Facebook Inc. will pay $500 million to resolve claims it collected user biometric data without consent in one of the largest consumer privacy settlements in US history, according to a statement Wednesday by lawyers for consumers
The accord, which requires a judge’s approval, will avert a trial that may have exposed the social networking company to billions of dollars in damages. Facebook fought unsuccessfully to persuade the US Supreme Court to derail the class action case. The users alleged that the company’s photo-scanning technology violated an Illinois law by gathering and storing biometric data without their permission.
The world’s biggest social-media company reported record fourth-quarter revenue of $21.1 billion, boosted by ads on Instagram and in video. The 25% increase from the period a year earlier was the slowest-ever quarterly sales growth for Facebook, though it topped analysts’ average estimate of $20.9 billion. Shares fell about 7% on the news.
Facebook said it had 2.89 billion monthly active users of its products around the world, but growth stagnated in the US and Canada on the main social network — the primary source of advertising sales. Monthly active users hit 2.5 billion on the main network as of Dec. 31, slightly topping analysts’ estimate of 2.49 billion.
Facebook has warned for several quarters that growing at the same rate will be more difficult in the future. The company’s trajectory is limited by the number of world internet users, most of whom already have an account on Facebook or its WhatsApp, Instagram and Messenger properties. That means finding future revenue streams will be increasingly difficult, requiring experimentation with avenues that might not pay off, such as in artificial intelligence, virtual reality and shopping.
What Facebook “has to grapple with is a rising cost framework while each incremental dollar of revenue growth gets tougher," said James Cakmak, a partner at Clockwise Capital.
Expenses rose 34% to $12.2 billion the period ended Dec. 31, the Menlo Park, California-based company said Wednesday in a statement.
The uncertainty comes as Facebook has fewer public cheerleaders. The company has been vilified by US presidential candidates while facing new global privacy laws and two federal antitrust probes. Chief Executive Officer Mark Zuckerberg has testified multiple times in Congress about his company’s stumbles.
Still, Facebook and Google dominated digital ad spending with an estimated 61% of the market in 2019, a slight increase from a year earlier, even as Amazon.com Inc. gained sales, researcher EMarketer said in November.
Facebook’s said it had 248 million monthly active users in the US and Canada on its main social network at year’s end, an increase of 2.5% from the period a year earlier and just 1 million more people than at the end of the previous quarter.
The company’s stock gained 55% in the past year, closing Wednesday at a record high of $223.23 in New York.
“Facebook stock has had a huge run and investors were hoping for even faster growth, especially in the US," said Richard Greenfield, an analyst at LightShed. The “bar was high," he added, citing the stock price heading into the earnings report. “This is not ‘broken."
The company reported net income of $7.35 billion, or $2.56 a share, compared with $6.88 billion, or $2.38 a share, a year earlier. Analysts, on average, estimated $2.53 a share.