Home World Events Business Facebook’s Stock Crash and Growth Dilemma

Facebook’s Stock Crash and Growth Dilemma

Facebook’s stock dipped US$120 billion on July 25, suffering the biggest financial loss of any company in history. Here’s what happened.

The social media company released statistics on its earnings for the second quarter of 2018, showing that its revenue and, more importantly, growth failed to live up to shareholders’ expectations, and had slowed.

For Facebook, which was launched in 2004 and now has over 2.2 billion users, an underlying problem is that it has simply grown too big and is running out of ways to make money from its users. Its userbase is already almost a third of the world’s population and over half of all Internet users worldwide. In the United States, Facebook has hit a high point of about 185 million active users.

An underlying problem for Facebook is that it has simply grown too big, and is running out of ways to make money from its users. (Image: pixabay / CC0 1.0)
An underlying problem for Facebook is that it has simply grown too big and is running out of ways to make money from its users. (Image: pixabay / CC0 1.0)

According to Variety magazine, Facebook’s Stories and Watch features, both of which feature fewer ads than the normal newsfeed, have proved increasingly popular with users.

The drop-off in ad revenue began to manifest significantly after Facebook focused its attention on video content, something that has become more ubiquitous across social media in recent years.

Facebook’s dilemma is reflected in its attempts to gain access to China, where its services have been blocked by the Chinese government’s Great Firewall since 2009.

In 2016, Facebook CEO and co-founder Mark Zuckerberg uploaded a photo of himself running without a facemask in Beijing, where air pollution is a health hazard and a topic of political sensitivity for the Chinese government.

Facebook has made many attempts to woo the Chinese government.
Facebook has made many attempts to woo the Chinese government. (Image: Twitter)

Earlier, Zuckerberg had tried a variety of other stunts, such as making a 20-minute speech in Mandarin Chinese or letting Chinese leader Xi Jinping pick the name of his wife’s unborn daughter (an offer Xi declined).  

According to 1redDrop:

A few days ago, Facebook was blocked in its latest attempt to enter the Chinese market after it received brief permission to set up a “technology hub” in Hangzhou, a city on China’s eastern coast. But less than a day later, the Chinese government withdrew approval for the business.  

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Leo Timm
Leo Timm is a writer and translator focusing on China's traditional culture, international relations, and its national polity. Follow him on Twitter at @nationalpolity.

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