Facebook confirms it's the subject of FTC antitrust probe

Meanwhile, Facebook shares were up in after-hours trading as the company exceeded Q2 revenue expectations.

Facebook on Wednesday confirmed that the Federal Trade Commission has opened an antitrust investigation into the social media giant. While reporting its second quarter financial results, Facebook said the FTC informed it of the investigation in June. 

"The online technology industry and our company have received increased regulatory scrutiny in the past quarter," the company's Q2 release said. The release also referenced the US Justice Department's newly-announced broad antitrust review of the entire tech industry

Confirmation of the FTC antitrust probe follows the news that Facebook and the FTC have agreed to a sweeping, $5 billion settlement related to Facebook's user privacy violations. Facebook also just reached a $100 million settlement with the US Securities and Exchange Commission (SEC) for "making misleading disclosures regarding the risk of misuse of Facebook user data." 

In spite of the intense regulatory scrutiny it faces, Facebook managed to exceed revenue expectations for the second quarter. Shares were slightly up in after-hours trading. 

The social media giant reported diluted earnings per share of 91 cents on revenue of $16.89 billion, up 28 percent from last year.

Analysts were expecting non-GAAP earnings of $1.88 per share on revenue of $16.5 billion.

Facebook's quarterly figures accounted for the $5 billion settlement with the FTC. They also accounted for a $1.1 billion income tax expense due to the developments in the Altera Corp. v. Commissioner decision in which the Ninth Circuit Court of Appeals reversed a United States Tax Court ruling regarding the treatment of share-based compensation expense in a cost sharing arrangement.

Without those two added expenses, Facebook's operating margin would have been 12 percentage points higher and its diluted EPS would have been $1.08 higher, the company said. 

"We had a strong quarter and our business and community continue to grow," CEO Mark Zuckerberg said in a statement. "We are investing in building stronger privacy protections for everyone and on delivering new experiences for the people who use our services."

fb.png

Mobile ad revenue represented about 94 percent of total ad revenue, up from 91 percent in Q2 2018. 

Daily active users (DAUs) were 1.59 billion on average for June 2019, up 8 percent year-over-year. Monthly active users (MAUs) were 2.41 billion as of June 30, 2019, up 8 percent year-over-year. 

At the end of its fiscal 2018 year, Facebook announced it would phase out usage metrics for its individual apps -- Facebook, Instagram, Messenger and WhatsApp -- and instead report the company's "overall family metrics." The change corresponded to a slowdown in the growth of Facebook's flagship app in key markets, though Instagram usage continued to grow at a robust pace.

Around 2.7 billion people use Facebook, WhatsApp, Instagram, or Messenger each month, the company said Wednesday. On average, more than 2.1 billion people use one of Facebook's services every day.

While Facebook is under considerable pressure from federal agencies like the DOJ and the FTC, it also faces regulatory scrutiny on other fronts. The US Congress, for instance, is also investigating the tech sector's competitive landscape. Meanwhile, Facebook's cryptocurrency project, called Libra, has faced serious pushback from politicians and regulators around the globe. 

Prior and related coverage: