDPR, the Washington Post reported.

For advertisers, though, Facebook and Instagram are performing as well as ever. Facebook's stock continued to nosedive during the call with investors, who pressed the company on its slowing growth and future ad revenue.

Facebook's revenue grew at its slowest pace in nearly three years.

The threat of additional regulatory setbacks remains a concern, according to analysts.

The stock slide began right after Facebook reported second-quarter results after the market closed Wednesday.

Facebook has shown that it can not sail forever forward while facing various storms, including Cambridge Analytica and the Russian government's use of the social media platform to sow divisions amongst Americans during the 2016 presidential campaign.

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