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Facebook Shares Plummet After Missing User, Revenue Targets

26 July 2018

There's a scratch in Facebook's Teflon coating.

Facebook shares fell more than 8 percent, to $199.95, in after-hours trading.

The proximate cause was the company's disclosure its revenue rate growth will slow precipitously in the current quarter and the next one.

Wehner said the "deceleration", as he termed it, is "a combination of factors", including the rising US dollar; what Wehner called the company's newfound "focus on growing engaging new experiences like Stories and promoting of those; giving greater controls to users of the service people who use service for privacy".

"The implementation of GDPR in Europe and continued scrutiny of privacy policies following the Cambridge Analytica scandal left investors feeling uncertain about Facebook", says Aaron Goldman, CMO of 4C, a Facebook marketing partner.

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Despite the rocky quarter, Facebook shares had hit an all-time high before Wednesday's earnings report and its quarterly revenue was still up 42 percent from this time past year.

During the earnings call, Facebook executives teased a new figure to remind investors of its massive audience even as growth slows.

Facebook's daily and monthly user counts were up 11 percent year-over-year, confirming that the momentum of its business is still overpowering its PR problems that took place prior to the company publishing these reports.

The Menlo Park, Calif. -based company reported second-quarter earnings that bested analyst estimates, but the results fell short of projections for revenue and daily active users.

At times, it has seemed as though Facebook can't quite decide where its values really lie.

The biggest chunk of online advertising budgets tend to flow to the services with the most data on their users and the broadest set of users in terms of age.

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According to the research firm eMarketer, Facebook is expected to hold an 18 percent share of the $273.29 billion worldwide digital ad market, behind Google's 31 percent.

Facebook's shares recovered somewhat after the call.

The company reported net income of US$5.11 billion, or US$1.74 a share, compared with analysts' average estimate of US$1.71 a share, according to data compiled by Bloomberg.

Revenue in the second quarter totaled $13.23 billion, shy of the $13.33 billion analysts expected, raising worries that the political and social backlash against the company is affecting its bottom line.

In late May, the General Data Protection Regulation came into effect in Europe, restricting the way advertising companies collect data from individuals. In 2016, Russian Federation ran a campaign on Facebook to cause political unrest in the U.S. around the presidential election. They could similarly disadvantage smaller, lesser known companies that don't have the resources to comply and which could face big fines if they don't.

A metric worth noting that Facebook released for the first time is 2.5 billion.

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"We also believe "considerable strength" from the Instagram side of the house has neutralized any soft spots on the core Facebook platform in our opinion".

Facebook Shares Plummet After Missing User, Revenue Targets