March 20, 2018 / 1:27 AM / 4 months ago

Breakingviews - Facebook gives members one more reason to leave

NEW YORK (Reuters Breakingviews) - Mark Zuckerberg has handed users one more reason to quit Facebook. Newspaper reports that a UK political consultancy used millions of user profiles creates fresh risks at the social network he founded. People are already spending less time on Facebook. The danger is that members may unfriend it altogether.

Facebook Founder and CEO Mark Zuckerberg exits the stage during the annual Facebook F8 developers conference in San Jose, California, U.S., April 18, 2017. REUTERS/Stephen Lam

Facebook lost more than $35 billion of its value on Monday after reports said that more than 50 million people had their personal data misappropriated by political consultancy Cambridge Analytica. The firm used the Facebook trove, obtained without authorization, to build a software program to influence voters, including in the 2016 U.S. presidential election, according to the New York Times and Observer of London.

Multiple investigations have been opened in the United States and Europe as a result - just as Facebook scrambles to address earlier challenges involving fake-news and ad-measurement mishaps. The controversy hasn’t yet shaken the confidence of Madison Avenue, which is still shoveling money to Facebook. Revenue rose 47 percent last year to $41 billion.

The debacles may be taking a toll in other ways though. Zuckerberg said at his last quarterly earnings presentation that the aggregate time users spent on the social network was falling by 50 million hours every day. Advertisers often turn to how long people hang around as a sign of engagement.

And although the number of daily active users in the fourth quarter rose 14 percent year-over-year, to 1.4 billion globally, cracks are starting to appear in key markets. In the United States and Canada, members dipped by 1 million in the fourth quarter from the preceding three months, to 184 million, while in Europe member growth has slowed significantly. Those regions generated nearly 75 percent of the company’s fourth-quarter revenue.

Like MySpace before it, Facebook’s long-term dominance is by no means assured. New research from eMarketer estimates that Facebook’s share of the U.S. digital-ad market will slip slightly over the next two years as user growth slows and pricing for ads reaches its limits. The onslaught of privacy concerns - and the risk that it drives away users - may accelerate that decline.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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