Facebook’s day of reckoning: Blip or sign of broader turn?

Facebook’s day of reckoning: Blip or sign of broader turn?

UPDATED with after-hours stock price: Facebook's financial results for its tumultuous second quarter slightly undershot Wall Street forecasts for total revenue and monthly active users.

Facebook had already warned investors ahead of the market opening that they should expect a significant decline in growth rate, with users in Europe falling from 282 million to 279 million. Revenue increased 42 per cent to US$13.2 billion, missing the US$13.3 billion Wall Street consensus. 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.

Windsor added that Facebook is forced to hire more people to handle tasks such as filtering inappropriate content after discovering the limits of artificial intelligence.

Until Wednesday, Facebook shares had been at record highs as investors seemed to shrug off fears about data protection and probes into the hijacking of private information by the political consultancy Cambridge Analytica.

For more than a year - ever since Zuckerberg published a 5,000 word manifesto arguing that Facebook needs to make the world a better place by bolstering civic engagement and addressing social ills - the company has seemed torn between its philosophical mission and its economic one.

After having weathered all of the above, declining financial growth and static user growth has finally resulted in a major investor panic. But Facebook, which reported sales growth averaging 50 percent the past 10 quarters, may just be lowering the bar so it can win back confidence in future quarters. "We run the company for the long term, not just for this quarter", he said. Microsoft dropped $80 billion in 2000 as well.

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More likely, though, market buzzards are holding off because of how quickly some analysts are turning on the company. It went into effect in May and gives Europeans more control over their personal data.

At the same time, it could be an indication that the appeal of Facebook is slowly wearing thin, especially following all the privacy issues it has recently suffered.

"While those actions might take time to play out, it is still possible that threatened fines associated with GDPR to Facebook or other sellers of advertising could also have the effect of spooking advertisers into changing how they use data", said Wieser, who thinks the shares should be worth $140 U.S. - well below Thursday's level.

And Facebook warned that revenue growth from emerging markets and the company's Instagram app, which has been less affected by privacy concerns, would not be enough to fix the damage.

"It's going to be hard for markets today with such a massive market cap stock down so much".

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