Issue of the week: Facebook’s bloodbath

Slowing growth and further evidence of political meddling have whacked Facebook. Can it bounce back?

Facebook suffered the “largest one-day wipeout in American corporate history” last week, said James Dean in The Times. A “shock” quarterly earnings report saw shares plunge by 19% – knocking a whopping $119bn off its market value and some $17bn off the personal fortune of its founder, Mark Zuckerberg. The company warned that “profit margins would narrow in the coming years as it spent more on improving privacy and security”, following this year’s Cambridge Analytica scandal. But what really freaked investors was the slowing rate of daily user growth: it was just 1.5% higher than in the previous quarter – “the slowest on record for Facebook”. According to emarketer, the company has a “teen problem”, with Zuckerberg “lampooned as awkward, weird and even lizard-like in online memes”. Although some defecting youngsters have moved to Facebook’s photo-sharing app Instagram, others have deserted it entirely.

Facebook is suffering “a slew of problems”, said Robert Cryan on Reuters Breakingviews. “Constant stories about the mishandling of data, toxic content and state-sponsored misinformation raise questions about the attractiveness of the platform for advertisers and users alike.” This week, the firm identified further meddling in the form of a campaign to disrupt the US midterm elections. Even so, investors appear to be “replacing excessive optimism with undue glumness”. Facebook isn’t the only tech stock to suffer a backlash, said James Titcomb in The Daily Telegraph. Twitter and Netflix have also suffered “heavy declines” in “a stockmarket bloodbath” that has “threatened to put an end to the astonishing tech boom of the last few years”. Yet some members of the old “Faangs” group continue to race ahead. Amazon is still riding high and “Apple is on the cusp of becoming the world’s first trillion-dollar company, after smashing Wall Street forecasts with a leap in profits.”

Move over “Faangs” and make way for “Maga”, said Richard Waters in the FT. The new acronym describes the “narrower group of Big Tech companies” – Microsoft, Apple, Google and Amazon) now leading the market higher. It is “tempting to see Facebook’s slip as a sign that Big Tech’s days of go-go growth are coming to an end”: some analysts point to a levelling off of digital’s share of the ad market. But the new digital markets have plenty of highgrowth opportunities – not least cloud computing, which is quickly becoming “a rocket propellant” for Amazon, Microsoft and Google. “It takes constant reinvention to keep a seat at tech’s top table.” For now Facebook has slipped, but it has reinvented itself before. Don’t rule it out in the future.