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Facebook Sued by Advertisers For Inaccurate Metrics
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Facebook is facing a class-action suit by a group of its advertisers for allegedly disseminating inaccurate metrics that overestimated the amount of time Facebook users were actually looking at their ads.  Those metrics determine ad pricing for Facebook.  The suit was originally filed in 2016, but after using its discovery process to review Facebook records, the plaintiffs added a fraud claim.  The plaintiffs allege that Facebook tried to hide the decline in its metrics by excluding users who looked for 3 seconds or less, with the result being that Facebook's metrics looked better than they would have with the short spans included.  Its average duration for viewership was, as a result, much higher than it really was. 

 

Facebook collects the metrics and then furnishes them to the ad clients, a practice that one ad executive has called akin to "grading your own homework." When originally discovered, Facebook said that it had overestimated user time viewing by 60% to 80%.  However, the plaintiffs have alleged that the over-statement was more like 150%-900%. The plaintiffs say that they uncovered in the documents a statement on Facebook's plan to "obfuscate the fact that we screwed up the math."  Suzanne Vranica, "Advertisers Allege Facebook Put Off Disclosing Error,"  Wall Street Journal, Octob...

 

Major advertisers such as Procter & Gamble and GE have called for media companies to have their average viewing times computing by independent third parties in the wake of the Facebook issue. The major advertisers also urged Facebook to deal with the litigation and crisis by candor and being transparent in the future with its data. The gradual release of the mistake along with the now alleged understatement have undercut Facebook's credibility.  Most experts believe that other media companies will be affected as well as advertisers demand more disclosure and ways to verify the data.  

 

The suit will proceed as a contract action with the new fraud allegation, which would entitle the advertisers to punitive damages.  Initially, the suit was one for misrepresentation.  However, apparently, the discovery process establishes what the plaintiffs believe to be a deliberate attempt to continue misleading advertisers, a cover-up of the extent of the problems.

 

Because it is a class action, anyone who advertised on Facebook would be entitled to damages if the plaintiff companies win the suit. What could have been accepted as a computation error could be fraud if the plaintiffs can establish that Facebook did not self-correct once it was aware of the errors.

 

DISCUSSION STARTERS

Explain what advertising formula is being questioned.

Discuss the advertisers' rights of recovery and under what theory. 

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