Advertisers say that Facebook has grown more dependent on Instagram in the past year, as its main platform has endured hits on its reputation, including a brand boycott in July. More than 1,000 advertisers joined civil rights groups to protest how Facebook handled hate speech and disinformation, exposing brand safety concerns with the service.
“It is absolutely true that more advertisers are moving to Instagram,” says one ad agency executive, who spoke on condition of anonymity, and who works closely with Facebook. “Our ad spending has been more skewed to Instagram than it has been to Facebook because a lot of clients either chose to pause their dollars or move them completely off Facebook and focus only on Instagram.”
The Facebook case promises to uncover more of the inner workings of the social network than ever. It will look at how the company treated consumers, rivals and advertisers, and it will explore questions about the digital ad market. The complaints allege that Facebook made ads more expensive and made fewer choices available to brands. The complaints nod to the brand safety troubles advertisers had on the social network, including the July boycott. “Facebook does not provide advertisers with meaningful ways to ensure that ads are distanced from content that could harm a brand’s reputation,” the complaint said.
The complaint also argues that Facebook’s control of the ad market enabled it to adopt opaque practices that hide how effective its ads are, which some advertisers might recognize as a common concern.
“Advertisers are harmed by a lack of transparency about Facebook’s reporting metrics, inability to audit Facebook’s reporting metrics, unreliable metrics due to Facebook error, and the prevalence of fake accounts,” according to the states’ complaints. “In addition, they are unable to ensure the same ad is not shown to the same person across media platforms. Without accurate information about performance, advertisers cannot accurately assess the value of their ad spend on Facebook’s properties.”
There have been ongoing frustrations with Facebook reporting erroneous metrics to advertisers regarding how their marketing performs. Facebook and its executives have tried to make amends, though, employing more tools to independently audit the platform.
Too big to bail
Facebook has more than 10 million advertisers across all its properties, which is also driving the antitrust complaints. Regulators have made part of the case about how multitudes of small businesses have been sucked into Facebook’s orbit because of a lack of competition in social advertising.
“By eliminating, suppressing, and deterring the emergence and growth of personal social networking rivals,” the complaint from the states said. “Facebook also harms advertisers in a number of ways, including less transparency to assess the value they receive from advertisements, and harm to their brand due to offensive content on Facebook services.”
On Wednesday, Facebook was again sued in California by small advertisers piggybacking on the antitrust case. Attorneys in that case suggested that any Facebook advertisers since 2014 would be able to join the lawsuit, and that consumers and advertisers could seek to claw back all of Facebook’s ad revenue from a given year.
Advertisers might not stand much of a chance suing Facebook on these grounds, however, according to Warren Postman, a partner at Keller Lenkner, a law firm that represents civil plaintiffs in another lawsuit against Facebook, which also overlaps with the antitrust activity.
“Advertisers agree to arbitrate any claims they have,” Postman says. “That’s going to be an issue for them to bring a class action in court.”
In its defense
Facebook issued a forceful rebuttal to many of the allegations and will have ample time to mount a defense. Facebook blasted regulators and state attorneys general for engaging in “revisionist history,” and trying to unwind business moves regulators approved years ago.
“Businesses choose us because our apps and services deliver real value,” Facebook general counsel Jennifer Newstead said in a blog post on Wednesday. “Unfortunately, these lawsuits misunderstand the advertising landscape and offer instead a distorted view of how advertisers spend to reach their target audiences.”
“This will be a hard-fought dispute,” Postman says. “Facebook is not just going to give up.”
The FTC and the states have both filed exhaustive complaints that describe how Facebook CEO Mark Zuckerberg and top lieutenants viewed competition, and the tactics they used to stay atop social media since the company was founded in 2004.
The complaints read like a "greatest hits" from Facebook’s growth, as well as its lowest moments. The filings cover everything from how Zuckerberg allegedly twisted the arm of Instagram founder Kevin Systrom to negotiate a sale of his app. The complaint delves into Facebook’s development of its platform to integrate with third-party apps to supercharge the experience on the social network, and then used those connections to also gather intelligence on rivals.
The complaint from the 48 states accused Facebook of “deploying a buy-or-bury strategy that thwarts competition and harms both users and advertisers.”
In its reply, Facebook said that its behavior was common among internet and media companies that do not always make their services available to potential rivals. “Companies are allowed to choose their business partners, and it gives platforms comfort that they can open access to other developers without that access being exploited unfairly,” Facebook’s Newstead said.