Facebook accused of knowingly inflating its ad audience

"Senior executives knew for years Potential Reach was inflated and misleading."

Robert Galbraith / reuters

Facebook's senior executives knew that it was overestimating the number of users its advertisers could reach, according to an amended lawsuit reported by the Financial Times. A product manager told senior executives in 2018 that Facebook's potential reach audience figures were "deeply wrong," and proposed changing the metrics to make it more accurate. However, senior executives allegedly rebuffed the changes, saying that the impact on revenue would be "significant," according to the filing.

Sections of a filing that were previously redacted show internal communication between the product manager and executives in charge of the reach metrics. "It’s revenue we should have never made given the fact it’s based on wrong data," the employee said. Sections of the lawsuit were previously sealed on the basis that they were commercially sensitive for Facebook.

The lawsuit alleges that Facebook included fake and duplicate accounts in its potential reach metrics, suggesting numbers in certain regions that were larger than the number of people living there. "Facebook knew for years its potential reach was misleading, and concealed that fact to preserve its own bottom line," the filing states.

Facebook argued that the numbers were only estimates, and that advertisers don't pay based on potential reach but on ad impressions and clicks. However, the reach numbers are used by advertisers for budgeting reasons, and Facebook itself said in an internal document that they were "arguably the single most important number in our ad creation interfaces."

It's not the first time that Facebook has been accused of overstating user numbers to boost revenue. Back in 2016, the company admitted that it had been overstating user video views for two years. In 2019, it agreed to pay $40 million to settle the claims.

So far, that has had virtually no impact on advertisers, as Facebook's revenue continues to grow unabated. However, given that the company has banned news links in Australia, and faces issues with Apple over ad tracking, Facebook is less confident about the coming year.

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