Facebook facing fraud suit after inflating key video ad metric

28th October 2016. By Amy Miller

Facebook is being sued for fraud in federal court after the social network apologized in September for artificially inflating the average time it told clients that users spent watching videos on the site.

Three Nevada residents who purchased video ad placements filed a lawsuit against Facebook in Oakland, California, on Thursday seeking damages on behalf of a proposed nationwide class of people and businesses who placed two or more video ads on Facebook between May 4, 2014, and Sept. 23, 2016.

In August, Facebook disclosed that its metric measuring the average time users spent watching videos was artificially inflated by 60 to 80 percent because it only factored in video views of more than three seconds.

On Sept. 23, Facebook publicly apologized for significantly amplifying users’ viewing times. The metric should have reflected the total time spent watching a video divided by the total number of people who played the video, Facebook said. Instead it reflected the total time spent watching a video.

But Facebook also said the “discrepancy” didn’t affect advertising billings.

“We want our clients to know that this miscalculation has not and will not going forward have an impact on billing or how media mix models value their Facebook video investments,” David Fischer, vice president of business and marketing partnership at Facebook, said in a post that day.

The Nevada plaintiffs, however, argue that Facebook’s misrepresentations were misleading and fraudulent under California law and constitute unfair conduct. They argue that they placed ads they wouldn’t have if Facebook’s metrics had been accurate, and note that Facebook brought in $5.8 billion during the last three months of 2015, and $1.6 billion of that was profit generated largely from advertising.

“Facebook induced advertisers, like Plaintiffs, to continue to purchase advertising they would not have otherwise purchased or to purchase advertising at a higher rate than they would have otherwise spent,” they argue.

They are seeking an order requiring Facebook to pay back all monies it “has wrongfully obtained from Plaintiffs.”

A spokesperson for Facebook said the “lawsuit is without merit and we will defend ourselves vigorously.”