Facebook has historic stock drop in wake of scandal – Info PR

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.

Slate reported:

… 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 Guardian reported:

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.”

Bloomberg reported: “[I]t seemed almost inevitable that at some point, the social media giant
would get what it had coming.”

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After Facebook’s
data leak with Cambridge Analytica—and also due to the
EU’s General Data Protection Regulation laws
going into effect in May—3 million users in Europe left Facebook.

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.

The Financial Times reported:

… 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.”

Slate
reported:

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.)

Bloomberg
reported:

… [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.

Quartz reported:

… 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.

LiveMint reported:

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?

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