In the News

Facebook Reported Revenue It ‘Should Have Never Made’, Manager Claimed

Financial Times

February 18, 2021

Lawsuit cites product executive’s qualms over figures provided to advertisers

A Facebook employee warned that the company reported revenues it “should have never made” by overstating how many users advertisers could reach, according to internal emails revealed in a newly unsealed court filing.

The world’s largest social media company has since 2018 been fighting a class-action lawsuit claiming that its executives knew its “potential reach metric”, used to inform advertisers of their potential audience size, was inflated but failed to correct it.

According to sections of a filing in the lawsuit that were unredacted on Wednesday, a Facebook product manager in charge of potential reach proposed changing the definition of the metric in mid-2018 to render it more accurate.

However, internal emails show that his suggestion was rebuffed by Facebook executives overseeing metrics on the grounds that the “revenue impact” for the company would be “significant”, the filing said.

The product manager responded by saying “it’s revenue we should have never made given the fact it’s based on wrong data”, the complaint said.

“Facebook knew for years its potential reach was misleading, and concealed that fact to preserve its own bottom line”

Lawsuit against Facebook.

Several other employees echoed his concerns, with one writing that the “status quo in ad reach estimation and reporting is deeply wrong”, according to the filing, parts of which had been initially sealed largely on the grounds that they were commercially sensitive for Facebook.

The lawsuit, which was filed in northern California in 2018 by a small-business owner, alleges that Facebook knowingly included fake and duplicate accounts in its potential reach metric, misleading unwitting advertisers.

It cites research showing Facebook had suggested potential reach in certain US states and demographics that was greater than the actual populations. A Financial Times investigation in 2019 found similar discrepancies in Facebook’s ads manager, an online tool to help advertisers build campaigns.