Here’s a headline you don’t see every day: Meta agrees to pay up to $18 billion in a settlement with states. That’s a lot of money. But when Meta pays it, will the world change? No. It will keep deceiving and making bad decisions.
An $18 billion settlement should sting. It should cause board members to lose sleep. Shareholders should balk at management. And the company itself should hopefully think long and hard before engaging in similar conduct moving forward. Except when the company is Meta. $18 billion isn’t going to stop much of anything. Why?
Because to Meta, $18 billion is just another cost of doing business.
Meta has reached a settlement with “nearly all U.S. states” that requires the tech giant to pay up to $18 billion and make various changes to how Facebook and Instagram operate. The settlement resolves allegations that Meta allowed children to use Facebook and Instagram and designed its platforms to be addictive. Meta has denied any wrongdoing.
Granted, $18 billion is a lot of money. But Meta is bigger than $18 billion. Facebook, Inc. generated $201 billion in revenue last year.
Here’s the money put into perspective. Meta disclosed it posted $201 billion in revenue, $83 billion in operating income, and $60 billion in net income in 2021. This means Meta generated more than $500 million in profit per day throughout the year. Furthermore, its Family of Apps business—which includes Facebook, Instagram, Messenger, and WhatsApp—took in nearly $199 billion in revenue and more than $102 billion in operating income.
Let’s compare those jaw-dropping figures to Meta’s new settlement. The $18 billion might max out at roughly 9% of Meta’s annual revenue.
That’s about 30% of Meta’s annual net income. Do those numbers sound bad to you? They should. Until you read this:
The settlement would be paid out over roughly a decade.
An $18 billion fine becomes entirely toothless when spread out over ten years of profits for a company that generates $60 billion per year. Reuters noted that the settlement wasn’t expected to materially impact Meta’s profitability because it doesn’t affect Meta’s core economics of personalized feeds and advertising revenue.
So there you have it. The issue isn’t the fine. The issue is what Meta can afford to pay in fines.
A Fine Only Matters If It Affects the Business Model
Politicians love nothing more than holding big flashy announcements for monstrous corporate penalties.
“$5 Billion.”
“$10 Billion.”
“$18 Billion.”
Make those numbers big enough, and they’re sure to get headlines. The problem is those headlines rarely address a key question:
How does the fine compare to the value a company realizes by continuing its business practices?
Once we start asking that question, the answers become much less satisfying. If a company can earn $200 billion per year on its existing business model, absorb billions of dollars in regulatory fines, and keep growing year after year, management will come to view regulators like rent collectors.
Rent is due every month. You pay. You wait for the next invoice.
Legal fees?
Compliance costs?
Server farm expenses?
Regulatory costs?
Just more rent. The cost labels change. The practice does not.
Big Regulatory Fines Become the Cost of Doing Business
We haven’t even been here before with Meta.
The Federal Trade Commission fined Facebook $5 billion several years ago for privacy violations relating to the Cambridge Analytica scandal. Meta still reports the FTC payment and amended consent order on its SEC filings.
Remember when $5 billion sounded like a ton of money? Facebook is still here. Meta is much larger than it was then. Meta earned about $135 billion in 2023. $165 billion in 2024. And $201 billion last year.
You should ask regulators why they keep approving settlements if companies like Meta keep growing after paying gigantic fines.
Silicon Valley Was Happy Meta Pulled a Settlement Tune
One telling detail about Meta’s $18 billion settlement? How Wall Street reacted to it. Meta’s stock popped on the news of the settlement. That’s right. Investors were happy about the news. Analysts seem to believe the settlement removed a significant overhang for investors. In other words, now that we know how big the fine could be, we know what we need to pay and can move on with our lives.
Consider that logic for a moment.
Meta could agree to pay one of the largest settlements in American history…and somehow that still puts investors on easier financial footing than uncertainly waiting around to see if things could be worse.
Congratulations. You have just successfully made a fine, not punitive.
If a company can negotiate a settlement, know exactly how much it will cost them, and send its stock price higher after “paying” billions of dollars to government regulators, then we have failed as regulators. The real penalty is uncertainty. As long as Meta can estimate the costs and probabilities, it can account for those dollars in spreadsheets just like any other cost of doing business.
Changing Behavior Is More Important Than Monetary Fines
I haven’t ignored the other part of Meta’s settlement. Meta made a bunch of concessions regarding teenage users as part of the settlement. That includes how Meta ages-verifies users, how long kids can spend on the apps, limitations on sending teens notifications at night, and more. I care about this part of the agreement far more than I do about the $18 billion.
Money goes in the bank. Changed behavior can impact Meta’s ability to operate. Sure, regulators can extract billions (and Meta can afford it), but at the end of the day Facebook and Instagram will probably look much the same.
The only way regulators can truly change corporate behavior is to actually change how companies behave.
If kids shouldn’t be on Facebook, pass legislation to keep them off. Restrict the age verification processes companies use. Implement new standards for knowingly allowing children to create accounts. Create significant penalties for companies that violate standards and refuse to implement basic controls. Require independent audits. Go deep. Push hard.
Meta could pay $18 billion every year and never make a dent in its profit margins.
Until regulators restrict its behavior.
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