Court Facebookmurphy Financialtimes: The documents allege that Facebook has been inflating the numbers of timeline views and “daily active users” in order to charge advertisers inflated rates. The complaint alleges that Facebook management told advertisers not to rely on third-party data sources.
Facebook has made billions of dollars and become one of the most valuable companies in America by overstating the prominence of its user base and overstating how many people view its ads, according to a court filing on Thursday evening.
A Business Insider Intelligence eye-popping chart shows Facebook’s stock price soaring over the past year.
Facebook’s revenue is almost entirely dependent on its ability to attract advertisers, which has made it imperative for the social network to convince companies that their ads will be seen by a large number of people. In the complaint, the plaintiff alleges that Facebook inflates its advertising metrics. The company can do this because third-party measurement firms do not have access to Facebook’s data and therefore cannot verify those numbers.
There are two ways that Facebook can inflate its metrics: by overstating what users see on their timelines and how many people are on the site.
To do this, Facebook would increase the number of “daily active users” (DAUs), which we define as accounts active on the platform for a minimum of 30 minutes a day, in order to make it appear as though more people use its service than there in fact are.
“Facebook would then use these inflated numbers to claim that it was reaching a larger number of daily users for its ads to be shown to,” the complaint reads. “If advertisers relied on third-party measurement companies’ statistics instead of Facebook’s own, Facebook could get away with this manipulation.”
Facebook also overstates the amount of time users spend on its app. The company has claimed that users spend an average of more than 50 minutes a day on its services, but they spend only about 20 to 30 minutes on Facebook’s app, according to the complaint.
The plaintiffs’ lawyers say they have an email from a Facebook employee suggesting that the social media platform is purposefully overstating viewer numbers in order to charge advertisers inflated rates.
“We have a problem here,” the email reads. “The issue is that Facebook’s numbers are almost entirely made up. Nobody in their right mind would spend as much money on Facebook advertising as they did without doing the hard math.”
“Facebook has the rest of the media industry convinced that a view is worth a dollar,” the employee writes. “When your [admittedly impressive] $20 CPMs (or whatever) are worth almost nothing, you have to really get into the details.
“Here’s where the ‘fake news’ part comes in. You see, Facebook counts a view on their platform, as a view. So let’s say, as an example, you have a video that 1 million people played for 3 seconds each (impossible but just an example.) That would be 3 million views. If they are counting those views at $1 each, then your video actually generated $3 million dollars of revenue.
