Facebook sets US$3bn aside for anticipated fine, as it seeks to become a more private platform

Facebook’s financial results for the first quarter of the 2019 calendar year show the social media giant is setting aside US$3bn for the anticipated costs of the US Federal Trade Commission’s investigation into its platform and data processes. The social media giant also conceded that as the matter is unresolved “there can be no assurance as to the timing or the terms of any final outcome”. It estimates the loss from the matter will cost the company between US$3bn and US$5bn.

Founder and CEO Mark Zuckerberg also used the call with investors to deny the company uses content from messages sent between people on its platform to target them with relevant advertising, and flagged the challenges and “trade offs” of making its platform more private and secure.

Zuckerberg testifying before congress last year

In the financial results to investors, Zuckerberg issued a short statement.

“We had a good quarter and our business and community continued 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 the call with investors, however, he elaborated on his plans for a more private future, and what that platform could look like.

“We all need to communicate privately, and this service could be even more important in our lives. So I think we should focus our efforts on building this privacy-focused platform,” he said.

“Our plan is to build this the way we’ve developed What’s App – focus on the most fundamental and private use case – messaging – making it as secure as possible, with end-to-end encryption, and then build more ways for people to interact on top of that.”

He said a privacy-focused platform would be built around several principles: private interactions, encryption, safety, secure data storage, and interoperability.

Facebook will also be focused on reducing permanency with its new platform build, Zuckerberg said.

“You shouldn’t have to worry about what you share coming back to hurt you later, so we won’t keep around messages or stories for longer than necessary,” he said.

Zuckerberg flagged that these ideals do come with “trade offs”, although he did not elaborate on how these might be solved.

Facebook’s Q1 2019 results (Click to enlarge)

“Over the next few years, we’re going to rebuild more of our services around these ideas There are a lot of open questions and real tradeoffs on important social issues, so we’re committed to working openly on this and consulting with experts and governments as we go,” he said.

Later, he added: “We can’t have complete free speech, but no hate. We can’t have complete privacy, while also stopping every safety threat. We can’t tell platforms to keep everyone’s data private, but then expect a broad definition of data portability for research or competition.

“The values and equities at stake are too important and too conflicting for any company to balance them in a way that everyone will be comfortable with. So part of building trust will be deferring to a public process on how to make these tradeoffs.

He rejected the notion a more private platform would limit the company’s ability to profit from people’s conversations and online activities.

“We don’t use the content of messages between people to target ads today, so encrypting that content won’t change what we do. It will strengthen people’s privacy without meaningfully affecting our business.”

Facebook’s two-year revenue performance (Click to enlarge)

Facebook said its advertising revenue for the three months ending 31 March, 2019 was US$14.91bn, a 26% year-on-year increase. Its total revenue was US$15.08bn, also a 26% increase.

Mobile advertising revenue now accounts for 93% of total advertising revenue, up from, 91% last year.

Its total costs and expenses – including the US$3bn legal bill – were up 80% to US$11.76bn.

Overall, its net income was US$2.429bn, down from US$4.988bn in the same period last year.

Facebook’s Daily Active User growth (Click to enlarge)

The company said it had daily active users of 1.56bn in the first quarter of 2019, an increase of 8%, while its monthly active users were also up 8% to 2.38bn.

Facebook now employs 37,773 people, an increase of 36% year-on-year.


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