Facebook's poor second-quarter earnings report and lower revenue growth and operating margin guidance have investors scrambling to sell, causing shares to plunge 18 percent Thursday.
But it's not all bad news for the social media giant. While Facebook's namesake product may be headed for turbulent times, it still has great potential in three of its products: Instagram and messaging apps WhatsApp and Messenger.
"On average, people only access nine apps each day, so Facebook has 30 percent of the attention market on mobile as it has Facebook, WhatsApp and Instagram," said Marco Rimini, chief development officer at Mindshare. "The challenge is to leverage that portfolio and capture different moments and additional consumers."
It's not like Facebook itself is going away. The company still has 2.23 billion monthly active users and is still experiencing growth in the Asia-Pacific region. While usage is flattening in North America and Europe, worldwide daily active user numbers were up 11 percent from a year ago to 1.47 billion people, with gains led by new users in India, Indonesia and the Philippines. In the Asia-Pacific region, advertising revenue was up more than 10 percent sequentially and a whopping 47 percent from a year ago.
The company also has 2.5 billion monthly active users across all its properties, a stat Facebook shared for the first time on its earnings report Wednesday. If they turn away from Facebook, there's a chance they're still using a Facebook product.
"First, it refers to individual people rather than active accounts, so it excludes when people have multiple active accounts on a single app," CEO Mark Zuckberberg said on the earnings call about the 2.5 billion user stat. "And second, it reflects that many people use more than one of our services."
Instagram still has much more room to monetize, with heavy interest from marketers. Data marketing technology company 4C observed 204 percent growth in Instagram ad spend year over year during the second quarter.
"By setting up campaigns that run on both properties, advertisers are able to take advantage of pinpoint targeting against a much bigger pool of people," said Aaron Goldman, chief marketing officer of 4C. "Also, the time spent between the two platforms is sizable and advanced advertisers who are doing real-time advertising can cherry pick the perfect times of day to deliver their messages. If Facebook starts to pool WhatsApp and Messenger users into the mix and enable the same types of ads and targeting, the potential is truly uncapped."
Facebook has also talked about adding ads to the WhatsApp and Messenger experience. Chief operating officer Sheryl Sandberg said on the earnings call that more than 3 million people use WhatsApp Business, which just launched in January, and it is testing out payments through the service in India.
Messenger has been building tools for businesses as well, and encouraging users to migrate to its platform as their default messaging platform of choice. There are still new places to put ads, like directly into user's inboxes as well as click-to-messenger ads that could link News Feed posts to Messenger. The company is also making "great progress" turning its Stories feature — which is rolling out across WhatsApp, Instagram, Facebook and Messenger — into a place for advertising, Zuckerberg said.
But it's not going to be smooth sailing for Facebook. The company acknowledged the latest earnings report only included the month after Europe's General Data Protection Regulation was enacted, meaning its numbers could continue to decrease in the future. And with California's GDPR-like rules going into effect in 2020, it's possible more states and countries could also enforce similar rules.
"California's regulations strike at the jugular of Facebook's active users with a thermonuclear impact on losses," said Eric Schiffer, CEO of private equity firm Patriarch Organization. "Instagram has immense power to offset losses, but Facebook must bolt open the glowing treasure chest of revenue potential without crushing the magnetic user experience."
Instagram is a "major tailwind" for Facebook, said Daniel Ives, GBH Insights chief strategy officer and head of technology research. However, he's more cautious about other challenges on Facebook may find hard to offset.
"The combination of News Feed overhaul, business model changes, content issues and GDPR have created some major headwinds in the near term that are difficult to neutralize," Ives said. "The softer guidance creates a white knuckle period for Facebook (and its investors) to prove the longer term story is well intact."