In September 2016, Facebook produced a statement confessing to miscalculating how it measures video viewership, a problematic “discrepancy,” the social media network called it, that greatly peeved high-spending advertisers and publishers who rely on accurate numbers to gauge how they invest on the platform.
Today, a class action lawsuit has been filed against Facebook by individuals who bought video advertisements on the platform and claim the social media hub purposely inflated its “duration metric,” a vital measurement that tracks how long users spend watching advertisers’ videos.
At the heart of the lawsuit, court records show, are plaintiffs’ claims that they were misled to believe users were watching purchased advertisements for longer than they actually were. As a result, the plaintiffs allege, Facebook “induced” advertisers into continuing to purchase ad inventory that they would not have otherwise spent money on, while most likely paying for ads at a higher rate than they would otherwise have been willing to pay.
What kind of money are we talking about here?
According to the 14-page complaint, $1.6 billion of Facebook’s $5.8 billion January 2016-reported income was brought in mostly through ad revenue. In fact, advertising is Facebook’s most important source of revenue, not to mention a “central component of its growth strategy,” for which the platform provides the ability to buyers to target users based on many categorizing factors, such as gender, age, relationship status and profile keywords.
Broken down, a prominent market research website said the “average Facebook user generates $12.76 in yearly revenue,” a figure that grows in lockstep with the company’s active user base. This number, the complaint continues, is projected to hit $17.50 in ad-generated revenue per active user in 2017.
“Facebook generates billions of dollars in revenue by selling advertisements to American consumers,” the suit says. “In this process, millions of American advertisers pay substantial sums of money for advertising based on Facebook’s representations of how many consumers can be reached and influences by [ads] that appear on the website.”
When did all of this come about?
In mid-September 2016, Facebook released the following admission on its own business page:
“We found an error in the way we calculate one of the video metrics on our dashboard – average duration of video viewed. The metric should have reflected the total time spent watching a video divided by the total number of people who played the video. But it didn’t – it reflected the total time spent watching a video divided by only the number of “views” of a video (that is, when the video was watched for three or more seconds). And so the miscalculation overstated this metric.”
Specifically, the suit notes, Facebook excluded from its duration calculation times when a viewer either did not watch the video or watched it for fewer than three seconds.
How long did this go on for?
After posting the aforementioned admission on its own site, “Facebook also admitted to the Wall Street Journal that as a result of its error in calculating the video metrics,” the complaint reads, “Facebook reported for two years that the average time users spent watching videos was ‘artificially inflated by 60% to 80%.’”
Who might be covered by the class?
The proposed class includes any person or entity in the U.S. who had an account with Facebook or Facebook business between May 4, 2014 and September 23, 2016 who paid for a placement of two or more video ads of 10 seconds or more in duration.