Facebook anticipates up to $5 billion fine for privacy violation

Facebook’s earnings hit by $3 billion legal expense related to FTC investigation

Facebook’s earnings hit by $3 billion legal expense related to FTC investigation

Excluding the charge, Facebook would have earned $1.89 a share, up from $1.69 in the year-ago quarter and easily beating analysts' average estimate of $1.63 per share, according to IBES data from Refinitiv.

Setting aside between $3bn and $5bn will hurt Facebook's shareholders because it means recorded earnings per share of $0.85 compared to what would have been $1.89 per share. Facebook set aside $3 billion to cover anticipated costs associated with the settlement, but said the charges could reach as high as $5 billion. Facebook noted that "there can be no assurance as to the timing or the terms of any final outcome" in regards to the FTC investigation.

The FTC began investigating the social-media giant in March 2018 after news of Facebook's mishandling of user data in the case of Cambridge Analytica became public.

Investors have generally shrugged off issues surrounding data use, regulatory hurdles or political pressure when evaluating Facebook, focusing instead on its robust financials.

Facebook has been in negotiations with the regulator for months over a financial penalty for claims that the company violated a 2011 privacy consent decree.

First-quarter sales jumped 26 per cent and monthly visitors at Facebook's main site topped projections. Previously, the largest fine leveled against a tech firm was a $22 million slap on the wrist for Google in 2012 over failure to abide by a previous FTC agreement not to use cookies to track users of Apple's Safari browser. That's after the company spent $3.96 billion on capital expenditures during the quarter.

The matter was a reckoning for Facebook and saw CEO Mark Zuckerberg dragged before Congress and the European Union Parliament. They have now regained much of the ground lost past year amid slowing growth and costs associated with the company's privacy scandals. Facebook was also required to notify the FTC if user data was misused in anyway.

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Facebook has not just changed the world and the way we interact and socialise over the internet, but also in the way it repeatedly breaches customer privacy.

It claims to have 1.56bn daily active users, up 2.6pc from 1.52bn in the last quarter and up 8pc year over year.

Zuckerberg, meanwhile, doubled down on his long-term vision to turn Facebook into a "privacy-focused platform " modeled after its encrypted messaging app WhatsApp.

Daily users grew 8 precent to 1.56 billion.

Facebook needs to show that it's improving on user data practices and content management, said Jessica Liu, a marketing analyst for Forrester.

Williamson said advertisers are staying with Facebook despite controversies that have plagued the social networking giant.

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