Facebook Share Value Plunges After Growth Warning

Nearly $150 billion was wiped off the value of Facebook after the company warned that revenue growth was slowing.

Shares in the company plunged by almost 25 per cent in late trading after Facebook chief financial officer David Wehner told analysts that Facebook’s revenue growth would decelerate in the second half of the year and expenses would soar in 2019, The Times reported.

The company reported a second-quarter profit of $5.1 billion, up from $3.9 billion a year ago, as revenue rose to $13.2 billion from $9.3 billion. That revenue, however, was below expectations as expenses for improving security after the data leak, policing content after the Russian election meddling scandal and other costs soared by 50 per cent compared with the same period a year ago to $7.4 billion.

Facebook chief executive Mark Zuckerberg said: “We are investing so much in security that it will have a significant impact on our profitability,”  the Guardian reported. “We are starting to see that this quarter.”

David Wehner added: “Our total revenue growth rates will continue to decelerate in the second half of 2018, and we expect our revenue growth rates to decline by high single-digit percentages from prior quarters sequentially in both Q3 and Q4.”

The number of monthly users on Facebook’s platforms climbed to 2.23 billion at the end of June, missing forecasts of 2.25 billion, from 2.2 billion at the end of March.

Publishers have pointed to the high trust levels placed in news media by the public in sharp contrast to Facebook as the company as weathered a series of scandals including Cambridge Analytica and concerns about use of the platform to influence elections.

In a comment piece for the Guardian, Barry Lynn, executive director of the Open Markets Institute, accused Google and Facebook of endangering democracy by strangling the free press. 

He said: “Thus far, regulators in Europe and the United States have entirely failed to apply such traditional antimonopoly rules to Google and Facebook. This has left them free both to strip ad revenue from trustworthy publishers and to steer readers to and from publications almost at will.

“The citizens of the world’s democracies face a choice. We can allow Google and Facebook to continue to strangle half our free press to death, and turn the rest into cowed pets. Or we can demand that our governments act now to protect the journalists who protect our most fundamental liberties.”

Alphabet and Facebook are the world’s largest digital advertisers, respectively controlling 31 per cent and 18 per cent of the $273.29 billion market, research from Emarketer suggests.