Following the introduction of the European Union’s General Data Protection Regulation (GDPR) on May 25 this year, the number of daily active Facebook users in Europe dropped by 3 million people from the first quarter, dropping to 279 million. In contrast, this number of users in North America remained steady at 185 million people.
While the introduction of GDPR is one sure influencing factor on this drop there was also the intense scrutiny from the Cambridge Analytica data breach to consider as a contributing influence.
In an official statement Facebook CEO Mark Zuckerberg said that GDPR was to blame in the user decrease across Europe, while Aaron Goldman, CMO of 4C, a Facebook marketing partner stated that “The implementation of GDPR in Europe and continued scrutiny of privacy policies following the Cambridge Analytica scandal left investors feeling uncertain about Facebook”.
Facebook’s involvement with Cambridge Analytica, the third-party developer accused of mishandling data on up to 87 million Facebook users and using it to help target ads for political campaigns in the U.S. and the U.K, meant that the group had to rewrite its playbook for working with developers and audit hundreds of developers to account for any data it shared in the past. Along with this Mr Zuckerberg was forced to meet with legislators in the U.S. and EU to testify about how Facebook is protecting user data. In the U.K. Facebook was hit with a $650,000 fine, the highest possible penalty for mishandling user data.
With the introduction of GDPR Facebook had to change a number of operational procedures in order to comply with the new stricter privacy rules. Users across Europe were made aware of pending changes to its privacy policies. Along with this notice, all Facebook users were asked to affirm consent to its data collection practices before being allowed to continue to use Facebook.
Due to the drop in active users, Facebook also missed the revenue projections of most financial analysts for the second quarter of the financial year. Facebook generated $13.2 billion in revenue, shy of Wall Street’s expected $13.4 billion. The ad sales portion of revenue hit $13 billion in the second quarter, good for a gain of 42 percent from the previous 12 months.
Facebook shares dropped when the results were published and continued to drop during CEO Mark Zuckerberg and Chief Operating Officer Sheryl Sandberg’s earnings call with Wall Street analysts.