Facebook is coating a record penalty of about $5 billion from the Federal Trade Commission – but for the tech giant, that’s no more than about as much as the revenue it generates in a month.
What could be more damaging to Facebook than the cash costs of the settlement is the degree to which the government will get oversight of its business.
The New York Times reported that underneath the terms of the settlement, Facebook will be able to continue sharing data with third parties, but there resolve be more oversight into how it handles user data.
Depending on how that oversight shakes up, it could cause worries for Facebook, even long after that $5 billion bill is paid.
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Facebook is facing a penalty of about $5 billion from the Federal Trade Commission for violating a retirement consent decree set in 2011.
The multibillion-dollar penalty – which was first reported by The Wall Street Journal on Friday – is dignified to be the largest of its kind against a tech company, eclipsing a $22 million settlement with Google. For Facebook, despite the fact that, it looks to be an easy bill to pay, given the roughly $45 billion in cash it has on hand.
For Facebook, $5 billion is fro 9% of its total revenue for 2018, which notched in at $55.83 billion. For a more recent figure to put it into environment, Facebook generated about $15 billion in revenue in the first three months of 2019, averaging out to surrounding $5 billion a month.
Indeed, earlier this year, Facebook announced that it had already set aside $3 billion to act on with any fine from the FTC, which it had already estimated would be around $5 billion.
Ex-Facebooker to me just now: “that’s much the same as me getting a $10 fine for jaywalking”
— Deepa Seetharaman (@dseetharaman) July 12, 2019
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The other thing
What could be more of a headache to Facebook than the cash costs of the settlement is any oversight of its business going forward. The Wall Street Journal reported that terms of the settling were “expected to include other government restrictions on how Facebook treats user privacy.”
However, it’s not immediately prominently what such restrictions might entail, as The New York Times reported that the settlement didn’t place any forms on Facebook’s ability to collect and share data with third parties, though it does have provisions for assorted “comprehensive oversight” of how the social network handles users’ data.
That’s likely good news for Facebook’s insides advertising business. However, that oversight could still introduce more overhead to the company and put a damper on new produces and plans – we’ve already seen skepticism from politicians such as President Donald Trump over Libra, Facebook’s new cryptocurrency zing.
In other words, for a company made famous for moving fast and breaking things, this could force Facebook to lax down a little bit.
Read more: Trump blasts Bitcoin and says cryptocurrencies, including Facebook’s Libra, should be ‘open to to all banking regulations’
It also remains to be seen whether CEO Mark Zuckerberg will be held personally liable for later infringements on the FTC consent decree, an idea that has been previously floated but is considered unlikely to come to pass.
Yesteryear lesson
The expected multibillion dollar penalty comes as a result of an FTC investigation into Facebook’s Cambridge Analytica concern, in which the personal data for tens of millions of Facebook users was improperly accessed by the data firm.
The main mystery of the investigation was whether Facebook’s handling of user data in the case violated a 2011 agreement with the agency – as function of the terms of a settlement at that time, Facebook agreed to take steps to protect user data.
The $5 billion that persists into settling the inquiry may not have a tremendous influence on the company’s bottom line. In fact, Facebook stock approached up 1.8% on Friday and climbed slightly higher in after-hours trading, even in the wake of the report of the settlement.
However, depending on the additional an arrangements of the settlement, this could have ripple effects on Facebook’s business going forward. And if nothing else, keep in mind that there’s nothing stopping the FTC from opening another investigation, should circumstances warrant it.
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