Facebook told investors it’s setting aside $3 billion to cover an impending fine from the FTC, to settle an investigation which was opened in the wake of the Cambridge Analytica scandal. The matter remains unresolved, but the company is estimating the fine will be between $3 billion and $5 billion.
The FTC opened an investigation into Facebook’s handling of user data and privacy practices in March 2018.
It is not yet known if the FTC will also impose restraints on how the company operates as part of the settlement and Facebook is still facing a series of investigations around the globe, including three new ones opened last week in Canada, New York and Ireland.
While it would be the biggest fine ever handed out by the US agency, Facebook still recorded a $2.4 billion profit for the quarter (down 51 per cent on the comparable period) after allocating the $3 billion expense.
Facebook’s share price rose more than 10 per cent last week after releasing its financial results for the quarter ended March 31, 2019, with users and ad revenue both growing.
Total Q1 revenue was $15.1 billion, up 26 per cent and total ad revenue was $14.9 billion, up 26 per cent.
During the quarter mobile ad revenue grew 30 per cent year-over-year to $13.9 billion, making up approximately 93 per cent of Facebook’s total ad revenue, up from 91 per cent last year.
COO Sheryl Sandberg noted that in the first quarter, Facebook’s top 100 advertisers represented less than 20 per cent of its total ad revenue, meaning its advertiser base is more diverse compared to the same period last year.
The company estimates there are now around 2.7 billion people using Facebook, Instagram, WhatsApp, or Messenger each month, and more than 2.1 billion people are using at least one every day.
Facebook daily active users reached 1.56 billion, up 8 per cent compared to last year, led by growth in India, Indonesia, and the Philippines. Monthly active users grew 179 million or 8 per cent compared to last year.
Sandberg noted that the bulk of Facebook’s business comes from ads in Facebook and Instagram feeds, however Stories “are an increasingly important growth opportunity.”
The company says there are now three million advertisers using Stories Ads to reach customers across Instagram, Facebook, and Messenger.
During the earnings call Facebook CFO Dave Wehner said the average price per ad decreased 4 per cent and the number of ad impressions served across its services increased 32 per cent in Q1.
“Impression growth was primarily driven by ads on Instagram Stories, Instagram Feed, and Facebook News Feed. The year-over-year decline in average price per ad reflects an ongoing mix shift towards Stories ads and geographies that monetise at lower rates,” Wehner said.
Marketers are also buying more ads in Marketplace, the local ecommerce section of Facebook.
Also on the commerce front, Facebook has launched a small closed beta for Checkout on Instagram, with 23 brands in the US.
The feature allows advertisers to accept payments and complete transactions without shoppers having to exit the app. As well as a better customer experience, Sandberg noted the feature will help marketers with attribution.
“Obviously, if people learn about things through our ads and then close the loop all the way to purchase, it’s very strong for proving ROI, it also helps as a measure that return as well,” she said.