While Mark Zuckerberg is around $15 billion less wealthy than he was this time last week, he is still comfortably one of the top 10 wealthiest people in the world. So, while Facebook lost more than $100 billion in value in one day, a 20% fall, few tears will be cried for the founder. However, shareholders in Facebook are now being forced to face some very stark realities.
Why did the shares fall?
Companies such as Facebook depend upon user numbers growing as well as the amount of time they spend online. The fact that results this week were still in positive territory has been overshadowed by two main issues. Firstly, user growth numbers are at their slowest rate for more than two years as the company fights competition and attacks on its reputation. Secondly, in order to fight back and try and regain some of its lost reputation the company is spending billions of dollars to improve privacy and track advertising methods.
We now know that expected revenue growth in the short to medium term will be less than the billions of dollars the company has been forced to spend on improving privacy and the tracking of adverts. Therefore, profits for Facebook will take a short-term hit. However, if the hit is simply short-term why have the shares fallen so far?
Chickens coming home to roost
Over the last few years we have seen some enormous PR gaffes by Facebook including allegations regarding the use of tracking software, allegations that user messages were open to developers and data harvesting by an array of “partners”. Up until just a few days ago it seemed that Facebook was over the worst, had fought back and regained its reputation then the figures were announced!
It will be interesting to see what happens next week after investors, analysts and the company itself have had time to mull over the main problems. The fact that Facebook shares were at an all-time high prior to the results this week should not be understated because, while a 20% fall in the share price is significant, it is still only back to levels seen in May.
What next for Facebook?
In the small print of this week’s figures was news of an increased security budget for Mark Zuckerberg and his family which is now $10 million a year. While the company is correct to respond to specific threats to the founder, is it not time to reconsider the company’s future direction and leadership?
Mark Zuckerberg is still one of the top 10 richest people in the world and in reality he does not need to work. As a side note, many people will be unaware but Mark Zuckerberg only takes one dollar per annum in wages from Facebook, although quite what that says about the man is open to debate. Is he just one more founder who cannot let go of his baby, or does he literally love his work so much that he is prepared to work for literally nothing?
Conclusion
It may be hard to take, but maybe now is the time for Mark Zuckerberg to reconsider his position for the good of the company, shareholders and customers. He has done exceptionally well to create a social media mammoth which will survive well after he does eventually retire. When the focus of news articles is more about a company’s leader as opposed to the company this never ends well. Just ask Elon Musk!