Facebook's shares are taking a hit after the company reported its second quarter 2012 results. The stock was down 11 percent in afternoon trading, pricing Facebook at just under $24 a share. That's after an 8 percent dip in Thursday trading.
Facebook's revenue rose to $1.18 billion in the quarter. That's up from $895 million. Most of those revenues came from advertising. Still, the company reported a $157 million net loss, which compares with a net income of $240 million in the year-ago period.
Mark Zuckerberg, Facebook founder and CEO, didn't have much to say about the loss.
"Our goal is to help every person stay connected and every product they use be a great social experience. That's why we're so focused on investing in our priorities of mobile, platform and social ads to help people have these experiences with their friends," Zuckerberg said.
Lack of Guidance
Greg Sterling, principal analyst at Sterling Market Intelligence, noted that
Facebook said Thursday the company was still in an "investment phase" of development and that it was not going to be managed to a specific operating margin.
"This signaled to investors that in the near term they might have several more lackluster quarters," Sterling told us. "Facebook took great pains to talk about mobile and early promising results from their initial foray into mobile advertising. This has been an area of great concern among financial analysts."
Sterling also pointed to comments from Facebook COO Sheryl Sandberg, who spoke about the continuing need to educate marketers about the value and performance of Facebook advertising. Sandberg essentially said there was a wide gap between consumer usage of Facebook and ad spend. But she presented that gap as an indicator of potential future growth, not as a sign of weakness.
"Overall, financial analysts and investors may have come away with the impression that financial performance of the company, despite its ubiquity in the culture, was not going to be great for the foreseeable future," Sterling said. "I would also agree that the lack of guidance from Facebook is playing into disappointment with the company among investors."
Customer Satisfaction Tanking
Could things grow worse for Facebook in the quarters ahead? According to the American Customer Satisfaction Index E-Business Report, Facebook has plunged 8 points to 61 on a 100-point scale, setting a new low score for the Social Media category and placing it among the five lowest-scoring companies of more than 230 measured by the ACSI.
As Facebook declines, rival Google+ posted a score of 78 in its first appearance in the ACSI. According to the report, Google+'s strong showing is a result of an absence of traditional advertising and what is seen as a superior mobile product.
Google+'s strengths may be Facebook's weaknesses, as users complain about ads and privacy concerns. However, the most frequent complaints about Facebook are changes to its user interface, most recently the introduction of the Timeline feature.
"Facebook and Google+ are competing on two critical fronts: customer experience and market penetration. Google+ handily wins the former, and Facebook handily wins the latter, for now," said Larry Freed, president and CEO of ForeSee.
"It's worth asking how much customer satisfaction matters for Facebook, given its unrivaled 800 million user base. But I expect Google to leverage its multiple properties and mobile capabilities to attract users at a rapid pace. If Facebook doesn't feel the pressure to improve customer satisfaction now, that may soon change."