Markets

Facebook hammered as user growth cools

Facebook hammered as user growth cools

Facebook's margin fell to 44 percent in the second quarter from 47 percent a year ago as it spent heavily on security and initiatives to convince users the company was protecting their privacy.

Other companies have, in the past, experienced similar plummets on the stock exchange, if not quite as severe as Facebook, who are now battling new data laws and public concern over their privacy policies.

For numerous world's richest people, losing $16.8 billion in a day would be a wipeout. He was listed Thursday as $81.9 billion poorer than Jeff Bezos, who still hold the top spot on that list.

"High expectations can be a remarkable burden, and the reaction is often brutal when they are missed, but the revenue miss was slight, and $13.2 billion is not to be sniffed at". Shares recovered slightly, closing after-hours trading down 20.2% at $217.50. Even so, if Facebook is legitimately investing the time and money in improving privacy at the cost of slowed growth, it should all be to consumer benefit in the end.

User growth has flattened in the United States and Canada, key markets for the company due to the high prices ads there command. Leading up to the new stricter privacy rules, Facebook notified users across Europe of pending changes to its privacy policies.

Facebook had 2.23 billion monthly users as of June 30, up 11 percent from a year earlier, but well short of what industry analysts had been expecting.

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The social media platform earned $5.1 billion, or $1.74 per share, for the second quarter.

European advertising revenue growth in Europe "decelerated more quickly than other regions", partially because of the new European privacy laws, Wehner said. Other markets offer much less value: Asia-Pacific users rack up just $2.61 in revenue, and the rest of the world lumped together, a mere $1.91.

"Given the scale and sophistication of the activity we've seen, we believe most people on Facebook could have had their public profile scraped in this way", Chief Technology Officer Mike Schroepfer wrote in a statement at the time.

Describing the announcements as "bombshells", Baird analysts said the issues were to a large degree "self-inflicted" as Facebook sacrifices its core app monetization to drive usage. All users had to affirm consent to its data collection practices before being allowed to continue to use Facebook.

Still, the loss of users should not have shocked investors because Facebook has said for the past two quarters that it was starting to hit the zenith of user growth in its most mature markets like North America. The report also predicted far weaker growth in the future than had been expected. "Looking beyond 2018, we anticipate that total expense growth will exceed revenue growth in 2019".