Markets

Facebook Suffers Huge One-Day Drop in Market Value

Facebook Suffers Huge One-Day Drop in Market Value

Many had come to consider Facebook nearly immune to image problems, especially after the most recent scandal involving the British company Cambridge Analytica.

New options Facebook is offering users to opt out of certain data collection - inspired in part by a new privacy law in Europe - could lead to less advertising revenue.

Facebook suffered a blow in China on Wednesday when regulators there withdrew their approval of a company innovation hub to support local startups, the New York Times reported on Wednesday, citing a person familiar with the matter.

Facebook shares fell another 0.8 percent on Friday, closing at $174.89 on the Nasdaq.

Much of the latest drop in value has come from Facebook insiders selling more than $4bn worth of stock since details of the Cambridge Analytica data-mining scandal surfaced. The stock was up more than 23 per cent for the year, before it reported earnings after Wednesday's close.

Even though things are now looking dismal for Facebook, there are a handful of Wall Street analysts who are holding to a positive outlook for the company, even though they conceded that the abysmal second quarter results were worse than anticipated - not to mention the fact that European privacy laws just went into effect at the end of May.

And Facebook warned that revenue growth from emerging markets and the company's Instagram app, which has been less affected by privacy concerns, would not be enough to fix the damage.

FILE - Facebook's CEO Mark Zuckerberg answers questions about the improper use of millions of users' data by a political consultancy, at the European Parliament in Brussels, Belgium, in this still image taken from Reuters TV, May 22, 2018.

Its Q2 report warned profit margins would plummet for years due to costs to improve privacy safeguards and slowing usage in its big advertising markets. But as I've said on past calls, we're investing so much in security that it will significantly impact our profitability.

It's a staggering drop-off for Facebook and flies in the face of Wall Street's expectations.

Siva Vaidhyanathan, a media studies professor at the University of Virginia and author of the new book, "Antisocial Media: How Facebook Disconnects Us and Undermines Democracy", dismissed the significance of the stock plunge.

The key metric of monthly active users rose 11 percent to 2.23 billion, below most estimates of 2.25 billion, while daily active users grew a weaker-than-expected 11 percent to 1.47 billion. BMO Capital raised its expectation to $2,250 per share from $2,000.

When people sign up with Facebook, they usually make a huge amount of data available to the group.

Wehner gave three different reasons why the company's revenue growth would decline: currency headwinds, greater investments in new kinds of content-sharing, like disappearing videos, and greater user control over privacy - a direct response to criticism the company has fielded.