Jessica Goodfellow
Jul 25, 2019

Facebook reports 28% revenue uplift; reveals second FTC probe

Double FTC investigations cast shadow over better-than-expected Q2 results.

Facebook reports 28% revenue uplift; reveals second FTC probe

Facebook has had a rollercoaster 24 hours. Firstly, the US Federal Trade Commission announced it had reached a landmark $5 billion settlement with Facebook over its privacy issues, then the platform bounced back with strong second-quarter results, before revealing a second FTC investigation for possible antitrust violations.

The FTC’s $5 billion settlement with Facebook came more than a year after the US regulator first announced it was investigating the social-media network over its handling of user data. The investigation followed the 2018 Cambridge Analytica scandal, in which the data of 87 million Facebook users was improperly accessed.

The terms of the settlement also dictate that Facebook add new positions and practices to increase the transparency and accountability of how it handles user data, including a privacy committee, compliance officers, and an independent assessor.

“We believe that there needs to be a regulatory framework in place,” said Facebook chief executive Mark Zuckerberg on the call with analysts after the report. “My broader concern is that if that doesn’t get put in place, then frustration with the industry I think will continue to grow.”

Zuckerberg has previously said during the Q1 earnings that while regulation “may hurt our business”, it was “necessary” to “help establish trust”.

The measures, which the FTC’s commissioners approved in a 3-to-2 vote, have been roundly criticised for not going far enough. Lawmakers and privacy experts have pointed out that the $5 billion fine—while a record for the FTC—is not significant enough to Facebook’s bottom line, while the settlement does not dictate that Facebook make significant changes to its core business model.

In its second-quarter results later on Wednesday (24 July), the company said it recorded a $2 billion charge in the quarter tied to the FTC settlement. It previously set aside $3 billion.

But overall, the platform enjoyed a better-than-expected second quarter. It generated revenues of $16.89 billion for the quarter, up 28% compared to the same period in 2018.

This represents a slowdown from the 42% year-on-year growth it reported in Q2 2018.

Facebook’s profit margins were down, with a 27% operating margin in Q2 compared to a 44% margin during the same period a year earlier.

The platform’s daily active users (DAUs) and monthly active users (MAUs) both increased 8% year-on-year, to an average 1.59 billion and 2.41 billion as of June 30, 2019.

Mobile advertising revenue represented approximately 94% of advertising revenue for the second quarter of 2019, up from approximately 91% of advertising revenue in the second quarter of 2018.

Its headcount was 39,651 as of June 30, 2019, an increase of 31% year-over-year.

Emarketer principal analyst Debra Aho Williamson said the results show that Facebook can continue to grow both its ad revenue and its user base "in the face of enormous challenges".

"Today’s earnings release demonstrates that it still has that power," she said. "We expect Facebook’s worldwide ad revenue will increase 22.5% this year. That’s a higher growth rate than for digital advertising as a whole, which we expect will increase 17.6%.”

Overshadowing the results, Facebook confirmed during its Q2 earnings that it was facing an antitrust probe from the FTC

“The online technology industry and our company have received increased regulatory scrutiny in the past quarter. In June 2019, we were informed by the FTC that it had opened an antitrust investigation of our company,” reads the company’s earnings release. “In addition, in July 2019, the Department of Justice announced that it will begin an antitrust review of market-leading online platforms.”

The Department of Justice announced an antitrust review of the dominant tech platforms late Tuesday.

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