Facebook's user base is declining in Europe and that ought to terrify its American bosses
- Facebook's user-base is declining in Europe, where privacy laws are stricter.
- Facebook's privacy chief supports introducing new privacy laws in the US.
- That raises the prospect of decline in the US, too.
Facebook's user-base declined in Europe, the company reported on its Q3 2018 earnings call last night. It is the second quarter in a row in which Facebook has lost European users.
The decline is significant because Facebook has more users in Europe than it does in the US. The downshift comes after the Cambridge Analytica privacy scandal and the implementation of GDPR, Europe's new continent-wide privacy law. The two issues have been on Europe's front pages for months, forcing users to acknowledge how much information they are giving away for free. Facebook's response to the GDPR rules required all users to inspect their privacy settings - and the result seems to have been that many users dialled down their engagement with the app.
Facebook executives have promised they will follow Europe's lead on privacy regulation in the US, raising the prospect of similar potential declines in North America in the future.
- Facebook monthly active users in Europe: 375 million
- Facebook monthly active users in the US: 242 million
Two million users have abandoned the service in Europe on a monthly basis and 4 million have abandoned it on a daily basis. The declines occurred since Q1, before the GDPR rules came into effect. The third quarter is the first full quarter in which the new rules were in force.
- Decline in European monthly active users, Q1 to Q3: 377 million to 375 million
- Decline in European daily active users, Q1 to Q3: 282 million to 278 million
When asked at a conference in Europe last week whether she would support the introduction of an equivalent to GDPR in the US, Facebook's chief privacy officer, Erin Egan, said "yes." "We support strong and effective privacy legislation in the United States and around the world," Egan said. "We recognize the value of regulation of privacy."
CEO Mark Zuckerberg has also made noises about being more careful with user privacy, although he has not specifically supported an American version of GDPR. Apple CEO Tim Cook, speaking at the same conference, said he would support such a move. Some US lawmakers are considering a new privacy law.
The decline in daily active users in Europe, peak to trough, was 1.4%. If a similar decline happened in the US, Facebook would lose about 8 million users, based on last night's numbers.
Facebook stock was up about 5% in pre-market trading this morning, perhaps because declines from GDPR were already priced in. Zuckerberg had warned investors on his Q1 call to expect declines as a result of GDPR. Historically, Facebook's stock price has been sensitive to its user-growth numbers. US user growth is currently flat. In Q4 2017, daily active users dipped by 1 million in the US, the only time that market has shown a sign of weakness.