Facebook Loses $120 Billion Overnight

Facebook’s stock prices opened at approximately $172 on Thursday (26th July), meaning that it had lost over 20% of its value in overnight trading. The plummet in stock price equalled a total loss of $123.4 billion for the company.

The stock prices had been steadily climbing since March this year, two months before Facebook Dating was announced. By the time the market closed on 25th July, the price of a Facebook share was $217.50, the highest it has ever been.

The dramatic decline was caused by a poor earnings report for the second quarter of 2018.

TechCrunch has speculated some reasons why Facebook could have had such a disappointing Q2:

  • Slow User Growth: Facebook’s monthly user count grew by just 1.54%, comparable to 3.14% in Q1. The user count actually shrank in Europe, as well as flat-lining in North America, the company’s two biggest markets.
  • Decelerating Revenue Growth: More and more users are just checking Facebook Stories, where there are no adverts, rather than their news feeds. It’s already been estimated that Stories will overtake news feeds by 2019, so advertisers will have to catch up.
  • Privacy and Well-being: Following the Cambridge Analytica scandal, Facebook was forced to update its privacy controls. Therefore, it was harder for adverts to be targeted at certain users. Furthermore, Mark Zuckerberg is insisting that his company will continue to push the “Time Well Spent” philosophy. While this is positive for a consumer’s well-being, it is negative for Facebook’s revenue. 

The race for which company will be the first to hit a $1 trillion valuation has been talked about for a while now. Apple, Amazon, Microsoft and Alphabet are the front runners, and are each valued somewhere between $800 billion and $950 billion.

Facebook still had an outside chance, but this setback has pushed them all the way down to just over $500 billion, meaning it is solely a four horse race.

Read more here.