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Slow Growth and a European Exodus – But Don’t Ring Facebook’s Death Knell Yet

July 26, 2018

Facebook is having a week to forget. On Wednesday the social media giant revealed that revenue growth would “continue to decelerate in the second half 0f 2018” – and that it had shipped three million European active users.

Yesterday the news hit big: Facebook shares plummeted 20%, wiping $124 billion off the company’s value. It is the largest loss of value in one day, for a US-traded firm (Intel held the previous record, with a $91bn bust in the middle of the 2000 dot-com bubble burst).

Founder and CEO Mark Zuckerberg lost $16bn of his own personal fortune. He sought to allay fears of a steady slide by placing the blame on Facebook’s recent emphasis on security. “Looking ahead, we will continue to invest heavily in security and privacy because we have a responsibility to keep people safe,” he said.

Facebook continues to be embroiled in a number of privacy and security scandals, in the wake of the Cambridge Analytica affair. Zuckerberg has appeared in front of US lawmakers to defend his company’s actions, and has refused to grant an audience to their UK counterparts.

That appears to have prompted the European exodus. But it should not be overstated. The number of users on the continent has dropped from 282m to 279m – a drop in the ocean of Facebook’s 2.23bn “monthly active” users (those who use the site at least once a month), which has itself climbed 11% on 2017.

“It’s not that Facebook’s business is bad – it is very, very good – only that it is not as astonishingly perfect as Facebook’s shareholders thought it was,” wrote Bloomberg‘s Matt Levine. Clearly, Zuckerberg and his team are prioritizing security in a way that they know will harm the company’s bottom line, and they’re doing it anyway.

Expect very different news this time next year. Facebook may have just smashed a dubious record. But if it’s able to lose so much money in one day, and not just survive but bounce back almost instantly, the company is in pretty robust shape.

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Filed Under: Consumer, Social

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