Active users are up but maybe not where the valuable advertising money is
Facebook has lost one million users in Europe, the company said late Wednesday, pointing the finger in part at GDPR.
The news, coming in an earnings conference call, was among the figures that sent the social media giant’s shares tumbling – wiping $120 billion from its market capitalisation on the results, as revenue growth slowed.
In a conference call announcing the companies Q2 results CEO Mark Zuckerberg said that: “GDPR was an important moment for our industry. We did see a decline in monthly actives in Europe, down by about 1 million people as a result.”
Revenues Up, Share Price Down
While the company reported revenues of £10 billion, up 42 percent year-on-year, Facebook’s share price dropped 20 percent in the stock market when CFO David Wehner said he believed revenue growth would continue to decelerate.
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CFO David Wehner informed investors that: “Our total revenue growth rate decelerated approximately 7 percentage points in Q2 compared to Q1.”
“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,” he added.
Growing new content offerings on the platform, such as its stories feature were highlighted as reasons for the expected decline in revenue.
Stories are user-generated short videos that can only be viewed a few times before they disappear after 24 hours. This type of content has a lower level of monetisation.
The focus and growth of stories and in security is expect to decelerate the company’s revenue even further.
“We are also giving people who use our services more choices around data privacy which may have an impact on our revenue growth,” David Wehner noted.
CEO Mark Zuckerberg stated how: “we’re investing so much in security that it will significantly impact our profitability. We’re starting to see that this quarter.”
Value in Facebook Users
The company has 2.23 billion active monthly users; an increase of 11 percent year-on-year. The company is seeing user growth in the Asia-Pacific market, but user growth in North America has stalled.
The decline in Europe and stagnation in North America has worried investors as these are the most lucrative advertising markets for the company.
In North America it earns $25.91 per user and $8.76 per user in Europe.
However, in Asia-Pacific it only earns $2.62 per user, while this market may grow in value, it is not high enough to counter a drop in users in America or a further drop in Europe.
Use of AI
As part of the changes in the platform’s policies towards fake accounts and what it deems negative or inappropriate content, the company is using artificial intelligence programes to help it remove accounts and content.
CEO Mark Zuckerberg commented that: “We also use AI to prevent fake accounts that generate a lot of the problematic content from ever being created in the first place.”
“Our investments in AI mean we can now remove more bad content quickly because we don’t have to wait until after it’s reported. It frees our reviewers to work on cases where human expertise is needed to understand the context or nuance of a situation.”
“In Q1, for example, almost 90% of graphic violence content that we removed or added a warning label to was identified using AI. This shift from reactive to proactive detection is a big change and it will make Facebook safer for everyone.”
New products for Facebook Users
During the conference call chief operating office Sheryl Sandberg discussed the new content and user tools the Facebook would be rolling out in the coming months.
Video content will be the main offering as it will continue to focus and grow Facebook stories.
Last month they release Facebook Ads Animator a tool for business to create video ads using photos and content that the company has uploaded to the site.
COO Sandberg told commented that: “We’re also testing Video Creation Kit, which gives advertisers easy-to-use video templates for different marketing objectives. By learning what performs best across our platform, we can help other businesses succeed.”
“We know that creating video can be more difficult for small businesses that have fewer resources, so we’ve launched new tools on Facebook to help anyone make videos that work well on mobile.”