In the News

“Facebook Executives Allegedly ‘Knew for Years’ About Misleading Metric,” Financial Times

March 20, 2020

New court documents claim company was aware key ad metric was exaggerating marketing reach.

Facebook executives allegedly “knew for years” that a key advertising metric was exaggerating how many users might see commercials on its site, but have failed to disclose or fix the problem, according to filings from a class-action lawsuit against the company.

New court documents from the lawsuit, which was filed in Northern California in 2018 by a small-business owner, claim that Facebook personnel knew that its so-called potential reach metric, used to inform advertisers of their potential audience size, was “inflated and misleading”.

The documents go on to name chief operating officer Sheryl Sandberg and David Wehner, Facebook’s financial officer, in the context of internal communications in which they were involved in 2017. Their remarks and actions have largely been redacted from the documents, however, on the grounds that they are commercially sensitive for Facebook. 

The lawsuit claims that Facebook represents the potential reach metric as a measure of how many people a given marketer could reach with an advertisement. However, it actually indicates the total number of accounts that the marketer could reach — a figure that could include fake and duplicated accounts, according to the allegations.

In some cases, the number cited for potential audience size in certain US states and demographics was actually larger than the population size as recorded in census figures, it claimed. 

“Facebook’s failure to remove duplicate and fake accounts from its potential reach metric makes the metric fundamentally misleading,” the complaint said. Facebook, as of March 3, “still has not removed the fake and duplicate accounts from its potential reach calculation”, the documents claim. 

Facebook’s own estimates in financial filings suggest that duplicate accounts represented approximately 11 per cent of its 2.5bn monthly active user count for the fourth quarter of 2019, while fake ones accounted for another 5 per cent.

. . .

The new court documents allege that some employees “expressed concerns” about the alleged “inflation” of potential reach but no action has been taken.

One filing alleged that Ms Sandberg made “substantive comments” in a meeting in October 2017 where potential reach was discussed. 

Mr Wehner also discussed fake and duplicate accounts in a meeting the same month, but on a later earnings call “did not disclose the direct impact of duplicate and fake accounts . . . on potential reach”, according to the complainants. 

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