Facebook will lose users in Europe for the first time, following the introduction of the General Data Protection Regulation (GDPR) set out by the European Union, according to technology analysts.
The social network, co-founded by Mark Zuckerberg, will announce its latest quarterly results today at 10pm BST (2pm PT/5pm ET).
Ahead of the announcement, industry experts have predicted that the number of active users visiting the social network will either drop, or flat line.
Facebook has never reported anything other than user growth in Europe.
According to analysts, stalling numbers are likely the result of forcing Facebook users to consciously opt-in to having their information used for personal advertising – one of the key stipulations of the stringent GDPR rules.
Facebook could be losing customers in Europe after the stringent General Data Protection Regulation (GDPR) came into affect. Industry experts are predicting the number of active users to either flat line or drop slightly (stock)
Facebook is set to announce its second quarter results later today.
This quarter is a crucial period of time for the Menlo Park-based social network as it incorporates both the enforcement of GDPR in Europe, and the fall out from the Cambridge Analytica scandal, which saw the data of 87 million users mined by a political data firm without their knowledge.
GDPR, which came into affect May 25, stipulates that companies must explicitly request consent from their users in order to personal data for advertising purposes.
Companies that do not comply with GDPR can be fined up to four per cent of their global revenue.
To comply with the new regulations, Facebook rolled-out a security check-up to users worldwide which asked them to review what kind of personal information they consent to sharing for advertising targeting.
Users were also asked to consent to facial recognition technology on the site.
Analysts believe users may have been scared off by the explicit details about how their data is being used by the social network.
Facebook is expected to announce 2.25 billion monthly active users, and 1.49 billion daily active users during the latest quarterly results.
Facebook last month confirmed the number of North American users had dipped for the first time.
Wedbush Securities managing director Michael Pachter told the Telegraph: ‘European monthly active users grew sequentially over the last four quarters to end at 377 million.
‘We estimate zero sequential growth for June, ending again at 377 million.’
According to Facebook chief financial officer David Wehner, the social network is expecting a setback with these latest results.
When talking about the firm’s expectations around the amount of daily active users and monthly active users, he said it is anticipated to be ‘flat to slightly down… as a result of the GDPR rollout’.
Analysis by high-street bank Barclays has also revealed Facebook has 20 million European users under the age of 16. Under GDPR, these children now have to obtain parental consent in order to remain on the platform.
‘We expect some drop off, similar to other companies like Twitter and Snapchat from the kids issue,’ Barclays said.
Facebook reported last month that the amount of North American users had dipped for the first time. The Mark Zuckerberg-led (pictured) firm could lose up to three million users in the EU
WHAT CHANGES IS FACEBOOK MAKING TO COMPLY WITH THE EU’S GENERAL DATA PROTECTION REGULATION?
The European Union’s General Data Protection Regulation (GDPR) will enter into force on May 25, 2018 and offer greater privacy protection online.
New terms of service at Facebook are designed to ensure the Menlo Park, California, firm complies with the forthcoming EU rules, with European residents seeing the measures first.
Facebook is hoping to exclude 1.5 billion of its worldwide users from the new GDPR laws, arguing that only EU citizens should fall under its purview.
Almost 1.9 billion non-EU international users, outside of the US and Canada, would be protected by the stricter law under current rules.
Members in Africa, Asia, Australia and Latin America would be excluded from the GDPR’s protections if the move goes ahead.
Under the new policy, Facebook users will be asked to review and make choices about ads they receive, including whether they want Facebook to use data from third parties.
Facebook will begin to ask users if they want to opt in or out of its facial recognition feature, which is making a return under GDPR.
They will also be asked to review and choose what to share about sensitive personal data. This will include their political and religious beliefs, as well as relationship status information on their profiles.
Facebook is also taking steps to comply with rules that limit advertising and public viewing of data for teens.
This will mean no use of facial recognition for anyone under age 18 and limitations on who can see certain information teens have shared.
To comply with GDPR, Facebook will also limit what it shows to users between the ages of 13 and 15 unless they get permission from a parent.
Advertising revenue is not expected to be affected despite the drop in users.
A lower number of DAUs (daily active users) would have a minimal effect on advertising revenue, said chief strategy officer and head of technology research for GBH Insights, Daniel Ives.
The analytical firm predicts a worst-case scenario of a two per cent drop in annual advertising revenue – around £760 million ($1 billion).
eMarketer principal analyst, Debra Aho Williamson, believes North American DAUs will follow last month’s trend and be down or flat.
Ms Williamson does however, expect European DAUs to be lower for the first time, but she claims it may be irrelevant in the long run.
‘Even if MAU (monthly active users) and DAU show some weakness, Facebook has done an excellent job of becoming an indispensable communications platform,’ Ms Williamson told CNBC.
‘Simply put, it’s very hard to leave Facebook entirely.
‘Perhaps people will share less often or become more careful about what they share, but we believe that it remains a very important platform for many people.
‘And we also believe that engagement trends on Instagram as well as Messenger and WhatsApp will remain strong.’
Facebook itself may be facing tough times, but its empire is thriving.
Last month, Instagram announced it had hit one billion monthly users and analysts expect Facebook to post around £10.1 billion ($13.3 billion) in revenue, up 43 per cent from 2017.
WHAT IS GDPR AND HOW DOES IT AFFECT CONSUMERS?
The General Data Protection Regulation is an EU-wide law that cam into force on May 25 2018.
It gives greater power to regulators to penalise companies who mishandle personal data or are not transparent about how their business uses it.
For consumers, it brings new powers that require firms to obtain clear consent from users before processing their data.
It also grants users a right to easily access the data collected from them and transparency on how it is being used.
The General Data Protection Regulation is an EU-wide law that cam into force on May 25 2018. It gives greater power to regulators to penalise companies who mishandle personal data or are not transparent about how their business uses it (stock image)
Everyday users have to do very little to comply with GDPR – it’s more targeted at big online businesses.
Under the new rules, any company that controls or processes the data of EU citizens must adhere to the GDPR guidelines.
This ends territorial-based accountability used by some firms not based in the EU to previously avoid sanction.
The law also states that notification of a data breach must occur within 72 hours of being first discovered, increasing transparency around leaks.
The weight of fines able to be issued has also increased under GDPR.
Regulators will be able to issue penalties equivalent of up to four per cent of annual global turnover or 20 million euro (£17.5 million) – whichever is greater.
For tech giants such as Google and Facebook, this could mean the risk of fines running into the hundreds of millions.