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Facebook stock falls 24 percent following report of slow user growth

Facebook stock falls 24 percent following report of slow user growth

US and Canadian Facebook visitors provided an average revenue per user (ARPU) in the latest quarter of $25.91, the vast majority from advertising, while the ARPU of Europeans was $8.76, according to figures provided by Facebook. The social media company has contended for years with criticism about its content policies, its failure to safeguard private data and its changing rules for advertisers.

Facebook reported on Wednesday that growth in digital advertising sales and in the number of its users had decelerated in the second quarter.

In midday trading Thursday, the company's market value (the number of outstanding shares multiplied by the value of a single stock), fell by more than $122 billion.

A political analytics firm, Cambridge Analytica, acquired the data of tens of millions of Facebook users from a researcher who used a quiz app that was shared on the platform.

While Facebook was fined and CEO Mark Zuckerburg apologised repeatedly, Facebook's reputation has been damaged and it is literally paying the price. In the United Kingdom, especially, Facebook drew the ire of lawmakers, who hit the social network with a $650,000 fine, the maximum amount allowable for mishandling user data.

The drop in European visitors was potentially due to the continuous revelations highlighted there about Facebook's breaches and weaknesses, and the implementation of the European Union and related entities' General Data Protection Regulation (GDPR) in late May. Facebook's shares had gained more than 10 percent over the last month and closed higher at $217.50 on Wednesday, before the company reported earnings. The owner of the world's largest paid online TV network reported slower subscriber growth in the second quarter, and the company's stock has fallen almost 10 per cent since last week. We're starting to see that this quarter.

Facebook stock falls 24 percent following report of slow user growth
Facebook stock falls 24 percent following report of slow user growth

The 19 percent loss in Facebook's stock chopped $119 billion off its market value.

The new laws were only in effect for one month of the quarter, which means the company may feel more of an impact in the current quarter.

Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma, in recent years has trimmed, but not eliminated, the amount of Facebook shares in his clients' accounts, and he said he sees the company as a three-year investment.

"As we have written about extensively, the advertising industry - and digital advertising no less - has limits to growth, which we think is the primary factor constraining Facebook's revenue opportunity", Wieser said in a note after the earnings. The company said headcount was 30,275 as of June 30 - an increase of 47 percent year over year.

The plunge followed Facebook's warning late Wednesday that its revenue growth will slow down significantly for at least the remainder of the year and that expenses will continue to skyrocket.




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