×

Facebook Anticipates It Will Have to Pay FTC Up to $5 Billion for Privacy Violations

Facebook executives expect that the company will have to pay as much as $5 billion as a result of an ongoing FTC investigation into its privacy practices, they revealed in Facebook’s Q1 2019 earnings release Wednesday. As a result of these anticipated charges, Facebook set aside $3 billion in the quarter, which significantly impacted its earnings per share.

“In the first quarter of 2019, we reasonably estimated a probable loss and recorded an accrual of $3.0 billion in connection with the inquiry of the FTC into our platform and user data practices,” the company said in its earnings release.

Facebook chief financial officer David Wehner briefly addressed the issue during Wednesday’s earnings call, saying that the company had ongoing settlement discussions with the agency. “This matter is not resolved,” he said, adding that the actual amount that Facebook will have to pay was still uncertain.

The company delivered this news as it released a set of otherwise strong earnings numbers: Facebook generated revenue of $15 billion during Q1 of 2019, compared to close to $12 billion during the same quarter last year. Net income for the quarter without the $3 billion charge was $5.43 billion, compared to nearly $5 billion a year ago.

Including the charge, net income was $2.43 billion. This equals earnings per share of $0.85. Analysts had expected earnings per share of $1.62 on revenue of $15 billion.

Investors were apparently not too disturbed by the anticipated fine, and sent Facebook’s share price up more than 4% in after-hours trading. They might have taken some solace in Facebook’s continued growth:

The company revealed Wednesday that it reached 1.56 billion daily active users in March, which was up 8% year-over-year. Facebook ended March with 2.38 billion monthly active users, also up 8% year-over-year. Across its most popular apps, including Instagram, Whatsapp, Messenger and Facebook proper, the company reached an estimated 2.1 billion users ever day, and 2.7 billion users every month.

Combined with a fine or settlement amount that still leaves Facebook solidly in the black for the quarter, these numbers suggest that Facebook may emerge from its privacy scandals relatively unscathed.

Facebook CEO Mark Zuckerberg used the company’s earnings call Wednesday afternoon to address another investor concern: that Facebook’s move towards private messaging will be damaging to its ad revenue.

While Zuckerberg had in the past couple of months championed private messaging as the future of communication, he argued on Wednesday that this wouldn’t necessarily kill products like Facebook’s newsfeed. “Facebook and Instagram… will only to continue to grow in importance,” he said, adding that there was room for both “public and private spaces” on the internet.

Zuckerberg said that encrypting private messaging wouldn’t have any impact on Facebook’s business. Strengthening private messaging could theoretically cannibalize some of Facebook’s legacy products, he acknowledged. But in the end, Facebook could also grow its audience by syphoning messaging users away from other services.

More Digital

  • Asian Streamer Iflix Completes $50 Million

    Asian Streamer Iflix Completes $50 Million Fund Raising

    Asia-based streaming firm Iflix has completed its latest funding round by bringing in major institutional investor Fidelity. The company says it is now looking towards an IPO. Iflix, which has operations across 12 countries in Asia, says that the funding cycle brought in “well in excess of $50 million,” but provided few new details. Other [...]

  • Once Upon a Time in Hollywood

    ‘Once Upon a Time in Hollywood’ Tops Studios’ TV Ad Spending

    In this week’s edition of the Variety Movie Commercial Tracker, powered by the always-on TV ad measurement and attribution company iSpot.tv, Columbia Pictures claims the top spot in spending with “Once Upon a Time in Hollywood.” Ads placed for the drama had an estimated media value of $5.71 million through Sunday for 997 national ad [...]

  • Department of Justice

    DOJ Announces Antitrust Review of Tech Giants

    In a move that could potentially disrupt Silicon Valley’s biggest companies, the U.S. Justice Department announced that its antitrust division opened a review into “whether and how market-leading online platforms have achieved market power.” The DOJ, in its announcement Tuesday, didn’t identify which companies it is looking into as part of the investigation. Facebook, Amazon, Google [...]

  • Snap Inc

    Snap Stock Skyrockets as Company Adds 13 Million Daily Active Users in Q2

    Share prices for Snapchat’s corporate parent Snap Inc. shot up as much as 13% in after-hours trading Tuesday on news that Snapchat added 13 million daily active users in Q2 of 2019. The service ended the quarter with 203 million users, compared to 190 million at the end of Q1, and 188 million in Q2 [...]

  • jbl link bar

    JBL Finally Releases Its Android TV-powered Smart Sound Bar

    Over a year after first announcing it, Samsung subsidiary Harman is finally releasing its JBL Link Bar, a smart sound bar that comes with Android TV built-in. The new device effectively doubles as a smart speaker, and does away with the need for any additional streaming devices. Google and Harman / JBL first announced the [...]

  • Inverse-BDG

    Bustle Digital Buys Digital-Media Startup Inverse, Its Eighth Acquisition to Date

    Bustle Digital Group, continuing its strategy of snapping up smaller digital-media players, has acquired Inverse, geared toward an young-male audience with content about science, tech and culture. Terms of the deal weren’t disclosed. BDG founder and CEO Bryan Goldberg is well-acquainted with Inverse, which was founded in 2015 by CEO Dave Nemetz — who previously [...]

  • Pandora voice mode

    Pandora Launches Voice Mode for Everyone

    After first launching a limited beta earlier this year, Pandora opened up its mobile voice control to all of its iOS and Android users Tuesday. The new feature allows users to ask for songs, albums, playlists, stations, and even soundtracks for activities or times of day, with simple voice commands. Pandora’s voice mode is similar [...]

More From Our Brands

Access exclusive content