Facebook on Wednesday disclosed the results of its second quarter of fiscal year 2018, in which the social media behemoth revealed Europe’s General Data Protection Regulation resulted in one million active monthly users abandoning the platform, and warned that more is likely to come.
Note: OWI’s latest research, “Trust, Safety & Compliance: A Survivor’s Guide to GDPR-mageddon,” is now available to download.
The announcement marks one of the first tangible, dollars-and-cents consequences from GDPR, which went into effect in late May. But so far, the effect is a mere drop in the bucket for the massive company, which has maintained 2.2 billion active users around the world.
Chief Operating Officer Sheryl Sandberg did caution, however, that GDPR did not fully roll out in the preceding quarter. She warned investors that there could be further consequences from GDPR in the months to come, according to CNBC.
Shares of Facebook plummeted on Wednesday, dropping more than 20 percent in after-hours trading, but over very different concerns: The company’s revenue of $13.23 billion fell short of Wall Street expectations, where investors were expecting $13.36 billion. The company also warned that it expects its 2018 revenue growth rates to be lower than they were in 2017.
And the company also cautioned that GDPR could have further consequences, noting that improved privacy features are in the works to meet compliance with the EU law, and also to satisfy user demands in the wake of major data-related scandals, such as Cambridge Analytica, that led to Chief Executive Mark Zuckerberg testifying before U.S. Congress.
A recent poll found that 10 percent of corporate execs said GDPR compliance would cost their company over $1 million. The law set new standards for consent, transparency, and data processing for all companies handling the data of EU residents.
OWI Insight: While Facebook would undoubtedly have preferred keeping those million users, the truth is their absence is largely inconsequential for the company, which boasts 2.2 billion active monthly users from around the world — 376 million of them from Europe alone. In other words, GDPR cost Facebook just 0.2 percent of its user base in Europe. It’s likely there will be further effects from GDPR, as Facebook has warned. However, investors will remain focused on the bottom line, and Wednesday’s losses are mostly due to finances, not GDPR.