Facebook has long been set for growth.
Its monthly active users have always been rising over time but the company’s second quarter earnings announcement last Wednesday has changed the tone.
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If Asia-Pacific stayed on track jumping from 873 to 894 million users while the US remained at a stable 241 million monthly active users, Europe seems to have lost its way.
For the first time in history, monthly active users dropped by 1 million between the first and second quarters, falling to 376 millions.
Facebook has recently been facing many challenges from its latest setback in setting up an innovation hub in China to tanking share price and scandals over user data. The latter is how the company justified its decline.
Indeed, Europe has recently passed the GDPR, The General Data Protection Regulation, which strengthen numerous personal data rights. The regulation affects every company, but it is of paramount importance to those processing large amounts of consumer data. Facebook therefore could not escape it. The company’s CEO, Mark Zuckerberg, confirms the hit the regulation brought on the industry and defines it as an “important moment” which led to “a decline in monthly actives in Europe, down by about 1 million people as a result.”
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The GDPR was instated on May 25, that is, two-thirds of the way through Facebook’s second quarter. Thus, it is expected to still see some knock-on effects in the third quarter.
Moreover, Facebook’s compliance with the regulation is under question as the platform has blocked the use of certain of its features to those refusing to share certain types of data. This very policy goes against the spirit of the GDPR which states companies are not to penalize users for not sharing information.
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The social media giant has developed its platform and turned it into one of the biggest advertising online space. However, a significant share of that advertisement comes from the use of consumer data and Europe is a market Facebook cannot overlook as it brings more revenues than Asia-Pacific, in spite of its smaller user’s numbers, with $3.3 and $2.3 billion respectively.
Facebook acknowledges the weight of users’ engagement in retaining their advertising business. As Sheryl Sandberg, COO, notes, “as we look further out, we recognize that there’s still risk we’re going to watch closely”.