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Facebook warns of $5bn hit over US regulator probe

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Via Yahoo Finance

Facebook has warned it could face a hit of up to $5bn as a result of an investigation by US regulators into its handling of user data.

The social media giant, which also owns Instagram and WhatsApp, disclosed the estimated cost of the investigation into it by the Federal Trade Commssion (FTC) as it published first quarter financial results.

Facebook reported a 26% rise in revenues to $15.1bn, beating analysts’ targets, and estimated that more than 2.1 billion people on average now use its “family” of services every day.

But profits fell by 51% compared to the same period last year to $2.43bn as it set aside $3bn to cover the FTC inquiry into its “platform and user data practices”.

The FTC has been investigating revelations that Facebook inappropriately shared information belonging to 87 million of its users with political consulting firm Cambridge Analytica.

The probe has focused on whether the sharing of the data with the British firm, and other privacy disputes, violated a 2011 agreement with the regulator to safeguard users’ privacy.

It has yet to announce any findings.

Facebook said it estimated the range of loss it faced as a result of the investigation was between $3bn and $5bn.

The company added: “The matter remains unresolved and there can be no assurance as to the timing or the terms of any final outcome.”

But investors shrugged off the disclosure, sending shares 5% higher in after-hours trading as they focused on Facebook’s buoyant revenues – boosted by the success of its Instagram platform, and surging ad income.

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Facebook also reported an 80% rise in costs to $11.8bn, as it ramped up spending to improve content and security across its platforms.

The company’s number of employees stood at nearly 38,000 at the end of last month, up 36% on last year.

It added that its measure of monthly active users rose by 8% to 2.38 billion as of 31 March, while daily active users rose 8% to 1.56 million on average for March.

Founder and chief executive Mark Zuckerberg said: “We had a good quarter and our business and community continue to grow.

“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.”

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