Facebook takes historic dive

US$120 billion was wiped off Facebook’s market value as shares plunged 19 per cent

Facebook founder Mark Zuckerberg
Facebook founder Mark Zuckerberg

Facebook has suffered the biggest one-day wipeout in US stock market history one day after executives forecast lower profit margins.

Shares closed down almost 19 per cent at $176.26, wiping more than $120 billion off the company's value.

The wipeout comes after the social media giant announced it missed revenue expectations and growth is expected to be far weaker than anticipated.

During a routine analyst call, Facebook CFO, David Wehner, reportedly shocked analysts by saying the company faced a multi-year squeeze on its business margins. Executives warned about reduced revenue, tightening margins and the ongoing effects of privacy policy changes.

Facebook's margin fell to 44 per cent in the second quarter from 47 per cent a year ago. The company announced it spent heavily on security and related initiatives to protect the privacy of its consumers. 

Socialbakers' CEO, Yuval Ben-Itzhak, weighed into the discussion about Facebook’s Q2 earnings and what it means for the industry. 

“Facebook’s Q2 results came as a surprise but with 2.2 billion monthly active users Facebook is still the platform where most consumer engagement with brands is happening in the digital world. Despite growth being slower in Q2, Facebook’s daily and monthly user counts were up 11 per cent year-over-year,” Ben-Itzhak said in a statement to CMO

“This kind of growth at the scale of Facebook should still not be ignored. The market’s reaction to Facebook’s results feels nervous in the light of Cambridge Analytica and GDPR, however, we are still seeing marketers spending consistently on the platform, especially on Instagram."

He said Instagram, in particular, has emerged over the last year as an advertising powerhouse and revenue generator for Facebook.

“In June the platform hit one billion monthly users, and in comparing Facebook and Instagram ad share, we saw that Instagram’s share of ads has gone from 10 per cent to more than 50 per cent in just over a year. Social performance data shows that Instagram has become the most powerful platform for brands, making it very important to Facebook’s overall growth – today and in the future.”

He said since Facebook’s Q1 earnings and post Cambridge Analytica, Facebook has ramped up its efforts to become as transparent as possible.

“From the roll-out of Instagram verification badges in Australia to its recent announcement of a new View Ads tool, which provides a public list of all ads currently running on Facebook, Instagram and Messenger, transparency is key to the future of Facebook.

“These are all steps in the right direction to ensure that users are having an authentic experience. Authenticity should be the cornerstone to a good social media marketing strategy. In the fake news era, users want to know that the content they see comes from credible, trustworthy sources.”

Follow CMO on Twitter: @CMOAustralia, take part in the CMO conversation on LinkedIn: CMO ANZ, join us on Facebook: https://www.facebook.com/CMOAustralia, or check us out on Google+:google.com/+CmoAu 

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Show Comments

Blog Posts

Does your brand need a personality review?

There are five tell-tale signs your brand needs to take a long hard look at itself.

Charlie Rose

Senior Strategy Consultant, Principals

How to create profitable pricing

How do we price goods and services? As business leaders, we have asked ourselves this question since the history of trading.

Lee Naylor

Managing partner, The Leading Edge

Sport and sponsorship: The value of event sponsorship

Australia’s cricketers captured the nation’s attention during their recent run to the semi-final of the ICC Men’s World Cup. While the tournament ultimately ended in defeat, for over a month it provoked a sense of belonging, hope and empowerment for millions of people across Australia. Cricket, and sport in general, has a near-unique ability to empower individuals, irrelevant of their background, demographic or nationality.

Nikhil Arora

Vice-president and managing director, GoDaddy India

I didn't know about that. Thanks!

Jamison Herrmann

Twitter 'recap' helps you catch up with missed tweets

Read more

😂😂😂😂😂😂😂😂

Max Polding

What it takes to turnaround an iconic Australian brand

Read more

I spend a lot of time in my professional life as a provider of marketing solutions trying to persuade customers that CX, UX, UI and Custo...

sketharaman

Gartner VP: Why CMOs and CIOs must band together to make CX a discipline

Read more

I live the best deals at LA Police Gear.

Tyrus Rechs

6 Ways to ramp up Social Media to Your Web Design

Read more

Its absolute over priced acquisition. The CEO, must be fired for this all cash transaction. Absolutely no justification for prospective P...

about_face

Analysts question long-term play of SAP's acquisition of Qualtrics

Read more

Latest Podcast

More podcasts

Sign in