On July 26, 2018, the leading social media company on the planet – Facebook took a big blow in terms of its market value. Their share prices fell by almost 20% paving way to a downfall of more than 120 Billion US Dollars which is the biggest ever one-day wipeout of any US company in the stock market.

Facebook has been on a bumpy ride for quite some time now. Let me tell you the 3 major factors which contributed to its deceleration.

The decline in the growth of Active Users

Facebook usage (globally) has shown a declining trend in the last few quarters. The trend is common across every demography, ethnicity and age group.

The number of users – monthly grew at just 1.54%, in comparison to 3.14% in the last quarter. The daily active users grew at just 1.44%, in comparison to 3.42% in the last quarter.

The decline in the user growth rate can put brakes on the total number of active Facebook users in the long-run ultimately affecting the inflow of revenue.

This analysis has, to some extent, frightened the investors which reflected in the steep drop in investments. It halted the investors to jump with both their feet into investing in Facebook.

The Cambridge Analytica Scandal

The Cambridge Analytica scandal was definitely a big blotch on Facebook’s public image.

As Facebook was found to be somehow involved in gathering and sharing of 50 million users’ data with the political consulting firm – Cambridge Analytica, this drew the attention of billions of people worldwide.

A lot of experts believed that the users’ data might have been misused for directing messages in favor of Trump’s political campaigns and influencing the Brexit vote.

In response, Facebook clarified that they banned the app (which shared the data with the third parties) in 2015 and ordered all the parties to destroy the data.

However, the entire scenario didn’t go down well with people and planted some big red flags in the ‘trust zone’ for Facebook.

Europe’s new Privacy Laws

The Council of the European Union and European Parliament implemented the General Data Protection Regulation (GDPR) in May 2018. This regulation is strictly aimed at securing the privacy of all individuals within the European Union (EU).

The regulation contains firm provisions and requirements pertaining to the processing of personally identifiable information of individuals and applies to all businesses regardless of location, that are doing business with Europe.

Although Facebook has confirmed that it would follow the European GDPR, there is a lack of clarity in their actions as they have changed their terms of service so that the users in the rest of the world are governed by more lenient US privacy laws.

After implementation of the GDPR in Europe, their monthly active user count has shrunk by more than a million, and the coming quarters will show the bigger picture.

Facebook has certainly started emphasizing on privacy terms and policies, especially after the Cambridge Analytica scandal came into the light but it doesn’t seem to be much significant in pulling the public opinion on the positive side.

Is that it for Facebook?

Well, a lot of discussions are going around predicting the future of Facebook and I believe it is too early to say something like ‘it is the beginning of the end of Facebook’.

But the scenario does ring a lot of bells and Facebook must think of ways to re-purpose their offerings to users and marketers. Also, they must have a concrete strategy related to what they should do and what they shouldn’t.

What do you think? Let us know in the comments section.