Facebook's Stock In Free Fall Because Everyone Already Uses It

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Investors are fleeing Facebook’s stock in after-hours trading following the company’s first real post-scandal earnings report missed expectations. Investors are maniacs. Facebook is massive, it’s making massive amounts of money, and it’s practically gobbled up every user it could potentially have.

When we say that Facebook has brought “everyone” on the internet under its umbrella, we’re exaggerating, of course. But for the first time, Facebook reported how many people use at least one of its world-dominating products. About 2.5 billion people are a user of Facebook, Instagram, WhatsApp, Messenger, or one of the others that no one thinks about. (Ahem, Oculus.)

There are an estimated four billion people who are connected online in some way. Subtract the under-13 crowd, the people who will never use Facebook, the people with a terrible connection, and so on, and suddenly the company’s potential to bring in more users looks pretty difficult, at least in the short term. How many companies can claim that it’s literally not even possible at the moment to double their user base?

Facebook’s last earnings report came after the Cambridge Analytica scandal, but didn’t reflect what kind of impact that controversy had on its business. It did great in the quarter just after the scandal broke, and investors sang the hymn of Zuckerberg.

Today, Facebook did great, but it missed some of its targets, and its stock fell by as much as 24 per cent, at the time of writing. Here’s a little run down of what went wrong:

  • Facebook’s core network has been flat in the US and Canada for four quarters straight.
  • Analysts expected 1.48 billion worldwide daily users based on a Bloomberg average. Facebook delivered 1.47 billion daily users.
  • Average projections expected $US13.3 billion ($17.8 billion) in revenue; it turned out to be a lowly $US13.2 billion ($17.7 billion).
  • Average revenue per user turned out to be $US5.95 ($7.98) instead of the $US5.97 ($8.01) that Wall Street wanted.

You get the idea. Facebook turned in some stats that are a little lower than people expected and now its stock is plunging.

But consider just one stat from the report: Revenue increased 42 per cent year-over-year. That’s crazy. It may not be earning on ExxonMobil’s level just yet, but who knows what the future holds.

People certainly don’t seem to be leaving the platform in droves despite the weekly reminders that it’s irresponsible and crappy — 22 million more people still used Facebook daily in the past three months than did the quarter before it. (That said, that’s the smallest growth on that metric it’s seen since 2011.)

Where can Facebook go from here? Well, it’s doing its best to get more people online and continue filling its user base. These efforts have been shady and not very successful. It’ll continue to hollow out the media-sphere until its one of the only places left to advertise.

And then there’s the whole VR dystopia that it envisions opening up over the next few decades.

Facebook’s stock might go through a rough point for a little bit, and other investors will step in to pick it up cheap. It will never die, it will only grow stronger.

And while Apple is focused on being the first company to be worth $US1 trillion ($1.3 trillion), Facebook is focused on being the first company to sell every human on the planet as its product.

[Facebook]

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