Summits Yellow

Facebook may have to pay FTC up to $5bn in fines, earnings report confirms

Alyssa Clementi

Facebook is preparing to lose between $3bn (£2.3bn) and $5bn as a result of multiple unresolved FTC inquires, according to the company’s just -released Q1 2019 financial reports. Facebook has been under scrutiny for the past two years, following data and privacy scandals, but that hasn’t stopped it from growing. According to the reports, the social media giant managed to bump its revenue, daily active users, monthly active users, and mobile advertising revenue.

“In the first quarter of 2019, we reasonably estimated a probable loss and recorded an accrual of $3bn 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 condensed consolidated balance sheet,” stated the report. “We estimate that the range of loss in this matter is $3bn to $5bn. The matter remains unresolved, and there can be no assurance as to the timing or the terms of any final outcome.”

Facebook’s daily active users increased eight per cent year-over-year, to hit roughly 1.56bn users, while monthly active users also jumped 8 per cent, to an average of 2.38bn users. Facebook’s ad platform spiked in popularity, as mobile advertising revenue accounted for 93 per cent of advertising revenue for Q1 2019, up from 91 per cent of advertising revenue in Q1 2018. Total revenues for the quarter were ahead of expectations at $15.08bn, a 2 per cent year-on-year increase.

“Advertisers say they are concerned about Facebook’s many problems, but that concern hasn’t led to a drop in ad spending. The performance of the ads and the targeting capabilities continue to be the two biggest attractions for advertisers,” commented Debra Aho Williamson, eMarketer principal analyst.

Facebook’s capital expenditures, such as principal payments and financial leases, continued to rise as well, hitting $3.96bn in Q1 2019. The report also highlighted Facebook’s cash and cash equivalents and marketable securities, which totaled $45.24bn by the end of this year’s first quarter.

Additionally, Facebook's reputation with the US government and UK's Parliment didn’t seem to deter potential job canidates, considering its workforce grew by 36 per cent year-over-year. 

According to the financial results, Facebook’s 'Family' of services seems to be getting more attention, now that the company owns Facebook Messenger, Instagram, and WhatsApp. The report estimated that over 2.1bn people use the “Family” of services every day, and 2.7bn people use at least one service each month.

“Instagram is a major factor behind Facebook’s revenue growth. Its user base is still rising in the US and advertisers are increasingly gravitating toward Instagram Stories,” said Debra Aho Williamson, eMarketer principal analyst.

"We had a good quarter and our business and community continued to grow," said Mark Zuckerberg, Facebook founder and CEO. "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."

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