Facebook's latest earnings report was a complete disaster. After many months with bad media news, Facebook revealed its profits second quarter in July and reported less revenue than Wall Street analysts had estimated.
The most important thing the company announced was the fewest users. In fact, Facebook users have not risen to its most valuable markets, the US, Canada and Europe, but the number has shrunk.
After years of unstoppable influx of users (Facebook has over 2,2 billionmillions users worldwide and has three other services with more than a billion users) the company hit a wall.
Was it just a bad quarter? or is Facebook itself and bad management? We will learn the afternoon of Tuesday when the company reports Q3's profits.
The entry of new users will be what we should look first. Facebook may be shrinking in some markets, but the number of users continues to grow globally. Despite the fact that in the last quarter the Facebook inventory has fallen more than 20% since its latest profit announcement and has not recovered yet, the company had 22 millions of new daily users (in the last quarter).
There are not many for Facebook, but again there are 22 millions of people. So, yes, Facebook is still growing technically. But the problem is that all of these new Facebok users came from markets where the company does not make money, or does not earn that much money.
Every Facebook user in the US or in Canada generated about $26 in revenue for the company last quarter. Each user from “Asia-Pacific” generated just $2,62. In other parts of it world, such as South America or Africa, users generated just $1,91.
So if Facebook enters less users than usual and these users come from non-revenue-generating areas or give less revenue per user to the company, investors will start worrying.
On Tuesday, Facebook executives will have an opportunity to explain why this is happening, but also what their plan to do to correct it.
The good news is that Facebook has more revenue than basic social network revenues. Instagram has more than one billion users, and some estimate that this year it will make $ 8 billion dollars.
Facebook's Messenger service has 1.4 billion users and has started selling advertisements while the WhatsApp company owned by Facebook, with 1.5 billion users, essentially shows no significant revenue.
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