Facebook, which together with Google is responsible for about 60% of advertisers’ online spending, has knowingly built some of its amazing success on inaccurate data, recently unsealed court documents claim. This can pose a problem for a company that generates more than 90% of his income from the sale of advertisements.
In a nutshell, this class action suit, which was first filed in 2018, claims Facebook has massaged numbers for “ Potential Reach ” – an estimate Facebook gives its advertisers for the number of people who could see their ad – to get advertisers to spend more money on the platform, all in the hope reach the people Facebook promised. These documents reveal that a number of Facebook’s top executives, including Chief Operating Officer Sheryl Sandberg, were fully aware that for years the company exaggerated the number of eyes its advertisers could reach.
Like first reported by the Financial Times, the lawsuit alleges that when Facebook’s constituency proposed internal solutions to these inflated numbers, senior executives repeatedly brushed them off, arguing that their solutions would reduce the company’s all-important ad revenue.
Thanks to these unsealed documents, we know how exaggerated some of those numbers were. Here’s an example: in 2018 Facebook told its advertisers said it had a potential reach of 230 million adults in the US, out of the 250 million adults counted that year based on US census records. But according to a 2018 Pew Research Studyonly about 68% (or 170 million adults) actually use the platform. Sandberg confirmed in an internal email that “she had been aware of Potential Reach issues for years.” But she repeatedly shot down workers’ attempts to correct those numbers, according to the filing.
Internally, employees acknowledged that while invoicing the product
itself as an estimate for how much “peopleYour ad could reach, it’s an estimate at best for the number of accounts, including the untold number forgeries and duplicatesSome employees even checked the numbers in 2018, just to see what would happen if known duplicate accounts dropped out of Potential Reach and saw a 10% drop in the number advertisers got. Facebook chose not to cut them. When one of the product managers on the Potential Reach team later suggested adjusting the way they talked about these numbers, for example replacing the word ‘people’ with the word ‘accounts’, this suggestion was shot down due to concerns about the “significant” impact it could have on Facebook’s ad revenue. By suit, the manager replied that “it is revenue we should never have made, as it is based on wrong data.”
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In many ways, this case mirrors another high-profile advertising suit that hit the company in 2016 and accused Facebook deliberately withheld some serious issues with the video ad metrics to raise more money from those video ad partners. In 2019, Facebook settled the claim at a cost of $ 40 million dollars which, as others have noted, is quite a lot chump change to a company that earns tens of billions dollars in ad revenue per year.
And apparently Facebook hasn’t learned much from that slap on the wrist. When it comes to the ongoing problems with Potential Reach, the lawsuit points out that numbers Facebook continues to give its advertisers make even less sense, telling them it can reach “100 million” 18-34 year olds across the country . Census data shows that there is, in fact only 76 million of them – and we know not all of them use Facebook.
Both in court and further his own site, the company argued that these statistics are intended to be interpreted as estimates, not gospel. But internally, according to the new filings, the company admitted that Potential Reach was “arguably the most important number” that advertisers relied on when deciding to put their ad on Facebook’s platform at all.
We’ve reached out to Facebook for comment and will update here whenever we hear back.