Facebook Looses Advertisers’ Trust: Accused of Inflating Metrics for Years

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Facebook Inc. (NASDAQ: FB) has more than 1.7 billion users actively engaging on its platform. Whether it is to interact with friends or leverage businesses, Facebook has become the most popular choice for networking.

Facebook has the largest user base. Period.

This, in turn, is an obligation for the Social Networking Giant to provide its users with correct information and metrics. However, Facebook failed to do so. For the last two years, Facebook has been providing inflated video metrics to its advertisers.

In an official announcement, Facebook clarified that about a month ago they found out an error in how they calculate average duration of videos viewed. The correct way was to divide total time spent in watching a video by the total number of people who played the video. Instead, the total time spent in watching a video was divided by the total number of views of that video. The catch here is, a video is considered as ‘viewed’ only when it is watched for more than 3 seconds on Facebook.

The wrong calculation inflated the metric by 60% to 80%, misleading the advertisers who spent millions of dollars on promoting video content on Facebook significantly.

Facebook has been the ideal platform for marketers and businesses to connect with their customers, especially through video ads. Marketers bet high on ads played on Facebook due to a good average of duration of the video viewed. 60% of the businesses in the U.S. have plans to increase video investment on Facebook next year. Out of 70.8% marketers in the U.S. who intends on investing in video ads, 65.8% marketers were ready to roll out their video ads on Facebook, leaving behind YouTube.

Facebook has now 3 million active business advertisers from all over the world, as of March 2016, reporting a whopping 50% growth as compared to 2 million in the previous year. More than 70% of these advertisers are from outside of the U.S.

How Will it Affect Facebook and the Marketers

In this phase of an extremely competitive market, such incidents have high impacts on any business. In its official announcement, Facebook mentioned that the error has not and will not affect the billing or how media mix models valued their Facebook Video investments and offered third-party video verification options with companies like Nielson and Moat.

“We want marketers to measure video with us in the way they feel most comfortable.” said David Fischer, VP, Business and Marketing Partnerships.

However, a market leader committing such misleading errors does cause a severe impact. An error like this gave way to questions about the company’s strategies for growth. There is no denial that Facebook users now feel misled and cheated. As a consequence of this error, the company’s shares fell by 1% on Friday, last week.

Facebook has been competing with YouTube, Twitter, Snapchat for video advertising. With so many options, marketers are always on a look-out for higher rates from the platform they are investing in. Therefore, such metrics play a crucial role in influencing marketer’s decisions. With Facebook creating such errors, it will only lose public confidence.

It is also going to affect the investors and other stakeholders. After all, they end up losing stakes due to such misleading errors.

“Two years of reporting inflated performance numbers is unacceptable” mentioned a letter sent by Publicis Media to its clients.

Such errors and misleading data are very dangerous to a company’s reputation. Investors tend to move away from companies as the essence of trust starts fading. Even the customers lose confidence about making investments due to such incidents.

It only depends on Facebook and on the measures it takes, apart from the apology note, to rectify the error and get back to fair market grounds.



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