Facebook’s forecast for the future looks suddenly bleak

On Wednesday, for the first time in three years, Facebook failed to meet Wall Street’s expectations for revenue and user growth. The company’s user base of 185 million users in the United States and Canada remained flat over the last quarter, and added just 22 million users worldwide — the lowest number of additions since at least 2011. Facebook stock opened on an almost 20 percent loss Thursday morning, before it started slowly climbing up again.

On one hand, you couldn’t call the news a complete surprise. As Mike Isaac noted, Facebook has warned for months that the changes it was making to the News Feed would reduce its growth. And Mark Zuckerberg told analysts that the company’s efforts to fix its platform would have a meaningful, and negative, effect on revenue.

There’s also the limit of the human population to consider. There are about 3 billion people who have access to Facebook, and Facebook reaches 2.23 billion of them. Facebook has a variety of plans to expand internet access, but it has been slow going, and it recently killed a high-profile plan to build internet delivery drones.

Still, the news seemed to catch investors off guard. Facebook’s chief financial officer, David Wehner, warned that the bad news would continue indefinitely. “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 said on a conference call.

Facebook’s stock price declined sharply after hours Wednesday

Shira Ovide, writing in Bloomberg, put it best:

Was Tuesday, in fact, the day when almost two years of nonstop negative headlines began to show up in Facebook’s core business? The results announced Wednesday marked the first full quarter since the Cambridge Analytica data privacy scandal. It also saw the rollout of Europe’s General Data Protection Regulation, which drove away 1 million users, Zuckerberg told analysts.

Whatever the cause, it appears that Facebook may have peaked in North America. And while efforts to improve the platform will surely continue, the company has a full slate of negative headlines to anticipate. The Justice Department and FBI are both investigating Facebook over Cambridge Analytica. The Security and Exchange Commission and Federal Trade Commission are conducting investigations of their own.

Meanwhile, the debate over how Facebook should handle misinformation, which led Zuckerberg to defend the speech rights of Holocaust deniers last week, is still raging. No one of these things is likely to dislodge Facebook from its place at the center of online communication. But it’s fair to say that the cumulative effect so far has been greater than expected.

”Is Facebook invincible?“ asked Kurt Wagner, my colleague at Recode, in his earnings preview Tuesday. Wednesday’s results made it evident that the answer is no.

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