Facebook is suffering a major financial blow after months of punishing headlines about privacy and content concerns. Its stock plunged up to 24 percent in after-hours trading Wednesday, wiping out as much as $150 billion of the social media giant’s market value in under two hours. The loss, as CBS News contributor Nicholas Thompson put it, is “larger than the entire size of McDonald’s.”
The stock drop comes after Facebook announced its second-quarter revenue missed Wall Street analysts’ expectations by around $130 million and growth in the number of active users is slowing down.
“All of this has come together into a very bad day for Facebook….They have much lower operating margins than they had before. User growth is not so good and it looks like the new products they’re rolling out are not as profitable and so the market completely freaked out. To put that number in context the amount Facebook’s stock declined in market cap is larger than the entire size of McDonald’s. I mean that is a huge drop and it could end up being the largest drop in history,” Thompson.
Part of what’s happening, according to Thompson, is that Facebook’s focus on user privacy makes its products harder to monetize.
“So after GDPR (the EU’s General Data Protection Regulation), after Facebook started really solving the problems that it has, it turns out you can’t make as much money in the long run and that is partly what the markets are reacting to,” Thompson said. “The new stuff like the Stories which is Facebook’s big priority where you put in what you did during the day and it disappears is much harder to monetize than Newsfeed. And they’re not making as much money on Instagram, even though it’s a hugely growing product, as they did on Newsfeed,” Thompson said.
To put a positive spin on the news, Thompson said it’s a sign that Facebook is committed to fixing their problems and will most likely do just fine in the long run.
“They’re going to keep spending this money which means they’re going to be less profitable. That is the positive way to look at it,” Thompson said. “They have four of the six biggest social platforms owned by that company so they’re going to be OK.”
By noon Thursday, Facebook’s huge loss in stock market value had shrunk somewhat, to around $97 billion during regular trading hours, but its stock plunge is still set to be the largest market-value drop in history, Bloomberg reported, beating out Intel’s $91 billion loss in one day in September 2000.
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