Facebook is facing a record-setting penalty of about $5 billion from the Federal Trade Commission — but for the tech giant, that’s only about as much as the revenue it generates in a month.
What could be more damaging to Facebook than the monetary costs of the settlement is the degree to which the government will get oversight of its business.
The New York Times reports that under the terms of the settlement, Facebook will be able to continue sharing data with third parties, but that there will be more oversight into how it handles user data.
Depending on how that oversight shakes up, it could cause headaches 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 (FTC) for violating a privacy consent degree set back in 2011.
The multi-billion-dollar penalty — which was first reported by the Wall Street Journal on Friday — is poised to be the largest of its kind against a tech company, eclipsing a $22 million settlement with Google. For Facebook, though, it looks to be an easy bill to pay, given the roughly $45 billion cash it has on hand.
Five billion dollars is about 9% of Facebook’s total revenue for 2018, which notched in at $55.83 billion. For a more recent figure, to put it into context, Facebook did about $15 billion in revenue in the first three months of 2019, averaging out to about $5 billion a month.
Indeed, earlier this year, Facebook announced that it had already set aside $3 billion to deal with any potential fine from the FTC, which it had already estimated would be around $5 billion.
Ex-Facebooker to me just now: “that’s like me getting a $10 fine for jaywalking”
— Deepa Seetharaman (@dseetharaman) July 12, 2019
The other thing
What could be more of a headache to Facebook than the monetary costs of the settlement is any potential oversight of its business going forward. The Wall Street Journal reported that terms of the settlement were “expected to include other government restrictions on how Facebook treats user privacy.”
However, it’s not immediately clear what such restrictions might entail, as the New York Times reports that the settlement doesn’t place any conditions on Facebook’s ability to collect and share data with third parties, though it does have provisions for more “comprehensive oversight” of how the social network handles users’ data.
That’s likely good news for Facebook’s core advertising business. However, that oversight could still introduce more overhead to the company, and put a damper on new products and plans — we’ve already seen skepticism from politicians including President Donald Trump over Libra, Facebook’s new cryptocurrency initiative.
In other words, for a company made famous for moving fast and breaking things, this could force Facebook to slow down a little bit.
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Source:: Business Insider