Facebook Inc saw the first signs of user disenchantment in the midst of public scandals over privacy and content, with second-quarter revenue and average daily visitors missing analysts' projections.
Facebook Inc. on Wednesday warned revenue growth would slow in the second half of the year and said that expenses would grow faster than revenue next year, sending shares down as much as 22 per cent over concerns about the impact of privacy issues on the social media company's business.
Instagram has grown to 1 billion monthly users from 600 million in late 2016, while Facebook's two messaging apps, Messenger and WhatsApp have each reported well over 1 billion monthly users. Analysts were generally expecting earnings-per-share of $1.72 on revenues of $13.3 billion. But the results followed a period in which data-privacy issues came under harsh scrutiny, with Chief Executive Officer Mark Zuckerberg testifying before U.S. Congress for hours on the company's missteps. News that the data firm accessed information from as many as 87 million Facebook (FB) users without their permission broke in the final weeks of the first quarter.
"Fundamental damage to the Facebook platform has been "very contained" in our opinion and is generally better than feared from the white knuckle period a few months ago", Daniel Ives, head of technology research at GBH Insights, said in a note to clients Wednesday.
There's a scratch in Facebook's Teflon coating as the social networking company loses approximately US$150 billion ($219b) in market capitalisation in under two hours, Reuters has reported. At the stock's lowest point, more than $148 billion of the company's value - significantly more than the entire market cap of IBM ($134 billion) - had been wiped out.
Facebook suffered a blow in China on Wednesday when regulators there withdrew their approval of a company innovation hub to support local startups, the New York Times reported on Wednesday, citing a person familiar with the matter. "It just seems like the magnitude is beyond anything we've seen, especially across a number of the tech (companies) we cover".
"So far, there has been no evidence that shows that controversies, such as the spread of fake news, Russian interference in the USA elections, and the Cambridge Analytica scandal, have prompted advertisers to divert ad dollars", says Haris Anwar, senior analyst at Investing.com.
They were also expecting 2.25 billion monthly active users for the quarter.
Although Facebook shares were in a slump after the Cambridge Analytica scandal broke earlier this year, the stock had risen sharply and hit record levels this month. Mobile ads accounted for the vast majority of Facebook's total revenue, but also came up short of analysts' estimates.
Wehner gave three different reasons why the company's revenue growth would decline: currency headwinds, greater investments in new kinds of content-sharing, like disappearing videos, and greater user control over privacy - a direct response to criticism the company has fielded. Facebook disrupted some business by putting in place new rules to get all political advertisers to verify their identities.
Facebook used to be made out of corporate Teflon.
Wehner said quarterly revenue growth would be closer to 30 percent the rest of the year.