Published: Wed, October 31, 2018
Markets | By Otis Pena

Record low user growth at Facebook

Record low user growth at Facebook

Big winners on Wall Street in recent years, internet giants including Facebook, Inc and Google parent Alphabet Inc have suffered a battering over the last month.

Profit jumped nine per cent to US$5.14 billion on revenue that leaped 33 per cent to US$13.7 billion in the quarter that ended Sep 30. Monthly active users, meanwhile, were up to 2.27 billion-a ten percent jump compared to past year. Three analysts surveyed by Bloomberg expected 2.28 billion, on average. Earlier this year, the company said revenue growth rates would decline in the third and fourth quarters, sending shares plummeting. That set a low bar for Tuesday's results.

As Facebook user growth has tapered off, its ad sales had continued to surge as it found ways to better target ads to draw clicks and views.

Most of its new users also live in regions that are less profitable than in the US.

Zuckerberg said Facebook was also looking more toward some of the properties it already owned, such as messaging apps WhatsApp and Messenger, which together have more than 2 billion users.

On top of those concerns, advertisers have been grappling with Facebook's impact on society.

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"Facebook grew revenue at a nice pace in the important USA and Canada markets", EMarketer analyst Debra Aho Williamson said. According to media reports, the advertisements would be powered by Facebook's native advertising system and would be aimed at helping users understand and participate in businesses using the messaging app. And that's not good news for Facebook.

The earnings report comes a week before an even bigger test for the company: The U.S. midterm elections. Facebook's executives have touted their commitment to avoid the missteps of the 2016 election, when Russian Federation ran a misinformation campaign that disrupted United States politics.

Facebook has been working to restore trust with users after a scandal in March over user data that an app developer shared with a political consultant - an incident that led to Zuckerberg testifying before Congress in April.

Shares of Facebook are up 5.6% on Wednesday morning at $154.47, reflecting a 12.5% loss YTD, underperforming the tech-heavy Nasdaq Composite Index's 6.1% increase and the broader S&P 500's 2% return over the same period. About 14 million people had sensitive information, like their search history and location check-in history, accessed by hackers.

Shares fell again after Facebook Chief Executive Mark Zuckerberg, on a conference call with analysts, repeated the company's warning that shifting user behavior would leave revenue and cost growth out of sync for "some time".

It was up more than 4% when Facebook finished its call with analysts late Tuesday.

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