The Problem With Facebook’s $40 Million Video Measurement Lawsuit Settlement


I fear a dangerous precedent is being set: Tech giants that are increasingly controlling the advertising space can get away with anything.

To me, the recent $40 million settlementOpens a new window Facebook has agreed to pay advertisers that filed a class action lawsuit — in which they alleged the company knowingly inflated the video metrics it reported to paying customers — is a worrying sign.

The payout isn’t the issue. Rather, it’s that besides paying the settlement, ultimately a slap on Facebook’s multi-billion-dollar wrist, there will be no other repercussions for the world’s largest social media network.

The lawsuit

The legal battle kicked off in 2016, when Facebook admitted it had been accidentally miscalculating those metrics for 18 months, affecting up to 1.35 million advertisers.

The company disclosed that it had only been registering video views of three seconds or longer, which meant it was providing padded numbers by disregarding shorter viewing sessions, misrepresenting the average time consumers spent watching paid video ads.

When Facebook went public with the issue, it said it had discovered the problem a month before owning up to its error.

Not long after the announcement, a group of small advertisers sued the social media firm in federal court in California for unfair competitive practices by publishing incorrect results. They then added claimsOpens a new window in October last year charging that, in fact, Facebook had been covering up the video view discrepancies for more than a year.

The amended complaint argued that “the average viewership metrics…were inflated by some 150 to 900%,” rather than by the 60-80% the tech company initially had reported.

Finally, though, this three-year-long ordeal seems to be coming to a conclusion.

While Facebook remains steadfast in its denial of the claims against it in the case, it nevertheless has agreed to the terms of a proposed court settlement: A $40 million payout to the plaintiffs and public acknowledgment of its metric measurement blunder. However, Facebook doesn’t have to admit to any other wrongdoing.

Here’s what a Facebook spokeswoman said in a statement: “This lawsuit is without merit but we believe resolving this case is in the best interests of the company and advertisers.”

Why marketers should care

Think about it. This is a significant allegation. That one of the biggest advertising platforms in the world knowingly misrepresented the effectiveness of its clients’ paid campaigns should scare us.

Following these accusations, advertisers should be thinking twice about investing budget on the social platform.

Sure, as Garett Sloane writes for Ad AgeOpens a new window , the case has “spurred marketers to question the reliability of measurement reports from the social network and led them to demand more safeguards from all digital platforms.”

But there’s a big gap between questioning and actually boycottingOpens a new window . Yes, they fixed the problem. But I can’t find any indication that Facebook has put a single extra safeguard in place to prove to advertisers this type of thing will never happen again.

And this advertising-related misstep isn’t an isolated incident for Facebook. In 2017, it was found that a “bug” in its advertising platform had resulted in advertisers being overcharged for click-based video carousel ads that were seen by mobile users but which didn’t actually lead to any verifiable clickthroughs to advertisers’ selected destination. This lasted for a year before it was discovered.

Yet, these cases seem to have had zero affect on the growth of Facebook’s ad business. In 2018, ad revenues soared 38%, while Facebook generated more than $16.6 billion from ad sales in the second quarter of 2019, a 28% year-on-year growth.

Meanwhile, Facebook and Google are only cementing their hold on the digital advertising market, and are expected to account for more than 60% of US digital ad revenue this year, according to eMarketer.

Speaking to Sahil Patel at the Wall Street Journal, Kait Boulos, vice president of marketing for ad agency Varick, points out that “this is a recurring theme that we keep seeing: Facebook gets called out on something, but marketers continue to use the platform. It does not seem that we’re close to any straw breaking the camel’s back in terms of something hindering or pushing marketers away from the platforms.”

She’s right. Ultimately, it’s just too valuable of a medium for advertisers to avoid.

And that’s the problem. As fellow Toolbox contributor and my colleague Ethan Schrieberg explains, “as long as marketing teams can prove to the C-suite that they’re converting consumers through Facebook, then investment will continue to flow.”

Which means that Facebook can keep pushing the limits.