Mike Isaac

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Facebook Shares Drop as User Base Reportedly Declines

After weeks of steadily trading above $30 per share, Facebook stock tanked early this week, closing on Tuesday afternoon at a month-long low of $28.09.

The stock closed down around .55 percent on Tuesday, following a precipitous 8.6 percent drop the day before.

Shares of Zynga, a company whose games are strongly tied to the success of the Facebook platform, also dropped more than 5 percent on Tuesday, closing at a year-long low of $4.58.

The drops come after Capstone analyst Rory Maher released a report claiming Facebook’s U.S. user base declined by 1.1 percent over the last six months, with an additional decrease in Facebook’s European user base.

To be fair, some of this is to be expected. Facebook’s size exceeds 900 million monthly active users, many of whom are located in the U.S. Facebook previously admitted that stagnation in its user growth is to be expected.

“We anticipate that our active user growth rate will decline over time as the size of our active user base increases, and as we achieve higher market penetration rates,” Facebook stated in its original S-1 filing. “To the extent our active user growth rate slows, our business performance will become increasingly dependent on our ability to increase levels of user engagement in current and new markets.”

Going forward, Facebook’s prized areas of growth are international. Japan, Russia and especially China — the latter being a country in which Facebook currently holds near zero market penetration, according to Comscore — could yield significant numbers of new users.

Update: Amended the headline to reflect drop in user base number, not growth.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik