Facebook sets aside $3B in Q1 to cover legal fees related to FTC probe

Facebook published its first quarter financial results on Wednesday, notifying investors that it accrued a $3 billion legal expense in Q1 2019 related to an ongoing US Federal Trade Commission (FTC) investigation. The FTC probe is ongoing and could cost Facebook anywhere between $3 billion and $5 billion, the company said.

The social media giant reported diluted earnings per share of 85 cents on revenue of $15.08 billion, up 26 percent from last year.

Analysts were expecting non-GAAP earnings of $1.63 per share on revenue of $14.97 billion.

Without the huge legal expenses related to the FTC probe, Facebook said its EPS would have been $1.89.

Since last year, following the Cambridge Analytica scandal, the FTC has been probing whether Facebook violated a 2011 privacy consent decree that obligated the company to take steps to protect its users’ privacy. The consent decree followed a prior FTC investigation that found Facebook mishandled user data. Earlier this year, the Washington Post first reported that Facebook was negotiating a record, multi-billion dollar fine with the FTC to settle the current probe.

“The matter remains unresolved, and there can be no assurance as to the timing or the terms of any final outcome,” Facebook said in its Q1 report.

In a statement, CEO Mark Zuckerberg struck a positive note about the quarter.

“We had a good quarter and our business and community continue to grow,” he said. “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.”

In March, Zuckerberg said Facebook will retool its messaging services to be more interoperable, ephemeral, and with end-to-end encryption.

Q1 ad revenue amounted to $14.9 billion, up 26 percent from last year. Mobile ad revenue came to $13.9 billion, up 30 percent. Mobile ad revenue represented about 93 percent of total ad revenue, up from 91 percent in Q1 2018. 

Daily active users (DAUs) were 1.56 billion on average for March 2019, up 8 percent year-over-year. Monthly active users (MAUs) were 2.38 billion as of March 31, 2019, up 8 percent year-over-year. As many as 66 percent of Facebook’s monthly active users visit Facebook every day, the company said.

Last quarter, Facebook announced it would phase out usage metrics for its individual apps –– Facebook, Instagram, Messenger and WhatsApp — and instead report the company’s “overall family metrics.” The change corresponded to a slowdown in the growth of Facebook’s flagship app in key markets, though Instagram usage continued to grow at a robust pace.

Around 2.7 billion people use Facebook, WhatsApp, Instagram, or Messenger each month, the company said Wednesday. On average, more than 2.1 billion people use one of Facebook’s services every day.

Article source: https://www.zdnet.com/article/facebook-takes-3b-hit-from-ftc-investigation-in-q1/#ftag=RSSbaffb68