Facebook Gets Rare Downgrade Over Advertising Spending Growth

Facebook’s stock took a hit on Wednesday (April 18) after research firm OTR Global downgraded the stock, the first time an investment firm has done so since January.

Bloomberg reported that OTR Global reduced its rating to mixed versus positive, citing concerns that advertising spending growth moderated in the first quarter. The only other downgrade of Facebook before OTR’s move was from Stifel Nicolaus in January, before the Cambridge Analytica scandal broke.

OTR expects ad spending in the first quarter to increase between 19 percent and 24 percent on a year-over-year basis. That compares to a 30 percent increase in the fourth quarter. Facebook’s shares lost 10 percent of their value in March alone in the wake of the scandal, among expectations that it and other technology companies will face increased regulations.

Bloomberg noted that OTR culls data from different methods, including interviewing experts in the industry, attending client events and reviewing the company’s financial filings.

Facebook has been under pressure since mid-March, when it revealed that Cambridge Analytica, the political consulting firm that worked on President Donald Trump’s election campaign, accessed the data of 87 million Facebook users without their consent. That has sparked investigation both in the U.S. and the U.K., culminating in CEO Mark Zuckerberg appearing before Congress last week.

Despite the backlash, The Next Web reported that the number of people using social media platforms increased by more than 100 million during the first quarter of 2018. According to the analysis, as of the end of March, there were 3.3 billion people around the globe using social media. Contributing to the growth rates was the fact that the number of people new to the internet increased by 276 million during the first three months of the year.

Meanwhile, there are now more than five billion people with mobile devices, with many owning smartphones that give them access to the internet — and thus social media. According to The Next Web, mobile users increased around 2 percent for the year ending in March.

In terms of social media usage, 389 million accessed it via a mobile device in the first quarter, marking a new record. That increase, which The Next Web pegged at 14 percent, pushed the number of social media users to 3.087 billion at the start of the current second quarter.


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