Facebook To Pay $40 Million To Advertisers To Resolve Allegations of Inflated Advertising Metrics

According to court papers last week, Facebook has entered a proposed settlement agreement where it will pay $40 million to advertisers to resolve allegations in a class-action lawsuit that the social networking platform inflated video advertising engagement metrics. Forbes explained:

"The metrics in question are critical for advertisers on video-based content platforms such as YouTube and Facebook because they show the average amount of time users spend watching their content before clicking away. During the 18 months between February of 2015 and September of 2016, Facebook was incorrectly calculating — and consequently, inflating — two key metrics of this type. Members of the class action are alleging that the faulty metrics led them to spend more money on Facebook ads than they otherwise would have..."

Metrics help advertisers determine if the ads they paid for are delivering results. Reportedly, the lawsuit took three years and Facebook denied any wrongdoing. The proposed settlement must be approved by a court. About $12 million of the $40 million total will be used to pay plaintiffs' attorney fees.

A brief supporting the proposed settlement provided more details:

" One metric—“Average Duration of Video Viewed”—depicted the average number of seconds users watched the video; another—–“Average Percentage of Video Viewed”—depicted the average percentage of the video ad that users watched... Starting in February 2015, Facebook incorrectly calculated Average Duration of Video Viewed... The Average View Duration error, in turn, led to the Average Percentage Viewed metric also being inflated... Because of the error, the average watch times of video ads were exaggerated for about 18 months... Facebook acknowledges there was an error. But Facebook has argued strenuously that the error was an innocent mistake that Facebook corrected shortly after discovering it. Facebook has also pointed out that some advertisers likely never viewed the erroneous metrics and that because Facebook does not set prices based on the impacted metrics, the error did not lead to overcharges... The settlement provides a $40 million cash fund from Facebook, which constitutes as much as 40% of what Plaintiffs estimate they may realistically have been able to recover had the case made it to trial and had Plaintiffs prevailed. Facebook’s $40 million payment will... also cover the costs of settlement administration, class notice, service awards, and Plaintiffs’ litigation costs24 and attorneys’ fees."

It seems that besides a multitude of data breaches and privacy snafus, Facebook can't quite operate reliably its core advertising business. What do you think?