Facebook shares have plunged 24% as the social network saw its user base and second-quarter revenue grow slower than expected.
A decline of 24% in Facebook’s value in regular trading would represent the biggest one-day loss in value for a US company.
It was the company’s first full quarter following the Cambridge Analytica privacy scandal.
The firm said it had 2.23 billion monthly active users at the end of June, up 11% on June 2017, the slowest growth in more than two years.
Analysts attributed the user growth shortfall largely to European privacy rules that went into effect in May.
The Cambridge Analytica scandal prompted several apologies from chief executive Mark Zuckerberg and generated calls for users to desert Facebook, which has grown strongly since launching as a public company in 2012.
The shares, which have risen as much as 23% this year, fell to $201.40 in trading after the bell as the company warned that significant investment would hit profits into next year.
If such a share price fall was to be realised when trading opens on Thursday, it would mean more than $150bn (£114bn) would be wiped off the value of the social media firm – with founder Mark Zuckerberg seeing his personal wealth, on paper, plunge by $17bn.
Total expenses in the second quarter surged to $7.4bn (£5.6bn), up 50% from a year ago. However, ad sales seemed unaffected by the scandal, rising 42% in the quarter to $13bn (£9.9bn).
Analysis
Yuval Ben-Itzhak, CEO of social media marketing firm Socialbakers, explores why this doesn’t come as much of a surprise – but why worried, growth-hungry investors may be overreacting.
For marketers and businesses, not much will change – Facebook is still the platform where most consumer engagement occurs. Now, with a new focus on transparency taking centre stage, and with Instagram crossing the one billion monthly users threshold and their ad share skyrocketing, it seems Facebook’s growth outlook isn’t as dreary as investors might have thought.
Ben-Itzhak, Socialbakers CEO, said:“Facebook’s Q2 results came as a surprise, but with 2.2 billion monthly active users Facebook is still the platform where most consumer engagement with brands is happening in the digital world. Despite growth being slower in Q2, Facebook’s daily and monthly user counts were up 11 percent year-on-year. This kind of growth at the scale of Facebook should still not be ignored.
“The market’s reaction to Facebook’s results feels nervous in light of Cambridge Analytica and GDPR, but we are still seeing marketers spending consistently on the platform, especially on Instagram.
“Over the last year we’ve really seen Instagram in particular emerge as an advertising powerhouse and revenue generator for Facebook. In June the platform hit one billion monthly users, and in comparing Facebook and Instagram ad share, we saw that Instagram’s share of ads has gone from 10% to more than 50% in just over a year. Social performance data shows that Instagram has become the most powerful platform for brands, making it very important to Facebook’s overall growth – today and in the future.”
“Since its Q1 earnings and post-Cambridge Analytica, Facebook has ramped up its efforts to become as transparent as possible. From the roll-out of Instagram verification badges in Australia to its recent announcement of a new View Ads tool, which provides a public list of all ads currently running on Facebook, Instagram and Messenger, transparency is key to the future of Facebook.
“These are all steps in the right direction to ensure that users are having an authentic experience. Authenticity should be the cornerstone to a good social media marketing strategy. In the fake news era, users want to know that the content they see comes from credible, trustworthy sources.”