Published: Thu, April 25, 2019
Markets | By Otis Pena

Facebook to take $5bn hit over privacy investigation

Facebook to take $5bn hit over privacy investigation

Investors were apparently not too disturbed by the anticipated fine, and sent Facebook's share price up more than 4% in after-hours trading. Facebook was also required to notify the FTC if user data was misused in anyway.

Facebook said Wednesday it expects to pay a fine of up to $5 billion related to the Federal Trade Commission's probe into its data practices, which would mark the biggest penalty against a tech company in the agency's history.

In 2015, we learned that a psychology professor at the University of Cambridge named Dr. Aleksandr Kogan lied to us and violated our Platform Policies by passing data from an app that was using Facebook Login to SCL/Cambridge Analytica, a firm that does political, government and military work around the globe.

"Advertisers love Stories ads, because they are engaging and fun, and because they can cost less than in-feed advertising", EMarketer analyst Debra Aho Williamson wrote in a note before earnings.

Facebook said on Wednesday that its operating costs rose to $11.7 billion in the three months ending March 31, up 80 percent from the year-earlier period. The company statement says, "The matter remains unresolved, and there can be no assurance as to the timing or the terms of any final outcome". The expenses result in a 51% year-over-year decline in net income, to just $2.4bn.

The logo of the American social network giant Facebook is seen on a screen next to an illustration of the stock market. The FTC has been looking into whether Facebook broke its own 2011 agreement promising to protect user privacy.

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That amount, which Facebook budgeted in its first-quarter earnings report to Wall Street as a "legal expense", would represent the largest privacy-related fine the FTC has ever imposed.

The FTC is investigating Facebook on charges it repeatedly and catastrophically failed to safeguard users' data, from allowing Cambridge Analytica to scrape 85 million users' information to permitting corporations like Microsoft and Netflix to access users' messages and other personal info as part of secret data sharing partnerships.

Facebook has said it will set aside $3bn (£2.3bn) to cover the potential costs of an investigation by United States authorities into its privacy practices.

Facebook's most important metrics are its monthly active users and daily active users - respectively, the number of users using the platform at least once a month and once a day. "No more platitudes. What action is Facebook Inc actually taking?"

"Representative David Cicilline, who chairs the U.S. House of Representatives Judiciary Committee's subcommittee on antitrust issues, said on Twitter that Facebook was "a repeat offender" and called for an FTC response "strong enough to prevent future violations". The region represents almost half of all Facebook users, but brought in less than a fifth of the company's revenue.

Facebook, valued at $521.4 billion, is one of the world's largest internet companies.

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