Facebook knew of “highly misleading” metrics that inflated video views for more than a year and failed to inform its advertising partners, according to an amended lawsuit filed on Tuesday in Oakland.
Following a Wall Street Journal report in September 2016, the social network acknowledged it had miscalculated key metrics by 60 to 80 percent, but that it had only been an issue for about one month. The amended claim, filed by Las Vegas marketing firm Crowd Siren and video advertiser Jonathan Murdough, said Facebook knew about its measurement flaws as early as January 2015 — and that the issue was far more severe, inflating video views between 150 percent to 900 percent.
The lawsuit also pushes back against Facebook’s claim the measurement issues didn’t impact billings.
“Facebook’s misrepresentations induced video advertising purchasers, including Plaintiffs, to continue purchasing video advertisements, and to purchase additional video advertisements, because purchasers believed that users were watching their videos, on average, for longer than users were actually watching their videos,” the lawsuit said.
The suit claims, pointing to internal company documents, that Facebook understood the cause of the issue by July 2015 but failed to notify its advertising partners — something Facebook has said is not true. Facebook set up a “no PR” strategy to avoid drawing attention to the issue, the suit claims. “Facebook’s internal efforts behind the scenes reflect a company mentality of reckless indifference toward the accuracy of its metrics,” the suit added.
For a company that made nearly $40 billion in advertising revenue last year, it’s clear why a crisis of advertiser faith would rock Facebook. But the company told TheWrap the fraud claim is “without merit” and has moved to dismiss the suit.
“Suggestions that we in any way tried to hide this issue from our partners are false. We told our customers about the error when we discovered it–and updated our help center to explain the issue,” a Facebook rep told TheWrap.
Pamela Chelin contributed to this report.