Unsealed court document claims Facebook ‘knew for years’ that a metric was inflated and ignored an employee warning to avoid a revenue hit
Source: Business Insider
Facebook executives knew for years its “potential each” advertising metric was inflated and overruled an employee warning to adjust it to avoid a revenue hit, plaintiffs of a lawsuit against the social media giant argued in an unredacted court filing.
On Wednesday, a judge from the US District Court in northern California revealed sections of a court document previously blacked out as part of a class-action lawsuit on behalf of DZ Reserve and other participating plaintiffs that was brought against Facebook in 2018. The lawsuit claims the social media giant inflated its potential reach metric to dupe advertisers.
The newly revealed sections claimed Facebook’s chief operating officer, Sheryl Sandberg, acknowledged problems with the potential reach metric in a 2017 internal email. Advertisers “frequently rely on” the metric — which shows the reachable number of people — when making purchasing decisions, the lawsuit claims. But employees said the metric in reality measures the number of accounts, which includes duplicate or fake ones, causing it to be misleading.
A product manager proposed amending the metric by reflecting the number of potentially reachable accounts, not people, but Facebook’s leadership team rejected the idea because it would cause a “significant” revenue impact, the filing states. The lawsuit claims Facebook discovered removing duplicate or fake accounts from the total number would cause a 10% drop in potential reach numbers.
The employee who proposed the fix said: “It’s revenue we should have never made given the fact it’s based on wrong data,” according to the filing. Other Facebook employees also said the number was misleading.
“These documents are being cherry-picked to fit the plaintiff’s narrative,” Facebook spokesperson Joe Osborne said in an emailed statement to Insider. “‘Potential reach’ is a helpful campaign planning tool that advertisers are never billed on. It’s an estimate, and we make clear how it’s calculated in our ads interface and Help Center.”
Two years ago, the company adjusted the potential reach metric, the FT reported. Instead of it calculating the number of active users shown an ad in the prior 30 days, Facebook determined the metric by calculating the number of users matching advertiser criteria in that time frame, the report said. The fake and duplicate accounts remained in the overall number, however, the plaintiff claimed.
The company has previously said advertisers pay for actual ad impressions and clicks, not for the potential reach metric, the Financial Times reported. The social media giant has been under fire for its metrics before. In 2019, Facebook settled a lawsuit after disclosing it had inflated viewing time for video ads because of an error in calculating metrics, The Wall Street Journal reported.
