Cohen Milstein represents a putative class of advertisers who claim that Facebook’s key advertising metrics are false and misleading due to systemic inflation of Facebook’s user base. This case is in discovery.

Case Background

The core of Facebook’s business is its large purported user base, which ostensibly enables advertisements placed on Facebook.com to reach a large number of people. In its 2017 annual report, Facebook claimed to have 2.13 billion monthly active users globally, with over 240 million monthly active users in the U.S. alone.  As a result, in 2017, Facebook earned approximately $40 billion from advertising revenue.

Before advertisers make a purchase, Facebook claims that the advertisement can potentially reach a specified number of people (“Potential Reach”). Depending on the demographic targeting selected by the advertiser, the “Potential Reach” is often millions of people. Facebook also claims that the advertisement will reach an estimated number of people per day (“Estimated Daily Reach”). The “Estimated Daily Reach” is based, in part, on the audience size or “Potential Reach.”

Plaintiffs allege that these foundational representations are false and misleading due to inflation of Facebook’s user base. Based on publicly available research and Plaintiffs’ own analysis, Facebook may overstate the “Potential Reach” of its advertisements by 200%-400%. For example, among 18-34-year-olds in Chicago, Facebook asserted its “Potential Reach” was approximately 4 times (400%) higher than the number of real 18-34 year-olds with Facebook accounts in Chicago.

Plaintiffs further allege that because Facebook inflated its “Potential Reach,” Plaintiffs purchased more advertisements from Facebook and paid a higher price for advertisements than they otherwise would have.

Documents produced by Facebook confirm that senior executives at the company knew for years that its “Potential Reach” metric was inflated – yet they failed to do anything, and even took steps to cover up the problem. In fact, in late 2017 and throughout 2018, Facebook executives repeatedly acknowledged “Potential Reach” was inflated and misleading due to, among other reasons, the fact that “Potential Reach” includes duplicate and fake accounts.

Plaintiffs seek compensation and injunctive relief for violations of California’s UCL, breach of the covenant of good faith and fair dealing, fraudulent misrepresentation, fraudulent concealment, and for restitution and punitive damages.

The case name is: DZ Reserve et al. v. Facebook, Case No. 3:18-cv-04978 (N.D. Cal.)