Facebook expects to pay as much as $US5 billion ($A7 billion) because of an ongoing Federal Trade Commission investigation into its privacy practices, the company has revealed in its first quarter earnings release
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As a result of the anticipated charges, Facebook has set aside $US3 billion in the quarter, which significantly impacted its earnings per share.
"In the first quarter of 2019, we reasonably estimated a probable loss and recorded an accrual of $3.0 billion in connection with the inquiry of the FTC into our platform and user data practices," the company said in its earnings release on Wednesday.
The company delivered the news as it released a set of otherwise strong earnings numbers: Facebook generated revenue of $US15 billion during Q1 of 2019, compared to close to $US12 billion during the same quarter last year.
Net income for the quarter without the $US3 billion charge was $US5.43 billion, compared to nearly $US5 billion a year ago.
Including the charge, net income was $US2.43 billion. This equals earnings per share of $US0.85. Analysts had expected earnings per share of $US1.62 on revenue of $US15 billion.
Investors were apparently not too disturbed by the anticipated fine, and sent Facebook's share price up more than 4 pere cent in after-hours trading. They might have taken some solace in Facebook's continued growth:
The company revealed it reached 1.56 billion daily active users in March, which was up 8 per cent year-over-year.
Facebook ended March with 2.38 billion monthly active users, also up 8 per cent year-over-year. Across its most popular apps, including Instagram, Whatsapp, Messenger and Facebook proper, the company reached an estimated 2.1 billion users ever day, and 2.7 billion users every month.
Combined with a fine or settlement amount that still leaves Facebook solidly in the black for the quarter, these numbers suggest that Facebook may emerge from its privacy scandals relatively unscathed.
Facebook CEO Mark Zuckerberg used the company's earnings call on Wednesday afternoon to address another investor concern: that Facebook's move towards private messaging will be damaging to its ad revenue.
While Zuckerberg had in the past couple of months championed private messaging as the future of communication, he argued on Wednesday that this wouldn't necessarily kill products like Facebook's newsfeed.
"Facebook and Instagram ... will only to continue to grow in importance," he said, adding that there was room for both "public and private spaces" on the internet.
Zuckerberg said that encrypting private messaging wouldn't have any impact on Facebook's business.
Strengthening private messaging could theoretically cannibalise some of Facebook's legacy products, he acknowledged. But in the end, Facebook could also grow its audience by syphoning messaging users away from other services.
Australian Associated Press