In what could be the biggest one-day drop of all time, Facebook shares opened at $174.89, down 19.6 percent compared to yesterday’s closing price of $217.50 according to NASDAQ:FB. 

Yesterday, Facebook was worth $629.6 billion. Today, it’s now worth $506.2 billion. In other words, Facebook lost $123.4 billion in value in ONE DAY. 

Now, today’s performance isn’t due to yet another data misuse or election interfering scandal.

The company has reported disappointing earnings. For the first time, Facebook’s growth is stalling.

There are barely more people checking Facebook every day compared to previous quarter.

Facebook is still growing, however, it’s clear that GDPR combined with a saturated market isn’t helping the company by any means. 

This is why Facebook is trying to change the narrative.

For example, for the first time ever, Facebook shared a new “family of apps audience” metric.

There are 2.5 billion people using at least one of the company’s app — Facebook, Instagram, Messenger and WhatsApp.

So it’s clear that Facebook thinks Instagram and its stories represent the future of the company.

But this is going to be bring some questions to life in then next few months as it’s unclear if Instagram can generate as much money as Facebook’s main app.

 

Measuring Facebook’s Losses

$123,400,000,000 is a big number. It’s hard to wrap the mind around how much this kind of money represents given the scale of these massive companies. As TechCrunch’s Jon Russell pointed out, bitcoin’s entire market capitalization is currently $141 billion. So it’s like nearly all bitcoins disappeared overnight.

Who would have thought Facebook could be more of substance than bitcoin? 

Even if you compare it to significant tech companies, this is a huge loss.

For instance, Netflix is worth $158 billion right now. Twitter’s market cap is only $33 billion.

It’s like Facebook did away with nearly 4 Twitters in market cap overnight. And I’m not even talking about Snap, which is only worth $17 billion.

 

Innovating Facebook’s Business Model

Most people have been focused on Facebook’s losses for now. But now it’s time to look at Facebook’s business model and understand what’s causing this these losses to happen.

Facebook is one of those once-in-a-lifetime, incredible success stories.

It did become a massive business in just a few years, but it also has a dangerous business model.

Thousands of employees are looking for ways to collect more data. Business teams can then sell expensive ads because they’re perfectly targeted.

And the best way to optimize efficient ads is by making addictive products that consumers feel like they need.

If you spend more time looking at stories, you’re going to be exposed to more ads. Period.

That’s why Facebook optimizes for engagement. It gets us (users) outraged, we become sad, and we like and we share the post. This is how Facebook makes money.

2018 is a turning point for Facebook.

People will look back at this moment as an inflection point in the company’s trajectory. But it’s still unclear if Facebook has the answer to its structural issues.