Over $109bn wiped off Facebook's market cap after growth shock

Facebook-Privacy-Scandal-Aftermath

Facebook shares took a hit this week after the world's biggest social network reported weaker-than-expected user growth in the first full quarter since being rocked by a series of scandals on data privacy. In the United States and Canada, the user base remained flat, and in Europe, it declined.

Chief financial officer David Wehner warned Wednesday in an earnings call with analysts that revenue growth had already "decelerated" in the second quarter and would drop "by high single digit percentages" in coming quarters.

USA and Canadian Facebook visitors provided an average revenue per user (ARPU) in the latest quarter of $25.91, the vast majority from advertising, while the ARPU of Europeans was $8.76, according to figures provided by Facebook.

Facebook's margin fell to 44 percent in the second quarter from 47 percent a year ago as it spent heavily on security and initiatives to convince users the company was protecting their privacy. CEO Mark Zuckerberg alone saw his net worth fall by roughly $16 billion as a result.

Despite the focus on Facebook's role in the affair, its shares have increased 23 percent since the beginning of the year, compared with a 6.5 percent rise for the Standard & Poor's 500 index.

Facebook's fortunes shifted in under two hours as the company first reported revenue and user growth that missed expectations and then issued warnings about future growth and expenses.

Zuckerberg confirmed during the call that GDPR was responsible for the user decrease in Europe.

Facebook has been an omnipresent part of American news for what seems like all of 2018, and rarely with a positive connotation. They believe users have woken up to Facebook's growing list of controversies and made a decision to vote with their "Log Out" buttons.

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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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Facebook has faced scrutiny since reports surfaced that British data firm Cambridge Analytica had improperly accessed the personal data of up to 87 million users.

Zuckerberg was compelled to meet with lawmakers in the US and European Union to testify about how Facebook is protecting user data.

Poletti said the steep decline was "stunning not only because of the scale, but because Facebook had managed to avoid this type of punishment through a multitude of sins too numerous to fully list here". "The mood was incendiary there".

Despite Facebook facing the hard truth behind user disenchantment, it still remains a profitable company and we definitely haven't seen the last of it yet.

"The market was expecting a lot more", Wieser says.

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