One of the mysteries of Facebook is that whenever public sentiment about the company feels most mixed, it delivers smashing results for Wall Street that keep any social consequences from depressing the company’s share price. This was true even during the depths of the Cambridge Analytica scandal, which began with a major price drop and ended with Facebook at a new all-time high, $209.94 a share, ahead of its earnings announcement in mid-July.
Since that report, which revealed slowing user and profit growth, Facebook’s share price has been tumbling steadily, falling to about $150. Even Tuesday’s earnings, which crushed expectations, did not right the Facebook ship. User growth is still slowing, and CEO Mark Zuckerberg cautioned that the product that built the Facebook-advertising empire, News Feed, has become outmoded. It won’t disappear overnight, but it will capture less and less of the total attention inside Facebook’s ecosystem. Replacing it, bit by bit, will be a mix of things: Stories, messaging, video, and more targeted “community” features like Marketplace and Dating.
The shift is substantial enough that Zuckerberg invoked the single biggest change in Facebook’s history: when the website Facebook.com became the phone app Facebook. This was the story of the company’s biggest trouble in the market and as a platform, back in the early days of its initial public offering. It’s hard to believe now, but it was not at all clear that Facebook could make the leap from desktop to mobile while growing revenue. There was tremendous skepticism about the company’s business fortunes, pretty much all of which turned out to be wrong. Not only did Facebook become dominant on mobile, it turned News Feed into a money-printing machine.
This is the lens through which to read Zuckerberg’s key statement to investors Tuesday: “I want to be up front that even assuming that we get to where we want to go from a feed-only world to a feed-plus-Stories world, it will take some time and our revenue growth may be slower during that period, like it was while transitioning our products to mobile.”