Facebook, the world’s largest online social media and social networking service, has always maintained its online presence and enjoyed its exponential growth. But, through recent privacy scandals and moderation controversies, this growth is beginning to decline. The recently posted earnings of Facebook for the second quarter of 2018 accurately proves this decline. This is the first time that Facebook’s quarterly sales did not meet the expectations in three years!
Facebook’s Quarterly Growth
Facebook has around 2.23 billion active monthly users and 1.47 billion daily ones. The quarterly growth of Facebook wasn’t bad though, with 42 percent year-over-year growth in the ad-revenue and 11 percent year-over-year growth in daily & monthly active users. But this is still the lowest count since 2011. Also, according to Recode, Facebook has stopped growing entirely in the US and Canada, which are its most profitable markets.
Cause of Declining Profits
Before the Cambridge Analytica scandal happened in March 2018, Mark Zuckerberg, CEO of Facebook said that fighting privacy abuse from foreign governments through wrong information and false news would lead to declining profits of the company. Also, it is not completely clear that the poor performance of the company this quarter is a result of the security measures it has been taking to fight abuse from foreign governments.
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According to Facebook, giving users more privacy controls would affect its advertising revenues, as it results in less targeted ads which is less effective, resulting in lower prices for ads placement.
Facebook Displayed No Signs of Negative Impact
The first quarter of 2018 in April, was a good time for the company because it was able to recover its US user decline as in the fourth quarter of 2017. This was possible by making a News Feed adjustment that de-prioritized page content and news. Hence, it means that, before this quarter, Facebook was never negatively affected by its News Feed changes, privacy scandals, Mark Zuckerberg’s presences in the court, or monitoring of hate speech and fake news on its platform.
But the present numbers tell a different story. According to David Wehner, Chief Financial Officer of Facebook, this recent instability in user growth would keep on increasing, and it may upsurge to a single digit percentage point decline in the third and fourth quarter of this year.
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