Facebook Loses Billions of Dollars in Value Overnight

Facebook has remained the social media giant since a very long time now and considering how rapidly tastes of users change along with serious competition, the news of Facebook’s total value declining from $629.6 billion to $506.2 billion overnight should not come as a surprise. On a brighter note, the devaluation is not totally because of the data compromise by Facebook that has been a hot topic recently!

The share price of Facebook closed at a record-high $217.50 on Wednesday and opened at only $172 the next day when the earnings for quarter 2 were announced. However, earnings are not the only factor to blame because there are some other reasons behind this fall in value. The user count of Facebook remained flat this quarter in the US and Canada while it decreased in Europe by approximately a million users. If these major markets fail to grow, a rapid growth in even the rest of the world is useless.

Apart from the number of users, Facebook reported the slowest-ever user growth rate globally. Last quarter, it reported a growth of 3.14 as compared to quarter 2 when the growth was only 1.54. It is for this reason why Facebook might have announced the “family of apps audience” metric that reported 2.5 billion people using at least one app from Facebook, Instagram, and WhatsApp. This surely hides the performance of Facebook alone!

Next, the CFO David Wehner himself predicts revenue deceleration over the coming quarters. The reasons he provided includes new privacy controls, currency problems and new social media experiences like stories. What can we expect from the investors now?

The final reason that may have led to this decline in Facebook’s value is the shift from news feed to stories by advertisers. Users are more inclined towards stories now and while story ads are more attractive, there are no links directing to the online stores in them and are not as well-optimized as banner ads on Facebook.

It seems like this is finally the declining point for Facebook unless it introduced something that would rapidly bring back users and advertisers.