Facebook released its first quarter earnings report on Wednesday. Therein, it revealed that it expects a fine of up to $5 billion from the Federal Trade Commission, which is conducting an ongoing investigating into whether the social network infringed on its users’ privacy. As reported by VIN News, while the company’s revenue grew by 25 percent for the quarter, it slashed its own income considerably by setting aside $3 billion as a one-time charge or contingency against the possible penalty. The company noted that the “matter remains unresolved.” The FTC has been probing to see if Facebook broke its own 2011 agreement promising to protect its users’ privacy.
Investors took the news well, with the company’s stock up nearly 5% to $190.89 in after-hours trading. EMarketer analyst Debra Aho Williamson, however, called the news a “significant development” and noted that any settlement is likely to have implications beyond the dollar amount. “(Any) settlement with the FTC may impact the ways advertisers can use the platform in the future,” she said.
This will not be the first public probe for the company. Last March, Facebook found itself tangled in a scandal in which the FTC investigated Facebook’s involvement with the data-mining firm Cambridge Analytica. That company allegedly accessed the data of as many as 87 million Facebook users without their consent. Facebook also faces several other probes in the U.S., Belgium, Germany and one by the Irish Data Protection Commission. Ireland is Facebook’s lead privacy regulator for Europe.
The social media giant, founded in 2004 by Mark Zuckerberg and headquartered in Menlo Park, California, shared in the report that its net income was $2.43 billion, or 85 cents per share in the January-March period. That’s a 51 percent drop from $4.99 billion, or $1.69 per share, a year earlier, mostly due to the $3 billion charge. Revenue grew 26 percent to $15.08 billion from a year earlier. If not for the charge, Facebook would have earned $1.89 per share. Analysts polled by FactSet had expected earnings of $1.62 per share and revenue of $14.98 billion. For the first quarter of the year, Facebook’s monthly user base grew 8% to 2.38 billion. The number of daily users grew 8 percent to 1.56 billion.
As per CBS News, Facebook has plans for a new private messaging system, where communication will be encrypted and temporary, CEO Zuckerberg told investors in a conference call following the release of the report. “This is going to be a central focus for the company for the next five years or longer,” he said. “In terms of advertising and commerce, it’s a spectrum,” Zuckerberg added, referring to the popularity of ads on Facebook’s Instagram. “The private network will lend itself to transactions.”