Late in July, Facebook’s shares dropped a huge 19% in a single day – the biggest one-day loss of value in US stock market history. As trading closed, the social network giant had lost over $100 billion in value, while Mark Zuckerberg’s personal wealth had dropped by nearly $16 billion.
Just 24 hours later, Twitter’s stock dropped 21%, after announcing it had lost 1 million active users – the combination of which caused a mass tremor across Wall Street.
To some analysts this has been a long time coming, thanks to a slowdown in growth, dwindling users’ attention and the fallout from recent political and data handling scandals.
To shaky shareholders it was as simple as concerns that neither platform would be able to sustain the profit levels they once held – and for that reason, they were out.
The impact on profit is expected to come from multiple directions, but namely costs up and users down, the (significant) costs coming from having to improve privacy safeguards and data protection.
Facebook claimed it would double the number of employees working on safety and security to 20,000 this year – and that doesn’t come cheap.
Twitter too has said that efforts to rid its platform of spam has led it to eject millions of accounts (about 3 million to be precise – although there has been an 8% drop in abuse reports). New European laws and GDPR have also had an impact, with legislation only likely to continue.
Jack Dorsey, Twitter’s co-founder and chief executive, said the numbers “reflect the work we’re doing to ensure more people get value from Twitter every day”.
What has long been the fear for Facebook is that the business model depends on new user growth, and with 1.94 billion monthly active users, Facebook may simply have run out of people to recruit.
What’s more, there is an increasing concern that young people are leaving the platform, as older ones remain. “Teens are abandoning – or just not joining Facebook” said Richard Holway, chairman at UK tech analyst house TechMarketView.
These factors will ultimately cause a slowdown in advertising on the platform, and therefore profits – whether now or in the near future, which of course is all shareholders care about.
But that doesn’t make either Facebook or Twitter lame ducks, rather such news will only spur both the readjust to changing media habits in a saturated market. The recent international launch of Facebook’s Watch platform marks a bold step towards diversification of the platform’s offering, and an all important move in to content curation. Even with its current numbers, the platform remains heads above market leaders like YouTube, Amazon and Netflix in terms of audience.
Moreover, if we readjust to focus on quality rather quantity, this can only mean good things for both advertisers and users – healthy platforms, quality data, engaged customers – ultimately positive for both brands’ long term growth.