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Zuckerberg may face challenge as Facebook goes ex-growth

Has Wall Street fallen out of love with Facebook?

The social media behemoth’s shares fell 20 per cent yesterday, not so much because it narrowly missed its quarterly earnings target of $13.3bn (posting $13.2bn) or that user numbers slipped back in the US and Europe, its most valuable markets, but a doomy warning from CFO David Wehner.

Wehner said: “Our total revenue growth rates will continue to decelerate in the second half of 2018, and we expect our revenue growth rates to decline by high single-digit percentages from prior quarters sequentially in both Q3 and Q4.”

And the reason? The extra costs associated with cleaning up its privacy and security act which require substantially more people, beings the likes of Facebook and Google are happier without unless they’re harvesting revenue.

Founder and CEO Mark Zuckerberg (below) said: “We are investing so much in security that it will have a significant impact on our profitability. We are starting to see that this quarter.”

On the plus side Zuckerberg also said he expected Facebook’s apps – Facebook, Instagram, WhatsApp and Messenger – contribute a bigger share of profits. He said 2.5 billion people use these, nearly twice the number accessing the Facebook website.

So Facebook isn’t on its uppers yet but the outlook has undoubtedly grown darker. Facebook and Google (no relation) are under fire from so many quarters (Google recently copped a €4.3bn fine from the EU for Android antitrust violations) that life is going to be much more of an expensive hassle in the future.

For a long while such companies seemed to have discovered the secret of eternal growth and riches. But life, as other monopolists of the past could tell you, ain’t like that.

Facebook’s Zuckerberg is doing his best to massage down investor expectations but that’s a tricky task. Ask WPP’s founder and former CEO Sir Martin Sorrell. Facebook’s big investors may feel that such a course needs someone else at the tiller.

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