Why Facebook’s user growth stalled in the second quarter of 2018

These have not been the best of times for social networking giant Facebook and that’s putting it mildly. The social networking giant’s journey took a controversial turn after the US presidential elections in 2016 and the Cambridge Analytica scandal added fuel to the fire later. But reputation aside, the second quarter results for 2018 show that the company has taken a hit from these controversies.

Why Facebook’s user growth stalled in the second quarter of 2018

Facebook reported a revenue of $13.2 billion in the second quarter of June and a profit of $5.1 billion even as its user growth for the quarter slowed down. It reported 2.23 billion monthly active users at the end of Q2 and 1.47 billion daily active users, an 11 per cent increase year-over-year. However, the results were below expectations and its share dropped 24 per cent, wiping out almost $150 billion in market capitalisation on Wednesday.

According to data from online statistics platform Statista, the social media company added no daily active users in North America and Europe in the last quarter. This affected the company as most of its revenue come from these regions, as compared to Asia-Pacific and other parts of the world, where the user numbers are on the rise but average revenue per user is very low.

For instance, in India, the company had reported Rs 341.8 crore (approx. $52.58 million, 1$ = Rs 65) in FY17 (April 2016-March 2017) and net profit of Rs 40.7 crore, according to the Ministry of Corporate Affairs. This had grown from Rs 177 crore (approx. $27.23 million) in FY16, while the company’ global revenue for 2017 stood at $40.7 billion. India overtook the US to become Facebook’s number 1 country in 2017, with 241 million users. According to Statista, the country had 270 million users on Facebook.

As a result, while Facebook’s average revenue per user in the US and Canada region is $25.91 per user, in Asia-Pacific it is as low as $2.62.  According to Statista, the popularity of the stories format isn’t as easy to monetise as new feed is another reason for its lower than expected growth.

The company has a two-fold challenge if it wants to maintain its growth trajectory — make more money in emerging economies with high user base and get more users in developed countries where it makes money.

source: businesstoday