Ad Agency Execs React to Facebook’s Historic Stock Price Plunge

So why did Facebook’s stock plunge as much as 24 percent in after-hours trading before opening at $174.89 Thursday, down 19.6 percent, causing the company’s market capitalization to fall from $629.6 billion to $506.2 billion?

Things didn’t get much better over the course of the week, as Facebook closed at $176.26 Thursday and opened Friday trading at $179.87 per share.

The doom and gloom extended beyond Wall Street, as an advertiser at a Fortune 100 brand said, “Facebook is becoming a platform of last resort not for any one reason, but for the steady drip, drip, drip of problems that, in totality, give you a whiff that there may be a governance or leadership shortfall there.

This has to give a prudent advertiser pause when considering where to invest advertising dollars and not knowing where the next instance of those shortfalls will manifest itself and not wanting to get caught up in the middle of that. It’s death by a thousand paper cuts.”

An easy answer would be the Cambridge Analytica scandal and the other various privacy issues Facebook has been dealing with, but those have been ongoing for months, and nothing happened on those fronts Wednesday to cause Wall Street to react.

Cheddar senior reporter Alex Heath agreed:

Periscope vice president of media Jen Brady thinks Facebook may have just been overvalued, adding, “It’s just a shake in the market. It’s almost like a wake-up call, too.”

An agency executive who asked not to be named feels that Facebook “got to a point where they got too big for their britches,” adding, “I’ve always been frustrated that the biggest player in the game is the most difficult to work with. Like any other platform, they cater to brands that spend more money—better reps, better creative shot services. When you’re not spending as much, you don’t have access to the same level of service. Facebook is not as hungry as Pinterest, or Snapchat, or some of the other players that really want you to come and spend with them.”

However, despite times when the temptation to move spending elsewhere became strong, “It’s completely impossible to avoid Facebook because of its massive reach,” that executive said.

On the revenue front, CFO David Wehner cautioned that the company expects a decline in the high single-digits percentage-wise over the next couple of quarters, citing currency exchange rates and the costs of growing Stories, complying with the European Union’s General Data Protection Regulation and giving users more privacy controls.

A second agency executive who wished to remain off the record said GDPR was already having an impact, noting that when some of the agency’s clients went dark for a bit during the period when the regulations were being implemented, “we lost some of our credibility within Facebook’s system,” and adding, “Facebook has been a little bit of a struggle, but the problem is that it’s just one of those beasts that you have to deal with. It’s one of those evolve-or-die situations, and Facebook is choosing to evolve in ways that are detrimental to advertisers. It’s making it really tough for us to invest dollars there.”

While Facebook’s user growth was strong year-over-year, comparing it with the first quarter of 2018 changes the picture, as the social network’s monthly user total of 2.234 billion was up just 1.54 percent and its daily user count of 1.471 billion crept up just 1.44 percent.

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