Facebook profits likely to fall after fake news and privacy scandals

Facebook is this week expected to report a rare decline in profits after a string of privacy breaches and fake news scandals.

With its founder and chief executive Mark Zuckerberg under pressure to clean up the social network, analysts predict the company’s net profit will drop to $4.7bn (£3.6bn) in the first quarter, from nearly $5bn a year ago.

It would be the first fall in quarterly profits since mid-2015.

Analysts also forecast that Facebook’s annual profits for 2019 will be just below last year’s $28.7bn (£22.1bn), as it spends on countering fake news and illegal content, and tackling data breaches and privacy concerns.

Facebook continues to pull in more users and advertising, however, and turnover in the first three months of the year is forecast to climb to $15bn from $12bn.

The string of scandals include Facebook’s role in Russia’s alleged influence on the 2016 US presidential election, and the Guardian’s revelations that Cambridge Analytica, a political consultancy hired by Donald Trump’s 2016 presidential campaign, obtained personal data from millions of profiles without consent.

Facebook was labelled “morally bankrupt pathological liars” by New Zealand’s privacy commissioner this month after hosting a livestream of the Christchurch attacks that left 50 dead. In an interview after the attacks, Zuckerberg refused to commit to any changes to the platform’s live technology, including a time delay on livestreams.

Facebook, which owns Instagram, last week admitted that millions more Instagram users were affected by a security lapse than it had previously disclosed. It had mistakenly stored the passwords of hundreds of millions of users without encryption.

Zuckerberg has pledged major reforms. The company hired thousands more content reviewers to police its websites and stem a rise in violent videos, after a Thai man two years ago livestreamed footage of himself killing his 11-month-old daughter.

Facebook is using artificial intelligence to tackle fake news and hate speech, and to stop suggesting users invite their dead friends to parties.

The Californian company also last year more than doubled the money it spent on Zuckerberg’s security to $22.6m.

Facebook is finally preparing to yield to pressure from Brussels over criticism that its new rules on online political advertising restrict EU parties from campaigning in the European elections in May.

Nick Clegg, Facebook’s head of global affairs and the former Liberal Democrat leader, has written to Antonio Tajani, president of the European parliament, to say the company is exploring ways to exempt 19 European political parties and institutions from the campaign rules.

Clegg’s comments are a response to a backlash created by Facebook’s new transparency rules that would require people or groups posting political ads to register in each EU state where the ads appear.

Clegg said Facebook was “exploring whether we can technically build tools that would allow authorised administrators of the 19 institutional pages we identified to target ads to people right across the EU”, Clegg wrote in the letter, according to the FT. “It will be a challenge to do this in the requested timescale and I will need to confirm whether or not it is possible with you if we agree that this is the right solution.”