Advertisers Allege Facebook Failed to Disclose Key Metric Error for More Than a Year
Advertisers Allege Facebook Failed to Disclose Key Metric
Error for More Than a Year
Facebook knew of problems with how it measured viewership
of video ads for more than a year before it revealed them in 2016, according to
a complaint filed by advertisers.
Advertisers allege that Facebook knew for more than a
year about problems measuring viewership of video ads before disclosing the
issue.
By Suzanne Vranica Updated Oct. 16, 2018 4:43 p.m. ET
Facebook Inc. knew of problems in how it measured
viewership of video ads on its platform for more than a year before it
disclosed them in 2016, according to a complaint filed Tuesday by advertisers.
A group of small advertisers filed a lawsuit in
California federal court in 2016, alleging the tech giant engaged in unfair
business conduct by disseminating inaccurate metrics that significantly
overestimated the amount of time users were spending watching video ads.
The plaintiffs later added a fraud claim, and in
Tuesday’s court filing they alleged Facebook knew of irregularities in its
video metrics by January 2015 and understood the nature of the miscalculation
within a few months, but failed to disclose the information for over a year.
The filing followed the plaintiffs’ review of some 80,000
pages of internal Facebook records that they obtained as part of court
proceedings.
The complaint, which cites the internal Facebook
documents, also alleges that the scale of the miscalculation was far worse than
understood.
“Facebook’s internal efforts behind the scenes reflect a
company mentality of reckless indifference toward the accuracy of its metrics,”
the plaintiffs said in Tuesday’s filing.
In a statement, a Facebook spokeswoman said, “Suggestions
that we in any way tried to hide this issue from our partners are false. We
told our customers about the error when we discovered it—and updated our help
center to explain the issue.”
Facebook said the lawsuit is without merit and has moved
to dismiss the fraud claim.
The plaintiffs in the case include Crowd Siren, a small
Las Vegas marketing agency, and Jonathan Murdough, a Pennsylvania resident who
purchased Facebook video ads.
The lawsuit, which seeks class-action status and punitive
damages, stemmed from a September 2016 Wall Street Journal report that said
Facebook had vastly overestimated average viewing time for video ads. Facebook
disclosed the issue in a post on its advertiser help center that August.
The error, and Facebook’s handling of it, became a
critical moment in the relationship between the social-media giant and
marketers who pay its bills. Many brands already were skeptical of the practice
by Facebook and other tech giants to closely guard their internal ad data—one
top executive likened it to “grading their own homework.” The incident fueled
renewed calls for Facebook to allow independent measurement and auditing.
Damping marketers’ concerns is important for Facebook as
it seeks a bigger piece of U.S. spending on online video ads, which is
projected to grow 30% this year to $27.8 billion. Facebook is expected to
account for almost 25% of U.S. video ad spending, eMarketer estimates.
For two years, Facebook had counted only video views that
lasted more than three seconds when calculating its “average duration of video
viewed” metric. Video views of under three seconds weren’t factored in, thereby
inflating the average length of a view.
Facebook replaced the metric with “average watch time,”
which reflects video views of any duration.
After disclosing the issue in 2016, Facebook said in a
statement that it had “recently discovered” the error.
Facebook told some advertisers that it likely
overestimated average time spent watching videos by 60% to 80%. The plaintiffs
alleged in Tuesday’s complaint that the error was much larger and that the
average viewership metrics had been inflated by some 150% to 900%.
Facebook also said at the time that the error didn’t
affect billings. However, in their complaint, the plaintiffs claim Facebook’s
misrepresentations “induced” advertisers to purchase video ads and to pay more
for Facebook’s video ads because they believed users were watching videos for
longer than they actually were on average.
The claims that Facebook failed to act when it discovered
the video metric error were in an August filing, but were heavily redacted at
the time. In the latest version of the complaint filed Tuesday, those claims
were unredacted.
The plaintiffs allege the Facebook documents show that by
July 2015 the company had received inquiries from several advertisers about
video metrics that appeared suspect, and had essentially determined the cause
of the issue.
In June 2016, nearly a year later, a Facebook engineering
manager, following up on advertisers’ complaints, discussed the issue
internally, writing, “somehow there was no progress on the task for the year.”
The plaintiffs also allege the company developed a “no PR” strategy to avoid
drawing attention to the matter.
Facebook decided to “obfuscate the fact that we screwed
up the math,” the complaint said, quoting the Facebook documents.
After the video-metric error, Facebook disclosed other
errors in its measurement practices on several occasions and came under renewed
pressure from the ad industry to make changes.
The Association of National Advertisers, a trade group
that represents top marketers including Procter & Gamble Co., General
Electric Co. and Verizon Communications Inc., called on the company and other
major digital ad-sellers to allow independent verification of their metrics.
Facebook has worked to address the matter by allowing
more third-party measurement companies to validate its data, and by undergoing
audits by the Media Rating Council, the media industry’s measurement watchdog.
Jason Kint, chief executive of Digital Content Next, a
trade organization that represents online publishers, said Facebook’s
measurement practices have been detrimental to the digital advertising
marketplace. “Facebook needs to lead with radical marketer and consumer
transparency to get past this. We haven’t seen it yet,” he said.
—Aruna Viswanatha contributed to this article.
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