Putting Mark Zuckerberg's $16.8 billion wipeout into perspective

Mark Zuckerberg

Mark Zuckerberg the mud may finally be starting to stick

Facebook reported its second quarter earnings Wednesday and the results, which were worse than expected, sent the company's stock into free fall, wiping out more than $100 billion off Facebook's market value.

Facebook's tally of second-quarter global daily active users, a key metric for tracking user engagement, rose 11% to 1.47 billion.

But shares slumped 7 percent in after-hours exchanges after hitting record levels in official trading, with the quarterly report largely weaker than had been expected.

"We are investing so much in security that it will have a significant impact on our profitability", said the CEO, Mark Zuckerberg, during the call, referencing a commitment he first announced in November 2017 in an effort to clamp down on foreign election interference, misinformation and hate speech.

Sales in the second quarter grew 42 percent, its slowest pace in almost three years, to $13.2 billion compared with $9.3 billion a year ago.

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Facebook's 2.23 billion monthly active users and 1.47 billion daily active users were both up 11 percent from past year but also just shy of analyst predictions of 2.25 billion and 1.48 billion, respectively.

"We expect our revenue growth rates to decline by high single digit percentages from prior quarters sequentially in both Q3 and Q4", Chief Financial Officer David Wehner said.

Revenue fell a little short of estimates - $13.23 billion, compared to the Thomson Reuters estimate of $13.36 billion. Given all the questions about the misuse of the platform, "to explain that there are a couple million people who chose not to continue using Facebook is unsurprising", said Brian Wieser, an analyst at Pivotal Research. Zuckerberg in January said he was going to adjust the news feed to make sure people spend more time on Facebook with meaningful content from their friends and family members - a move the company has said would decrease user engagement with the site. Facebook's stock continued to nosedive during the call with investors, who pressed the company on its slowing growth and future ad revenue. Despite the fact that the company earned $5.106 billion in profit and revenue was up 42 percent year-over-year, the stock was down. That same number fell in Europe, where the company has had to comply with a strict new privacy law, known as GDPR, the Washington Post reported.

Facebook's daily active users in Europe declined by 3 million amid the new regulation.

While privacy was an issue in Europe, politics played a role in North America, which is the company's most lucrative advertising market. Facebook and Instagram ad spending through 4C rose 48 percent year over year, according to Goldman. In the final minutes of trading on Wednesday, shares hit $217.50, an increase of 32 percent in the last 12 months.

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The social network beat the predicted $1.72 earnings per share, reporting $1.74.

Facebook used to be made out of corporate Teflon.

Facebook's headcount increased 47% year-on-year, to 30,275 as of June 30, 2018.

Analyst Ross Sandler with Barclays asked if revenue growth was set to drop to "around 20% by the fourth quarter of this year".

But there's also been a notable slowdown in user growth.

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