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 analysts had estimated Street.
The most important thing that the company announced was the least users. In fact, Facebook users did not grow at all in its most valuable markets, the US, Canada and Europe, but instead the number shrank.
After years of non-stop user influx (Facebook has over 2,2 billion users worldwide and has three other services with more than one 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 except from the income that basic social network. Instagram has over a billion users, and some estimate it will make $8 billion in revenue this year.
Facebook's Facebook Messenger service has 1.4 billion users and has begun selling ads while WhatsApp, a Facebook company with 1.5 billion users, has virtually no significant revenue.
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