A putative class action lawsuit has been filed against Facebook, Inc. just one month after Facebook announced that an erroneous formula had caused it to inflate a key video metric for the past two years.
Facebook admitted the error in a September 23, 2016 post on the Facebook business page. The metric at issue—the average time users spend watching videos (the duration metric)—is a critical measurement that advertisers rely upon when making purchasing decisions about where to place their advertising. But according to the September Facebook post, the formula used to produce the duration metric was wrong: while “[t]he metric should have reflected the total time spent watching a video divided by the total number of people who played the video,” it did not. Instead, the calculation was based on the “total time spent watching a video divided by only the number of “views” of a video (that is, when the video was watched for three or more seconds).” In other words, the duration metric should have reflected a significantly lower average because it should have incorporated those people who played a video for three seconds or less.
This surprising revelation was exacerbated by The Wall Street Journal’s report that Facebook told its business partners the miscalculation caused the duration metric to be artificially inflated by between sixty and eighty percent.
Citing Facebook’s September admission and the WSJ article, the putative class contends that Facebook’s misrepresentation about the duration metric induced them to purchase (at a higher rate than what they would have paid) or continue purchasing advertising with Facebook. This misrepresentation, the complaint asserts, violates a host of California statutes related to unfair business practices.
Takeaway: Whether big-time advertisers will join this putative class or bring a claim independently remains to be seen. Regardless, advertising measurement on digital media continues to be rife with error and a lack of transparency. Advertisers should ensure their media buying agencies establish viewability standards, monitor publisher compliance and press for the ability to use an accredited third-party verification provider in connection with their digital advertisement placements.