Facebook’s monster growth narrative is set to stall in the coming quarters, due in part to its recent privacy and data policy changes.
Shares plunged more than 20 percentage points in after-hours trading Wednesday when Facebook reported a $120 million whiff on its revenue goals – the company’s first miss since 2015 – and warned investors that growth will continue to slow throughout 2018.
CFO Dave Wehner said to expect “high single-digits” deceleration in revenue growth for the rest of the year.
Facebook’s sneeze also gave a few other platforms a bit of a cold. Twitter’s and Snap’s stocks declined slightly after the bell.
Wehner blamed the coming slump partially on Facebook giving people “more choice on data privacy, which may have an impact on our revenue growth.” He also pointed to exchange-rate-related headwinds and increased investment in products such as Stories, which don’t yet monetize at the same rate as news feed ads.
Even so, Facebook’s coffers remain full.
Ad revenue for the second quarter clocked in at more than $13 billion, up 42% year over year. Mobile accounted for $11.9 billion of that, an 87% increase from Q2 2017.
The average price per ad increased 27% and the number of ad impressions served grew 21% across Instagram and Facebook, meaning advertisers are still willing to pay a premium for Facebook’s inventory.
For a company that generated multiple billions in a single quarter, a $120 million miss isn’t much. But it no doubt rankles investors who aren’t used to seeing Facebook-related numbers go anywhere other than up and to the right.
Most analysts and observers expected a super quarter for the company. Although Facebook’s miss this quarter could have more to do with faulty forecasting than anything related to Cambridge Analytica or its other missteps, the growth deceleration coming in Q3 and Q4 is ominous.
Yet advertiser sentiment appears to remain strong. According to Facebook marketing partner 4C, there was a 15% increase in ad spend among its clients in the second quarter, a 49% YoY uptick.
Monthly active users and daily active users were up, hitting 1.47 billion and 2.23 billion in June, respectively, an 11% YoY increase in both cases. Around 2.5 billion people used at least one of Facebook’s family of apps in June.
But MAUs declined by around 1 million in Europe (DAUs by 3 million), a symptom of the General Data Protection Regulation. Facebook claims GDPR hasn’t had an impact on its revenue, but it’s also too early to say anything definitive. The rules went into effect in late May, more than halfway through the quarter.
CEO Mark Zuckerberg took the equable view.
“GDPR was an important moment for our industry,” he said, noting the slight usage decline in Europe. “At the same time, it’s encouraging to see the vast majority of people affirm that they want us to use context, including from websites they visit, to make their ads more relevant and improve their overall product experience.”