Published: Thu, July 26, 2018
Money | By Ralph Mccoy

Facebook plunges $US150b on privacy and revenue concerns

Facebook plunges $US150b on privacy and revenue concerns

The after-hours trading was on lower-than-expected revenue numbers from its second-quarter earnings report. But the after-hours drop wiped about $150 billion of its value.

The company had cautioned investors to expect a big jump in costs because of efforts to address concerns about poor handling of users' privacy and to better monitor what users post.

Total expenses in the second quarter surged to $7.4bn (£5.6bn), up 50% from a year ago.

Operating profit margin, which fell to 44 percent in the second quarter from 47 percent a year ago, will sink to the "mid-30s" for more than two years, Chief Financial Officer David Wehner said in investor guidance.

Facebook CEO Mark Zuckerberg could slide to sixth place from third on the Bloomberg Billionaires Index if the downward trend following late trading on Wednesday in the United States continues through Thursday.

Facebook lost users in Europe in the second quarter, when it implemented changes to follow new privacy rules in the European Union and faced more intense scrutiny in the fallout from the Cambridge Analytica affair.

Facebook's revenue grew at its slowest pace in nearly three years. However, ad sales seemed unaffected by the scandal, rising 42% in the quarter to $13bn (£9.9bn).

The social media site had a rough hump day as the company was below the mark with its sales and its global daily active users during its second quarter of fiscal 2018, due in part to the slew of data leaks and fake news fiascos that plagued the company during the period.

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Advertising revenue, the lifeblood of Facebook's lean business model, came in at $13.04 billion, below the Street's $13.16 billion estimate.

The company said for the first time that more than 2.5 billion users interact with at least one of its apps each month, but analysts have said many of them are spending more time with Messenger, WhatsApp and Instagram.

Facebook attracted about 20% of digital advertising spending in the United States previous year, according to research firm eMarketer.

"It appears that stronger Instagram performance (according to our checks) was not enough to offset some of the core app headwinds", said Colin Sebastian, analyst at Robert W. Baird & Co in a note.

Facebook has shown that it can not sail forever forward while facing various storms, including Cambridge Analytica and the Russian government's use of the social media platform to sow divisions amongst Americans during the 2016 presidential campaign.

The threat of additional privacy regulatory setbacks remains a concern, according to analysts.

In early April, Facebook revealed in a blogpost that Cambridge Analytica may have gained 37m more users' data than originally reported, bringing the total number of people who may have been affected to 87m.

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