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Facebook’s disappointing Q2 earnings show why the company needs Instagram more than ever

July 25th, 2018 at 4:16 PM
Facebook Earnings Q2 2018

Hours after its stock hit a record high during trading, Facebook reported its earnings for the second quarter and came in below analyst estimates on metrics like revenue and daily active users. The news sent Facebook shares crashing some 20 percent, which suggests reality may be catching up to the social networking giant — and the flap over fake news and related scandals may be starting to take a toll.

Revenue fell a little short of estimates — $13.23 billion, compared to the Thomson Reuters estimate of $13.36 billion. Likewise, global daily active users during the quarter were 1.47 billion, short of the 1.49 billion estimate from StreetAccount and FactSet.

Daily active users in both Europe and North America were down just slightly. In North America, the number was 185 million (short of FactSet’s estimate of 185.4 million) and 279 million in Europe (compared to FactSet’s 279.4 million estimate).

On a call with analysts, Facebook CEO Mark Zuckerberg reiterated that the company making significant investment in security upgrades to its products will affect its profitability and that “we’re starting to see that this quarter.”

Via a post to his own Facebook page, Zuckerberg added some extra context about the quarter, noting: “We continue to invest heavily in safety and security. This quarter, our systems identified and removed thousands of fake accounts, pages, and groups before the Mexican elections. We launched our tool to make political advertising much more transparent, including letting you see who any political or issue ad is targeting, how much they’re spending and more. This is a higher standard of transparency than TV or print ads. Beyond this, we now have 20,000 people working on security and content review across the world.”

Facebook’s earnings beat in April showed that advertisers — and users, to an extent — weren’t yet abandoning the company en masse in the wake of flaps like the Cambridge Analytica and InfoWars scandals. On today’s call, however, Facebook executives said they expect revenue growth compared to last year to be lower especially as we get into the rest of 2018.

A metric worth noting that Facebook released for the first time today is 2.5 billion. That’s the number of people using any app within its family of apps each month.

Today’s earnings release was the latest in a string of major stories to come out of Facebook in the past day or so, including the brutally frank memo from outgoing chief security officer Alex Stamos — which Buzzfeed published here — that talked about a need for the company to “pick sides” on moral and humanitarian issues.

Meanwhile, Facebook general counsel Colin Stretch announced plans to depart Facebook at the end of the year. And while some news reports disclosed the apparent establishment of a Facebook subsidiary in China, one day later that turned out to be not the case at all.

A very busy week for Facebook, in other words, keeps getting busier.

Andy is a reporter in Memphis who also contributes to outlets like Fast Company and The Guardian. When he’s not writing about technology, he can be found hunched protectively over his burgeoning collection of vinyl, as well as nursing his Whovianism and bingeing on a variety of TV shows you probably don’t like.

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