Facebook’s Growth Slows, Shares Fall After Privacy Scandals

Facebook’s shares lost as much as a quarter of their value after executives said that profit margins would plummet for several years due to the costs of improving privacy safeguards, Reuters informed.

The social media company reported 2.23 billion monthly active users, shy of Wall Street forecasts of 2.25 billion, CBS News informed. It’s the first time Facebook whiffed on an earnings forecast since 2015, in what has been a volatile day for the company’s stock, which reached a record high Wednesday morning before the earnings report came out.

A new European privacy law and a succession of privacy scandals involving Cambridge Analytica and other app developers have affected Facebook’s business, the company further warning that the toll would not be offset by revenue growth from emerging markets and Facebook’s Instagram app, which has been more immune from privacy concerns.

CEO Mark Zuckerberg said back in November 2017, long before the Cambridge Analytica scandal broke in March of this year, that fighting abuse from foreign governments in the form of misinformation and fake news would cut into the company’s profits, Verge reminds.

On an earnings call with investors, Facebook leadership did say that giving users more privacy controls would in the future cut into its advertising revenues, as ads become less targeted and thus less effective as a result, resulting in lower prices for placement. The company had also cautioned investors to expect a big jump in second-quarter costs because of efforts to address concerns about poor handling of users’ privacy and to better monitor what users post.

The plummeting stock price wiped out as much as $150 billion in market capitalization and erased the stock’s gains since April when Facebook announced a surprisingly strong 63 percent rise in profit and an increase in users. Should the shares drop on Thursday, it would be Facebook’s largest single-day decline, topping a 12 percent decrease in July 2012.

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