Facebook stated on Wednesday that it expects a fine of up to $5 billion from the Federal Trade Commission, which is investigating whether the social network violated its users’ privacy. This would set a new record for penalties by the FTC against a tech company.
The one-time charge slashed Facebook’s first-quarter net income considerably, although revenue grew by 25% in the period. The FTC has been looking into whether Facebook broke its own 2011 agreement promising to protect user privacy.
Investors shrugged off the charge and sent the company’s stock up nearly 5% to $190.89 in after-hours trading. EMarketer analyst Debra Aho Williamson, however, called it a “significant development” and noted that any settlement is likely to go beyond a mere dollar amount.
″(Any) settlement with the FTC may impact the ways advertisers can use the platform in the future,” she said.
Facebook has had several high-profile privacy lapses in the past couple of years. The FTC has been looking into Facebook’s involvement with the data-mining firm Cambridge Analytica scandal since last March. That company accessed the data of as many as 87 million Facebook users without their consent.
In addition to the FTC investigation, Facebook faces several others in the U.S. and Europe, including by the Irish Data Protection Commission, and others in Belgium and Germany. Ireland is Facebook’s lead privacy regulator for Europe. Regulators in Europe fined Google a record-breaking $5.1 billion for abusing its power in the mobile phone market. They also ordered the search giant to alter its practices.
The social network said its net income was $2.43 billion, or 85 cents per share in the January-March period. That’s down 51% from $4.99 billion, or $1.69 per share, a year earlier, largely as a result of the $3 billion charge.
Revenue grew 26% to $15.08 billion from a year earlier. Excluding the charge, Facebook earned $1.89 per share.
Analysts polled by FactSet expected earnings of $1.62 per share and revenue of $14.98 billion.
Facebook’s monthly user base grew 8% to 2.38 billion. Daily users grew 8% to 1.56 billion.
Donald Trump’s Jack Dorsey Twitter Meeting
Trump uses Twitter extensively to get his message out, particularly since the release of special counsel Robert Mueller’s report, including more than 40 tweets and retweets in the last two days, and two criticizing Twitter itself. But Trump has also asserted that social media companies have been exhibiting bias against conservatives, something the companies have rejected as untrue.
Trump gave his readout of the meeting, of course, on Twitter.
“Lots of subjects discussed regarding their platform, and the world of social media in general. Look forward to keeping an open dialogue!” Trump tweeted to his nearly 60 million followers.
While some tech company executives may lean liberal, they have long asserted that their products are without political bias. Twitter described the meeting with Dorsey as constructive and said it came at the president’s invitation.
“They discussed Twitter’s commitment to protecting the health of the public conversation ahead of the 2020 U.S. elections and efforts underway to respond to the opioid crisis,” the company said in a statement.
Trump tweeted earlier Tuesday that he would have more followers “if Twitter wasn’t playing their political games. No wonder Congress wants to get involved – and they should. Must be more, and fairer, companies to get out the WORD!”
Russian agents used social media sites to sow discord among U.S. voters in the 2016 elections. Companies such as Twitter and Facebook have since invested heavily in rooting out fake news, propaganda and hate speech. But conservatives are complaining that those steps are disproportionally aimed at their side of the political spectrum.