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Facebook expects to be hit with a fine by the Federal Trade Commission over its user data practices that could amount to as much as $5 billion, the social networking giant reported Wednesday.
The company said that the matter with the FTC “remains unresolved,” but it set aside $3 billion during the first quarter of 2019 to related to the fine, which had an impact on its earnings for the quarter. It expects the loss to be somewhere between $3 billion and $5 billion.
Investors were not fazed by the news, sending Facebook’s stock up more than 4 percent during after-hours trading on the Nasdaq.
Facebook has been dogged by concerns over privacy and its handling of user data over the last year. The Cambridge Analytica scandal, in which the political data firm was able to access user information to create targeted advertisements during the 2016 election, led Congress to summon CEO Mark Zuckerberg for a two-day hearing over the company’s privacy practices. The FTC’s investigation has focused on whether the company violated a 2011 agreement to improve its handling of user data.
Zuckerberg said in March that he plans to reorient Facebook’s mission around privacy-focused messaging and ephemeral communication. He reiterated that stance again on Wednesday, noting 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.”
During a one-hour call with investors following the earnings release, Zuckerberg devoted his prepared remarks to his focus on his vision for a more privacy-focused Facebook. “In our lives, we all have public spaces like the town square and private spaces like our living,” said the exec. “Facebook and Instagram have become the digital equivalent of the town square.” He continued that the company is committed to “working openly” on its privacy policies.
Zuckerberg also addressed questions about whether the shift in strategy will impact Facebook’s business, acknowledging, “We don’t know exactly how this will play out yet.”
Despite a rough 2018, Facebook’s business has felt little impact. The company reported first-quarter revenue of $15.1 billion, up 26 percent from the same period last year. Net income, which will be impacted by the FTC fine, came in at 85 cents per share. Wall Street, per FactSet, was expecting the social media giant to report first-quarter revenue of $15 billion and net income of $1.62 per share.
Facebook ended the first quarter with 1.56 billion daily active users, up 8 percent year over year. It has 2.38 billion monthly active users, also up 8 percent. The company also estimates that on average each day, more than 2.1 billion people use Facebook, Instagram, WhatsApp or Messenger — what it refers to as its “family” of services.
Facebook shares closed the day down less than 1 percent to $182.58.
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