Facebook's disastrous run will only worsen in 2019, and advertisers may be turned off by its 'toxicity'

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Facebook CEO Mark Zuckerberg.

• Facebook's problems are set to deepen in 2019, according to a note from Pivotal Research analyst Brian Wieser.
• He said issues like data breaches and election meddling have only been made worse by management and regulation is now inevitable.
• The analyst said investors remain too optimistic about Facebook.
• Wieser added that advertisers might start abandoning Facebook because of its "toxicity" - and there might be trouble ahead in China.

If you thought 2018 was bad for Facebook, just wait for 2019.

That's the verdict of Wall Street analyst Brian Wieser, who predicts that Facebook's problems "seem likely to worsen" over the next 12 months as it continues to grapple with a "vast" list of issues.

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In a note for Pivotal Research on Monday, Wieser wrote that Facebook is tackling issues including "complicity in a genocide," enabling political interference, and privacy scandals - all of which have been exacerbated by the "manner in which the company has chosen to address them."

Wieser believes that regulation is inevitable, and indeed, Facebook has said itself that it's ready to work with global lawmakers to introduce things like federal privacy laws in the US.

"The shape it [regulation] will take is unclear," Wieser wrote, "and the follow-on ramifications across the company - from managerial changes at the top to an imposition of new working processes in order to avoid future problems - could be significant, and potentially more expensive than the company (or most of the investment community) anticipates."

Wieser, who has been fairly bearish about Facebook's prospects recently, said the market remains too optimistic about Facebook and it could get a nasty wake-up call. "Investors have some appreciation of Facebook's problems at this time, although even now we think some are too positive or otherwise looking past the scale of the risks," he explained.

Facebook advertisers might be deterred by "toxicity"

But perhaps most ominously for Facebook, Wieser thinks that advertisers are starting to take notice of the company's woes. More than 98% of the company's $40.6 billion revenue comes from advertising, and it's second only to Google in terms of market clout. But that might soon be under threat, Wieser suggests.

"The toxicity of the company may also deter commercial partners from choosing to work with Facebook, or otherwise make terms less attractive to Facebook," he added.

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The idea that Facebook's crises might unsettle advertisers is not new, and there is little evidence as yet that buyers are taking their money elsewhere. Facebook' ad revenue grew 49% to $10.1 billion in Q3 last year following scandals including the Cambridge Analytica data breach.

But it's not just reputational issues Facebook needs to worry about in terms of advertising, Wieser said. Apple shocked Wall Street last week with an earnings warning which partly blamed economic weakness China, and the US President Donald Trump's trade war, for a drop in its revenue forecasts.

And Wieser suggested that Facebook may not be immune to trouble in China. "Facebook likely generated $5-7bn from Chinese advertisers on its platform, whose spending trends might be impacted by economic trends in China or changes in postal regulations," he said.

Pivotal downgraded its price target for Facebook from $125 to $113. Business Insider has contacted Facebook for comment.