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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