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Facebook will show if the data scandal harms the business



  Facebook CEO:

Four months after the Cambridge Analytica scandal humbled Facebook and divested tens of billions of dollars from its market value, the company's stock is back at record levels.

But investors are finding out if Facebook ( FB ) is truly invincible.

Facebook announces its second-quarter results following its IPO on Wednesday, demonstrating most clearly how the data debacle impacted user growth and ad sales.

News that the data company Cambridge Analytica accessed information from 87 million Facebook users without their permission broke out in the last weeks of the first quarter. Any serious fallout will appear sooner in the results of Wednesday.

Daniel Ives, an analyst at GBH Insights, wrote in a statement to investors this week that the results will be a "crucial barometer" to spot "fundamental damage" to the company, which he calls the darkest chapter referred to in the 1

4-year history of Facebook. "So far, he says, the damage is" very limited "and" much better than feared. "

Facebook endured grilling from legislators on both sides of the Atlantic and is being reviewed by several federal agencies in the United States, yet the company is expanding its portfolio of apps to users and remains a top destination for advertisers.

Related: Were your Facebook data shared with Cambridge Analytica? You can find out now

Wedbush analyst Michael Pachter expects Facebook expects 46 million users a day in the last quarter, down two million from the previous quarter, but expects that Facebook will only add one million users a day in the US and Canada.

Even slow growth could be seen as a win in the face of negative headlines and protests prompting users to delete Facebook Skeptics rebounded in April by reversing its first decline in daily users in the United States and Canada when the data scandal came to light for the first time.

Meanwhile, the ad business shows no signs of slowing. The consensus among analysts is that Facebook will post revenue of $ 13.3 billion for the quarter, an increase of more than 40% over the same period last year. They attribute the increase to the company's impressive promotional sales machine.

Facebook and Google remain by far the largest platforms for online marketers. If anything, the recent regulation could only help. During the quarter, a comprehensive new data protection law came into force throughout the European Union. Big-tech companies have more resources to adapt to policy change.

Brian Pivotal Research analyst Brian Wieser said in an investor note this month that early anecdotes indicate that the GDPR further "concentrates" advertising budgets with Facebook's "duopolists" and Google [19659004] [ GOOGL ) . Earlier this week, Google's parent album reported a 26% increase over the previous year despite the introduction of the GDPR.

Facebook could also find a good place in Instagram, the photo-sharing service it acquired in 2012 for $ 1 billion. The app has recently surpassed one billion active users and recently expanded to long-form videos that offer tremendous advertising potential.

Facebook does not do financial data for Instagram, but Wieser says, "Consumption on Instagram is still growing." This should help "alleviate" the decline in user engagement for the Facebook app.

CNNMoney (New York) First published July 25, 2018: 12:03 ET


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