Zuckerberg downplays Facebook advertising deception
Zuckerberg downplays Facebook advertising screwup
By James Covert September 24, 2016 | 2:26am
Facebook insists it’s no big deal that it inflated
numbers on viewership of its video ads — but some advertisers aren’t buying it.
Mark Zuckerberg’s social-networking giant apologized
Friday as it admitted that, for the past two years, it has overestimated the
amount of time users spent watching video ads by as much as 60 to 80 percent.
Specifically, Facebook said it had only included video
views of 3 seconds or longer when calculating the average length of a video
views it showed to advertisers, leaving out shorter times that would have
brought down the averages.
The “discrepancy,” as Facebook called it, distorted its
numbers to its advantage as the company ramped up a fierce battle with Google’s
YouTube division for video ads — the most lucrative segment of internet
advertising.
Facebook claimed the screwup didn’t affect its “billing” because
technically its ad rates are based on the number of clicks a video ad gets
rather than how long users linger over it.
Nevertheless, metrics on average viewing time are
prominently circulated to advertisers. Don’t be surprised if, in the near term,
existing advertisers demand reimbursement, and if prospective advertisers
hesitate over launching fresh, high-dollar campaigns, experts said.
“Advertisers will be demanding compensation, and I’ll bet
they get it,” said Mitchell Reichgut, chief executive of New York ad firm Jun
Group.
Facebook initially disclosed the problem on an obscure
Web page for advertisers several weeks ago.
“They tried to bury it in a blog,” Reichgut said. “That’s
not how you announce something of this magnitude.”
On Thursday, the issue blew up when the Wall Street
Journal reported (paywall) that advertisers including Publicis Group were
asking questions, forcing Facebook to come clean.
The incident raises fresh concerns about Facebook’s
“walled garden” policy with publishers and advertisers, which is notoriously
stingy when it comes to data sharing and has spurred calls for greater
third-party monitoring.
Moat, a New York firm that specializes in monitoring
Web-page views and whose clients include Facebook, said its measurements of
Facebook activity were accurate.
“The metric miscalculation reported by Facebook was
independent of Moat,” the company said in a statement.
Facebook shares on Friday lost 1.6 percent to close at
$127.96. Wall Street analysts with buy ratings on the stock downplayed the
news.
“In our view, this looks like a story in search of a
controversy,” wrote Cowen & Co. analyst John Blackledge, reiterating an
outperform rating on the shares.
Wells Fargo’s Peter Stabler, who has an outperform rating
on Facebook, added, “We haven’t encountered analysis that has dwelled on
‘average view time’ ” in measuring ad campaigns.
Still, some prospective advertisers may get cold feet,
said Ryan Urban, CEO of Bounce Exchange, a New York web analytics firm.
“They’ll see some negative impact with brand dollars in
the short term,” Urban said.
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