Facebook expects an FTC privacy penalty of up to $ 5 billion
SAN FRANCISCO (AP) – Facebook said it expects a $ 5 billion fine from the Federal Trade Commission, investigating whether the social network broke the consumer's privacy.
The company set aside $ 3 billion in its Quarterly revenue reporting Wednesday as a contingency to the possible penalty, but noted that "the case remains unresolved."
The one-time fee significantly reduced Facebook's first quarter net profit, even though revenue increased by 26% during the period. The FTC has investigated whether Facebook broke its own 2011 deal which promised to protect the user's privacy.
Investors pulled off the tax and sent the company's stock up more than 9% to nearly $ 200 in retrospect. However, Emarket analyst Debra Aho Williamson called it a "significant development" and noted that any settlement is likely to go beyond one amount.
"(Any) settlement with the FTC may affect the ways advertisers can use the platform in the future," she said.
Facebook has had several high-profile privacy lapses over the last couple of years. The FTC has seen Facebook's involvement with the data-mining firm Cambridge Analytica scandal since March last year. That company got access to data from as many as 87 million Facebook users without their consent.
The 201[ads1]1 FTC agreement tied Facebook to a 20-year privacy commitment; Violations can postpone Facebook for fines of $ 41,484 per breach per user per day. The agreement requires Facebook users to provide "affirmative express consent" whenever the data they have not disclosed is shared with a third party.
The newly-defined Cambridge Analytica, which provided political data services for the 2016 Trump campaign and others, had broad access to normally private user data. It exploited a Facebook loophole that allowed it to see the data of people's friends, not just people who explicitly allowed access when they took a personality quiz. Although Facebook had in-place controls that allowed people to restrict access, they were found buried in the site's settings and difficult to find.
In addition to the FTC survey, Facebook faces several others in the US and Europe, including one from the Irish Data Protection Commission, and others in Belgium and Germany. Ireland is Facebook's leading privacy regulator for Europe. The FTC is also gradually looking at how it can keep CEO Mark Zuckerberg responsible for the company's privacy lapses.
The social network said net income was $ 2.43 billion, or 85 cents per share in the January-March period. It's down to 51% from $ 4.99 billion, or $ 1.69 per share, a year earlier, mainly as a result of the $ 3 billion fee.
Revenues increased 26% to $ 15.08 billion from the previous year. Except for the fee, Facebook earned $ 1.89 per share. Analysts asked the FactSet expected earnings of $ 1.62 per share and a $ 14.98 billion revenue.
During a conference call with analysts, the company warns that it is facing "ad targeting headwinds" in the second half of this year. It includes developments such as Europe's new privacy policy that can weaken the company's ability to target ads. Facebook also plans to launch a much-promised "clear history" tool that lets users delete their browser paths from Facebook's data records while blocking the social network from tracking the links they click on.
Meanwhile, Zuckerberg doubled his long-term vision to make Facebook a "privacy-focused platform" modeled after the encrypted WhatsApp messaging application. Analysts have questioned the company's ability to make money if the focus is on private communication. But Zuckerberg said the company is currently not using the content of ad targeting messages anyway.
Facebook's monthly user base on its flagship service increased by 8% to 2.38 billion. Daily users increased by 8% to 1.56 billion. The company said about 2.7 billion people used Facebook, WhatsApp, Instagram or Messenger every month and 2.1 billion people spent at least one of their services every day.
