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.
Explain what advertising formula is being questioned.
Discuss the advertisers' rights of recovery and under what theory.
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