October 9, 2019
Facebook agreed to pay a $40 million penalty for providing incorrect metrics for average viewing time of ads on its platform. In 2016, Facebook admitted to the problem, and a group of small advertisers sued in California federal court, in part claiming that Facebook knew about the problem long before it admitted and fixed it. Facebook countered the impact was minimal because it doesn’t bill advertisers based on watch-time; plaintiffs disagreed, saying it is a “common indirect barometer to guide ad-buying decisions.”
The Wall Street Journal reports that, “under the terms of the proposed court settlement, Facebook would acknowledge it made an error in calculating its metrics but wouldn’t admit to any other allegations.”
Although a Facebook spokeswoman stated the lawsuit is without merit, ad agency Varick’s vice president of marketing Kait Boulos noted that, “video completion rate is still the reigning king out there from a [key performance] perspective, but watch time is absolutely one of the indicators that clients look at for business performance.”
Facebook’s advertising revenue is still strong; in Q2 2019, the company generated $16.6 billion in ad revenue, up 28 percent year over year. According to eMarketer, “Facebook and Alphabet-owned Google are expected to account for 60.9 percent of U.S. digital ad revenue in 2019.”
MediaPost reports the 2016 news report stated that Facebook inflated average viewing time by 60 percent to 80 percent. The plaintiffs, including LLE One (doing business as Crowd Siren and Social Media Models) then amended the suit to claim inflation of metrics by 150 percent to 900 percent.
The settlement, which awaits the approval of U.S. District Court Judge Jeffrey White, “calls for at least $28 million to be distributed to advertisers on a pro-rata basis ‘directly proportional to the amount they spent on video advertising’.” Attorneys representing the class action suit “could receive up to $12 million.” The opposing sides reached a settlement with assistance from a retired federal judge. Facebook “still faces a separate class-action complaint accusing the company of inflating the potential reach of ads.”