Facebook finds its user base had gone down in Europe the company reported as it announced its third-quarter earnings. This is the second quarter in a row that the company has lost users in Europe.
Reasons for the decline of users in Europe
Two reasons for the decline in Europe are the Cambridge Analytica privacy scandal and the implementation of the new continent-wide privacy law, the GDPR.
The Cambridge Analytica scandal
Wikipedia describes the Cambridge Analytica scandal as follows: "The Facebook–Cambridge Analytica data scandal was a major political scandal in early 2018 when it was revealed Cambridge Analytica had harvested the personal data of millions of people's Facebook profiles without their consent and used it for political purposes. It has been described as a watershed moment in the public understanding of personal data and precipitated a massive fall in Facebook's stock price and calls for tighter regulation of tech companies' use of data." This serious breach of privacy no doubt caused some users to simply stop using Facebook.
The General Data Protection Regulation (GDPR)
Wikipedia describes the GDPR: "The General Data Protection Regulation (EU) 2016/679 ("GDPR") is a regulation in EU law on data protection and privacy for all individuals within the European Union (EU) and the European Economic Area (EEA). It also addresses the export of personal data outside the EU and EEA areas. The GDPR aims primarily to give control to individuals over their personal data and to simplify the regulatory environment for international business by unifying the regulation within the EU." There can be huge fines for violating the GDPR.
You would think this regulation would bring in more users as it protects their privacy. However, it requires all users to inspect their privacy setting forcing users to acknowledge how much information they are allowing to be collected. This may have caused some users to simply stop being engaged with the likes of Facebook.
Facebook executives have said that they will follow Europe's lead on privacy regulation in the US. This could lead to future declines in the US,
The decline in Facebook users in Europe
In Europe the active number of Facebook users is 375 million whereas in the US it is just 242 million. Two million users have left Facebook on a monthly basis since the first quarter, and even more, 4 million, have abandoned it on a daily basis. The last quarter is the first in which the GDPR rules have been in force. In Quarter 1 to 3 the decline in Europe has been from 377 million to 375 million. The decline in daily active users has been from 282 million to 278 million. The decline in daily users in Europe from its peak to its recent low is about 1.4 percent. If this happened in the US it would mean the loss of about 3.4 million users.
In other areas Facebook usage is growing considerably
The anxiety about a decline in the US in Facebook users as well as Europe is a bit misguided it seems to me in that in the Asia Pacific region and the rest of the world the user base is growing substantially. The number of users in those areas is far larger than in the US and Europe. The markets in US and the EU may be more or less saturated and not likely to grow more in any event.
The Business Insider's own monthly active user's chart shows that in the last quarter the user base in the Asia-Pacific Region went from 894 million to 917 million over three times as many users as in the US and more than twice that of Europe. The rest of the world went from 723 million users to 736 million users. The total number of users went from 2,234 million users to 2,271 million users. So Facebook is actually still growing substantially world wide even though it has lost some users in Europe.
The Business Week article notes that Facebook usually reacts to user-growth numbers. In pre-market trading on Wednesday morning its stock price was up about 5 percent. The article suggests that declines from the GDPR were already priced in. Perhaps why the price went up is that the total number of users is up substantially in spite of the fact that Europe has lost users and growth is virtually flat in the US. Both areas are minor relative to the total user base of Facebook.
Previously published in Digital Journal
Previously published in Digital Journal