Last night for Facebook can be summarised in this tweet from Fox News tech correspondent Chris Ciaccia: “Facebook has lost $130B in market cap since it reported earnings tonight,” he wrote. “Put another way, it’s lost a GM, Ford and a Target COMBINED.” Although at the time of writing this morning, Facebook’s market cap remains $578.7bn – down a slightly less steep $42.7bn from the day before.
Why did the earnings go down so badly with Wall Street? On the face of it, Facebook’s quarterly financials were decent enough: Q2 revenues up 42% year-on-year to just over $13bn, and net profits up 31% to $5.1bn. Monthly active users (MAUs) were up 11% to 2.23bn, and daily active users (DAUs) were also up 11%, to 1.47bn.
However, the issue here is deceleration – Facebook’s quarter-on-quarter growth rate for DAUs was its slowest ever at 1.44%. The social network admitted that its monthly user total actually fell in Europe (from 377 million to 376 million MAUs) and stayed flat in North America at 241 million.
Announcing that 2.5 billion people use at least one of its ‘family of apps’ (Facebook, Instagram, WhatsApp and Messenger) wasn’t enough to prevent the company’s share-price sliding, especially when the company’s chief financial officer was warning that “Our total revenue growth rates will continue to decelerate in the second half of 2018, and we expect our revenue growth rates to decline by high-single digit percentages from prior quarters sequentially in both Q3 and Q4”.
(The 2.5bn people figure *is* noteworthy though. “It refers to individual people rather than active accounts, so it excludes when people have multiple active accounts on a single app,” CEO Mark Zuckerberg told analysts last night in Facebook’s earnings call.)
There are plenty of hot-takes out there this morning on Facebook’s challenges: including plenty of ‘the privacy and fake-news issues are finally catching up with the company’ verdicts. Enthusiastic (and premature) grave-dancing aside, though, this can’t help but remind us of what lies in store for the now-public Spotify if and when its user-growth disappoints investors.
In a world where even Facebook can lose nearly a quarter of its value in a matter of hours, the buffeting of the markets requires cool heads and long-term strategies. Talking of which, stand by for Spotify’s latest quarterly financials in a few hours’ time. We’ll be bringing you the details…