Daily Management Review

Facebook loses half of the profit due to record fine


Facebook reported for the second quarter and the first half of the year: the net profit of the social network in both cases decreased by half. Such a sharp drop is not due to the Facebook business, but to a record $ 5 billion fine imposed on the company by the US authorities for disclosing data of 87 million people to Cambridge Analytica. When publishing the reports, managers of the social network told about another investigation, which is being conducted in relation to it in the USA.

Facebook's net profit in the first half of the year decreased by half - from $ 10 billion to $ 5 billion; revenue grew by 27% - to $ 32 billion. On Wednesday, the corporation presented financial statements for the second quarter and first half of the year. The results of the second quarter were similar: net profit fell by 49% to $ 2.6 billion. Quarterly revenue increased by 28% to $ 13.2 billion.

The sharp decline in profits primarily reflects large-scale fines recently imposed on the social network; without taking them into account, earnings per share would be $ 1.99, which is better than analysts' expectations ($ 1.88), but the number was $ 0.91 with them.

At the same time, the company warned of a “more pronounced slowdown” in revenue growth in the second half of the year.

The current results of Facebook have already partially borne the cost of paying a $ 5 billion fine imposed by the Federal Trade Commission (FTC) earlier. $ 2 billion of the $ 5 billion fine was accounted in the second quarter, another $ 3 billion was allocated earlier in the first quarter, when it was already clear that the companies was facing a fine. Facebook has already announced predictions on further growth, despite the costs of improving privacy and security policies: “This quarter has shown once again that we can do both,” said Sheryl Sandberg, Facebook managing director, during presentation of the quarterly results.

The FTC has been conducting another investigation into the social network since June. “The online technology industry and our company have faced increased attention from regulators in the last quarter,” said the social network’s representative earlier. On Tuesday, the US Department of Justice also announced the launch of an investigation into "leading online platforms": they are being checked for compliance with the rules of competition. Names of the companies were not indicated, but it is assumed that Facebook is among these platforms.

source: bloomberg.com, reuters.com