Fake numbers? Facebook misled advertisers with inflated ‘potential reach,’ lawsuit says
Fake numbers? Facebook misled advertisers with inflated ‘potential
reach,’ lawsuit says
By SEUNG LEE PUBLISHED: August 16, 2018 at 3:09 pm
Facebook allegedly misled advertisers on its platform by
demonstrating it had a far larger audience size in U.S. cities and states than
it actually had, according to a lawsuit filed Wednesday.
The lawsuit, filed by a Kansas-based aromatherapy
fashionwear business owner, alleged Facebook ballooned its “Potential Reach”
number for how many users were targeted by an advertisement, thereby misleading
advertisers to purchase more advertisements than they might otherwise have.
The lawsuit from owner Danielle Singer alleges that
Facebook’s purported Potential Reach figures for the 18-34 age demographic in
all 50 states exceeded the actual population of 18-34 year olds who use
Facebook.
The lawsuit also says it received testimony from former
Facebook employees confirming the inflation. One anonymous employee said the
Potential Reach number was “like a made-up PR number.”
“Facebook’s misrepresentation of the Potential Reach of
its advertisements induced advertising purchasers, including Plaintiffs, to
continue purchasing advertisements, because purchased believed that more people
could potentially be reached by their advertisements than possibly could have
been,” reads the lawsuit.
A Facebook spokesperson told this news organization that
“this suit is without merit and we plan to defend ourselves vigorously.”
The lawsuit was filed with the U.S. District Court of
Northern California and seeks class action status from those who purchased
advertisements on Facebook from 2013 onwards. Facebook was sued on two counts:
a violation of California’s Unfair Competition Law and as a “quasi-contract
claim for restitution.”
Singer, who owns Therapy Threads, spent more than $14,000
on Facebook ads across the country, targeting major metropolises, such as San
Francisco.
Singer then did her own calculations comparing the Potential
Reach figures — which Facebook says is “designed to estimate how many people in
a given area could see an ad” and not designed to match population or census
estimates — with her actual figures. For example, in Chicago, Singer deduced
from U.S. census data that there were about 808,000 residents aged between 18
and 34; Facebook calculated its Potential Reach for Chicagoans in the same age
group to be more than 1.9 million.
“Even this calculation understates the level of inflation
in Chicago, since not everyone in the demographic has a Facebook account,”
reads the lawsuit.
For other similar calculations for states such as
California and cities such as San Jose, the lawsuit took publicly available
figures in addition to census data to roughly estimate how many 18-34 year olds
actually live in the United States to compare against Facebook’s Potential
Reach.
One study the lawsuit cites for its calculation was the
Pew Research Center’s “Social Media Use 2018” study, in which Pew Research
Center polled 2,002 U.S. adults on their social media habits. Sixty-eight
percent of polled adults said they used Facebook, and three-quarters of
Facebook users said they checked Facebook on a daily basis.
Another study from the Video Advertising Bureau
calculated just how much larger Facebook’s Potential Reach of 18-34 year olds
in all 50 U.S. states compared to the 2016 U.S. census data. In every state,
Facebook claimed they reached more 18-34 year olds than what was reported by
the U.S. Census Bureau, according to VAB. California was among the top 5 states
with the largest difference between Potential Reach and U.S. Census data at 34
percent difference.
The VAB study included Potential Reach from Facebook and
its subsidiaries, such as Instagram and Messenger, while Singer only initially
calculated the Potential Reach only within Facebook.
Using VAB’s study, San Jose had one of the highest
inflation rates at 91 percent. Facebook claimed there were 490,000 San Jose
residents between 18 and 34 years of age who could be reached, but Census data
showed there were only 256,000 residents in the age group. The highest
metropolitan inflation rate went to Dallas at 216 percent.
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