Nov 20, 2018

Facebook's losing streak could get even worse

Facebook is on its worst losing streak since going public, and experts are warning that reputational damage might make the stock declines even worse.

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Data: Yahoo! Finance; Chart: Chris Canipe/Axios

Why it matters: While it's unlikely advertisers will give up on the company immediately, analysts worry that recent scandals, coming to a head in a New York Times article last week, will weigh on investor confidence and their client relationships long-term.

  • Advertising experts from MoffettNathanson and Pivotal Research and Wall Street experts like angel investor Jason Calacanis are all voicing concerns about the viability of Facebook's stock, given the longterm impact these scandals could have on advertiser relationships and user growth.
  • "Marketers might not cut spending directly, but scrutiny of budgets on Facebook will increase, as will the time Facebook executives will spend explaining themselves the next time something goes wrong," said Pivotal Research Group's Brian Wieser in a note to investors.

Driving the news: CNBC reports that the company is on track for its third straight month of declines and its first year of declines since the IPO.

Between the lines: Taking a look at Facebook's 2018 stock woes vs. strong advertising growth, it's clear that marketers are less concerned about Facebook's long-term positioning than Wall Street.

  • While revenue growth from the main Facebook app is expected to slow as user engagement declines, revenue from Instagram and Facebook's messaging apps (Messenger and Whatsapp) is expected to accelerate.

Be smart: The fallout of these scandals will make it harder for the tech giant to get government approval for any strategic business acquisitions moving forward.

  • Before Facebook had a reputation for malfunction and neglect, Washington regulators approved two game-changing acquisitions for the company: Instagram in 2012 and Whatsapp in 2014.
  • As The New York Times' Mike Isaac notes on Axios' Dan Primack's podcast, Instagram has become Facebook's core business.

Go deeper: Facebook's executive trainwreck

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