Is Facebook finally facing up to its growth slowdown?

Cantillon: Social media giant was smart enough to warn investors of potential decline

Facebook reported its slowest revenue growth in about six years in the third quarter of the year. It doesn’t look like it will get much better – in the short term anyway. Photograph: Niall Carson/PA Wire

Facebook reported its slowest revenue growth in about six years in the third quarter of the year. It doesn’t look like it will get much better – in the short term anyway. Photograph: Niall Carson/PA Wire

 

This has been a tough year for Facebook. The Cambridge Analytica scandal in March, a data breach in September that exposed the private data of millions of users, concerns over extremism on the platform: Facebook has been using up a lot of its goodwill lately.

Numbers are falling. Growth in users, a cause of concern in the past, has slowed significantly. And although the company beat analysts’ profit estimates in its third-quarter figures this week, it missed targets for growing monthly users. In the three-month period, Facebook lost one million daily users in Europe, possibly linked to the impact of GDPR in the region. In the US and Canada, daily user numbers remained flat.

Fatigue

Maybe people have finally had enough. Or perhaps it’s just indicative of growing fatigue with social media. Rival Snap and social media platform Twitter are fighting their own battles on that front. Snap recently said it would stop using daily active users – which showed the first decline for the company in its most recent figures – moving to monthly active users.

But while the social network’s days of quarter-on-quarter stellar user growth are behind it, it is slowing revenue growth that may – eventually – concern investors.

Facebook reported its slowest revenue growth in about six years in the third quarter of the year. It doesn’t look like it will get much better – in the short term anyway.

Conservative game

In early 2018, revenue growth hovered around the 50 per cent mark. That growth was 33 per cent in third quarter, a significant decline, but not entirely unexpected – except, perhaps, by those who thought Facebook was playing a conservative game when it made its revenue predictions in July, when its revenue and profits also disappointed the markets.

Growth looks set to slow further before the end of the year. The graph will make discomfiting viewing for anyone who is counting on the firm’s continued growth.

And yet, Facebook’s share price has held up in the past day or so, even in the face of less than inspiring news. That has a lot to do with the fact that the company had already alerted investors to the potential decline, getting out ahead of the bad news before it broke.

Perhaps the company has learned some lessons from the past year after all.