The Federal Trade Commission has whacked Facebook with a record $5 billion fine stemming from the 2018 scandal in which a political consulting firm improperly accessed Facebook user data. The fine comes as a result of settlement talks between the two entities.
The consulting firm, Cambridge Analytica, scraped data from 87 million Facebook profiles without the consent of their users to be used for political advertising.
This led to Mark Zuckerberg testifying before Congress regarding Facebook’s privacy policies.
The fine is more than 200 times greater than the previous largest find from the FTC, which was $22.5 million slapped on Google for its privacy practices.
Mark Zuckerberg Is Laughing At Us All
And yet, Mark Zuckerberg and Facebook are laughing this $5 billion fine off. Here’s why.
The $5 billion fine represents a mere 9% of Facebook’s annual revenues last year, and 7% of its expected revenue this year. It represents about 23% of Facebook’s net income last year.
Facebook generated over $18 billion in free cash flow over the past 12 months.
Yet the real joke is that Facebook has over $45 billion of cash in its bank account. Mark Zuckerberg can just write one big check to the Federal Trade Commission and be done with them.
Not only that, but Facebook’s stock only suffered when the scandal broke, falling about 16% at the time to roughly $157 per share. Yet it rallied shortly after that to $210 per share.
Mark Zuckerberg and Facebook announced in the last quarterly earnings report that the company would take a $3 billion charge against earnings for the anticipated settlement. As a result, all the negativity over this entire scandal was already baked into the stock.