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When the European Union’s GDPR (General Data Protection Regulation) went into effect last June, analysts expected the regulation will affect social media giants like Facebook. Before GDPR, Facebook used to have a better legal ground to aggregate its users’ data and use it for targeted advertising. Currently, almost all of Facebook’s huge revenue comes from advertisement. While it was pretty clear GDPR was going to affect Facebook’s revenue, Facebook in their Q1 earning call tried to downplay these expectations. However, fast forward 3 months in Q2 earning call, Facebook CFO informed investors they should expect a significant decline in Facebook’s revenue growth rates. The expected decline is due to a combination of factors like increasing data security expenses, Cambridge Analytica privacy scandal and the decline of the number of European users because of GDPR.
These news led to an immediate 20% drop in Facebook shares wiping off more than $100 Billion from the company’s market cap. This loss marked the largest one-day loss by a company in the US stock market history.
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