Facebook agrees to pay advertisers $40 million over inflated video stats
Facebook has agreed to pay advertisers $40 million for the inflated video metrics it incorrectly provided, a case that spurred marketers to question the reliability of measurement reports from the social network and led them to demand more safeguards from all digital platforms.
On Monday, the terms of the settlement were filed with United States District Court in California, revealing that the sides had agreed to $40 million for the faulty metrics that were provided over a period of 18 months in 2015 and 2016. The class-action lawsuit claimed that 1.35 million advertisers could have been affected.
Facebook disclosed the measurement flub in 2016. The social network had used a bad formula to calculate the average amount of time people spent watching videos, which could have led marketers to believe their videos were more popular than they actually were.
Facebook said the error only affected videos that the marketers posted to their social pages for free and did not affect paid ads. However, plaintiffs argued that the misleading numbers led them to spend more on Facebook ads than they otherwise would have spent. The marketers claimed that since the video metrics were inflated they made buying ads a more attractive prospect.
After Facebook disclosed the reporting error, brands pushed for more accountability from all platforms to verify the numbers they provide. Facebook, YouTube, which is owned by Google, and Twitter all began working with Media Rating Council to audit their metrics. There was an overall greater awareness of the need for third-party measurement services, so the platforms were no longer the sole reporters of how media was performing on their own networks.
Over the course of the Facebook lawsuit, allegations surfaced that the social network knew about the bad numbers earlier than it let on. There were also claims it inflated the average video watch times by up to 900 percent, in some cases.
Back in June, both sides in the case had announced a settlement was in the works.
Update: Facebook denied the claims made against it in the case. Companies often settle lawsuits because it can be less costly than lengthy litigation. “This lawsuit is without merit but we believe resolving this case is in the best interests of the company and advertisers,” a Facebook spokeswoman said in an e-mail statement.