Facebook Braces For Billions In FTC Fines 04/25/2019

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For the first quarter, Facebook reported a profit of US$2.4bn, lower than the US$5bn previous year. The FTC began its investigation in the wake of the Cambridge Analytica scandal disclosed in early 2018 over alleged Facebook violations of a 2011 consent decree on user privacy.

This time around, McSherry says, the FTC should focus on a new settlement with Facebook that would be meaningful and followed by the company. Talk of a national data-privacy law is swirling around Capitol Hill, states like California have already forged ahead with their own measures, and U.S. presidential candidate Elizabeth Warren has proposed breaking up the biggest USA tech companies. Facebook had expected to post about $5.4 billion in profit over the first three months of this year, but it has revised that to $2.4 billion.

Commenting on the earnings report, eMarketer Principal Analyst Debra Aho Williamson said: "We are not surprised by Facebook's solid performance in revenue and user growth". "What they care most about is its vast user base and its targeting capabilities". However, the Company still managed to earn $2.429 billion in profit, which is quite lower than the profit generated in the last quarter, or even a year ago. Analysts surveyed by Thomson Reuters had forecasted $14.98 billion.

On average, monthly active users (MAUs) reached 2.38 billion as of March 31, 2019, were also up 8% year-over-year. The company's sales gains are increasingly being driven by photo-sharing app Instagram and advertising in its ephemeral Stories feature.

Facebook also announced that it recorded a charge of $3 billion due to an FTC inquiry into the company's user data practices, which ate into the company's bottom line. Shares surged as much as 11 per cent in extended trading.

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The FTC opened a new investigation previous year after Facebook came under fire again.

The legal settlement cut into the company's net income in Q1 to United States dollars 2.43 billion or 85 cents per share. "The matter remains unresolved, and there can be no assurance as to the timing or the terms of any final outcome", the social network said.

Facebook is expecting legal expenses of between $3 billion and $5 billion.

The bank added that developments in virtual and augmented reality, messaging, eCommerce and advertising all provided upside for "platform evolution" in the future.

The Mark Zuckerberg-led social network reported the staggering figure in its latest earnings report where it estimated a one-time loss of between $3 billion and $5 billion tied to money it set aside to settle privacy grievances by regulators. Business Insider's Rob Price reported this month that Facebook also uploaded the email contact information of 1.5 million new users without informing them or seeking their consent. Following events such as the Cambridge Analytica scandal and a security flaw which was discovered late past year, one would assume Facebook would be losing users.

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