Facebook is taking on a multi-billion dollar charge that’s tied to the Federal Trade Commission’s investigation into the firm’s privacy debacles.
In its latest earnings report, the social media giant said it expects to assume a charge between $3 billion and $5 billion in connection with an ongoing FTC probe.
The one-time charge made a dent in the company’s profits for the quarter, with its net income down 51 percent compared to the same quarter last year.
Meanwhile, Facebook’s revenue continued to grow in its latest quarterly earnings report, soaring as much as 26 percent compared to the same period in 2018.
Wall Street didn’t seem too concerned about Facebook’s hefty FTC fine, however, as the company’s stock climbed 5.7 percent to $182.58 in after-hours trading on Wednesday.
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Facebook is taking on a multi-billion dollar charge that’s tied to the Federal Trade Commission’s investigation into the firm’s privacy debacles
FACEBOOK BY THE NUMBERS
Revenue: $15.08 billion vs. analysts’ expectations of $14.98 billion
Earnings: 85 cents per share vs. analysts’ expectations of $2.38 per share
Monthly Active Users: 2.38 billion vs. 2.37 billion
Daily Active Users: 1.56 billion vs. analysts’ expectations of 1.56 billion
Average revenue per user: $6.42 vs. analysts’ expectations of $6.39
The FTC opened an investigation into Facebook’s privacy dealings last March in response to the Cambridge Analytica scandal, which saw some 87 million users’ data harvested and shared with Trump-affiliated campaign research firm Cambridge Analytica.
The investigation remains ongoing, but Facebook now expects to take on a charge worth as much as $5 billion from its settlement with the agency.
‘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, which accrual is included in accrued expenses and other current liabilities on our balance sheet,’ the company said in its earnings release.
‘We estimate that the range of loss in this matter is $3.0 billion to $5.0 billion.
‘The matter remains unresolved, and there can be no assurance as to the timing or the terms of any final outcome,’ it added.
The firm’s quarterly profits took a hit as a result of the $3 billion legal expense.
Wall Street didn’t seem too concerned about Facebook’s hefty FTC fine, however, as the company’s stock climbed 5.7 percent to $182.58 in after-hours trading on Wednesday
Profits were $2.4 billion, or 85 cents per share, for the fiscal first quarter, a 51 percent decline from the same period a year ago and down sharply from the $6.9 billion in profits it reported the previous quarter.
Still, Facebook managed to exceed Wall Street’s expectations in other areas, reporting a 26 percent year-over-year increase in revenue to $14.9 billion.
Facebook CEO Mark Zuckerberg didn’t mention the FTC fine in his statement included in the earnings report.
‘We had a good quarter and our business and community continue to grow,’ Zuckerberg said in a statement.
‘We are focused on building out our privacy-focused vision for the future of social networking, and working collaboratively to address important issues around the internet.’
Facebook’s user base continued to grow in the latest quarter, with monthly active users rising 2.5 percent quarter-over-quarter to 2.38 billion and daily active users up coming in at 1.56 billion, a 2.6 percent increase compared to the previous quarter.
Investors will be closely watching the company’s statements around privacy when it hosts its quarterly earnings call Wednesday evening.
Zuckerberg confirmed in March that Facebook would begin integrating the chat functions of its ‘family of apps,’ which include the main Facebook app, WhatsApp, Messenger and Instagram.
This move is part of Zuckerberg’s wider vision of moving toward ‘private, encrypted services’ and away from the News Feed-focused model it has relied on all these years.
FACEBOOK’S PRIVACY DISASTERS
December 2018: Facebook comes under fire after a bombshell report discovered the firm allowed over 150 companies, including Netflix, Spotify and Bing, to access unprecedented amounts of user data, such as private messages.
Some of these ‘partners’ had the ability to read, write, and delete Facebook users’ private messages and to see all participants on a thread.
It also allowed Microsoft’s search engine, known as Bing, to see the name of all Facebook users’ friends without their consent.
Amazon was allowed to obtain users’ names and contact information through their friends, and Yahoo could view streams of friends’ posts.
As of last year, Sony, Microsoft, and Amazon could all obtain users’ email addresses through their friends.
September 2018: Facebook disclosed that it had been hit by its worst ever data breach, affecting 50 million users – including those of Facebook boss Mark Zuckerberg and COO Sheryl Sandberg.
Attackers exploited the site’s ‘View As’ feature, which lets people see what their profiles look like to other users.
Facebook says it has found no evidence ‘so far’ that hackers broke into third-party apps after a data breach exposed 50 million users (stock image)
The unknown attackers took advantage of a feature in the code called ‘Access Tokens,’ to take over people’s accounts, potentially giving hackers access to private messages, photos and posts – although Facebook said there was no evidence that had been done.
The hackers also tried to harvest people’s private information, including name, sex and hometown, from Facebook’s systems.
Facebook said it doesn’t yet know if information from the affected accounts has been misused or accessed, and is working with the FBI to conduct further investigations.
However, Mark Zuckerberg assured users that passwords and credit card information was not accessed.
As a result of the breach, the firm logged roughly 90 million people out of their accounts earlier today as a security measure.
March 2018: Facebook made headlines earlier this year after the data of 87 million users was improperly accessed by Cambridge Analytica, a political consultancy.
The disclosure has prompted government inquiries into the company’s privacy practices across the world, and fueled a ‘#deleteFacebook’ movement among consumers.
Communications firm Cambridge Analytica had offices in London, New York, Washington, as well as Brazil and Malaysia.
The company boasts it can ‘find your voters and move them to action’ through data-driven campaigns and a team that includes data scientists and behavioural psychologists.
‘Within the United States alone, we have played a pivotal role in winning presidential races as well as congressional and state elections,’ with data on more than 230 million American voters, Cambridge Analytica claims on its website.
The company profited from a feature that meant apps could ask for permission to access your own data as well as the data of all your Facebook friends.
The data firm suspended its chief executive, Alexander Nix (pictured), after recordings emerged of him making a series of controversial claims, including boasts that Cambridge Analytica had a pivotal role in the election of Donald Trump
This meant the company was able to mine the information of 87 million Facebook users even though just 270,000 people gave them permission to do so.
This was designed to help them create software that can predict and influence voters’ choices at the ballot box.
The data firm suspended its chief executive, Alexander Nix, after recordings emerged of him making a series of controversial claims, including boasts that Cambridge Analytica had a pivotal role in the election of Donald Trump.
This information is said to have been used to help the Brexit campaign in the UK.
It has also suffered several previous issues.
In 2013, Facebook disclosed a software flaw that exposed 6 million users’ phone numbers and email addresses to unauthorized viewers for a year, while a technical glitch in 2008 revealed confidential birth-dates on 80 million Facebook users’ profiles.