Facebook reveals new FTC investigation as Q2 earnings show continued growth
The agency is looking into antitrust concerns.
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It's a big thumbs-up for Facebook when it comes to attracting and keeping users.
Facebook said Wednesday that the Federal Trade Commission opened an antitrust investigation into the company, but the heightened regulatory scrutiny doesn't appear to have slowed down the social network's growth.
The new investigation came on the same day that the Federal Trade Commission announced that it was hitting Facebook with a record $5 billion fine for its earlier privacy mishaps. It also comes a day after the US Department of Justice said it was looking into anti-competition concerns surrounding "market-leading online platforms," such as social media firms, suggesting that the review would impact Facebook.
Still, Facebook showed that users continue to log into the site in massive numbers. The world's largest social network said that 2.41 billion people now log into Facebook every month, an 8% increase compared to the same period last year.
Facebook reported $16.9 billion in revenue in the second quarter, which ran from April to June. That's above the $16.5 billion that analysts surveyed by Thomson Reuters expected on average.
The social network made $2.6 billion in the second quarter. It earned 91 cents per share, falling short of expectations of $1.85. It said that the earnings included several expenses such as the legal costs of the FTC settlement.
Facebook revealed little about the new FTC investigation, which it was notified of in June. The FTC didn't immediately respond to a request for comment.
Facebook CEO and co-founder Mark Zuckerberg didn't address the antitrust concerns in a call with analysts, but vowed to protect user privacy and monitor developers who access data through Facebook's platform.
"This is a major shift for us," he said. "We've built services that billions of people trust every day to communicate with the people they care about. Privacy has always been important to the services we provide and now it's even more central to our future vision for social networking."
Facebook is expecting people to share more in the social network's private spaces such as messaging, groups and Stories, a feature that lets you post photos and videos that vanish in 24 hours. At the same time, the company has been expanding into payments, virtual reality, e-commerce, cryptocurrency and other areas.
Earlier in the day, Facebook agreed to form a new board committee to help protect user privacy as part of a separate settlement with the FTC. The fine is the largest ever against a company for mishandling of consumer privacy, the FTC said. Lawmakers and advocacy groups argue that the deal didn't address the core problem: Facebook's ad business relies on collecting user data.
The FTC has been investigating the company since revelations last year that UK political consultant firm Cambridge Analytica harvested the data of up to 87 million users without their consent. The firm, which worked on President Donald Trump's 2016 campaign, got the data through the owner of a quiz app that scraped information from Facebook users and their friends.
The deal isn't the end of the scrutiny that Facebook is facing from regulators in the US and abroad. The social network is also planning to launch a new cryptocurrency called Libra in 2020, a move that sparked a backlash from lawmakers and nonprofits that think the company should temporarily halt these efforts.
Zuckerberg said that the company will work with regulators before launching the cryptocurrency.
"We get that these are really important sensitive spaces so our approach has been to try to have a very open dialogue about it," he said. "Facebook from a few years ago would have probably just showed up and released a product on our own."
Facebook's stock jumped more than 1% but then dipped after the company's CFO Dave Wehner said that the company expected revenue growth to slow in the fourth quarter and in 2020 because of a European data protection law, changes to operating systems and product changes that "put privacy more front and center."
The company's stock is still up less than 1% in after-hours trading to $206.10 per share.
Debra Aho Williamson, an analyst with eMarketer, said in a statement that advertisers are still on Facebook because of its massive audience and ad targeting. Still, they're also paying more attention to the social network's problems.
"Today's FTC settlement doesn't appear to have direct impact on Facebook's business, but there is no reason to think that other regulatory or governmental investigations won't have an impact in the future," she said.
Originally published July 24, 1:15 p.m. PT
Update, 1:21 p.m. PT: Adds background about FTC antitrust investigation and statement from Zuckerberg.
Update, 3:36 p.m. PT: Adds comments from earnings call and remarks from analyst.
