DEBATE: With slowing user growth, should investors be concerned about Facebook’s prospects? | City A.M.
With slowing user growth, should investors be concerned about Facebook’s prospects?
Jim Bowes, chief executive of digital experience agency Manifesto, says YES.
Facebook was once seen as one of the biggest disruptors to enter the business world. By essentially turning its users into its workforce, Facebook became an enormous money-making machine.
Through its interactions with the network, users fuelled its rise into a colossal data engine, continuously building up and storing information for advertisers to ensure that its content stays relevant.
But we are now seeing a generational shift in how people perceive their relationship with social networks. Younger audiences are becoming much more savvy at managing their online self. Increasingly, people are learning how to hide their real information, and are fundamentally are making this data irrelevant.
This leaves Facebook ripe for disruption.
With fake news becoming such a prominent discussion, trust is one of the most valuable brand assets. Facebook has a real mountain to climb to regain a trusted position, and while it is attempting to do that, there is a huge a window of opportunity for others to break through.
Read more: Facebook’s share price plunges, losing over $120bn off its market value
Chris Beauchamp, chief market analyst at IG, says NO.
The frequent references to its other available platforms, such as Instagram, and the new revenue metric of how many people use at least one of the Facebook apps each month send a message that this is a company looking to find ways of becoming more than just a social media site.
High expectations can be a remarkable burden, and the reaction is often brutal when they are missed, but the recent revenue gap was slight, and $13.2bn in sales is not to be sniffed at.
Facebook, and other tech stocks, are likely due a pullback in the near-term, with these earnings providing an excuse. And if the US-EU trade summit marks something of a thaw in tensions, other sectors may now play catch-up. But these tech giants, with their astonishing powers of cash generation, should still be looked on as compelling investments.
The social network might have its wings clipped, but it is still a remarkable money-making machine.
Read more: Facebook to use AI to crack down on Russian interference on platform