Facebook Inc. knew in early 2015 that it misled advertisers about the average time users spent viewing online video clips -- and then lied about it, according to a lawsuit.
The owner of the world's largest social network acknowledged in September 2016 that it had inflated the metric for marketers, and it said it fixed its calculations. Crowd Siren, the online marketing agency that filed the suit, said Facebook knew as early as 2015 that it was over-reporting the figures. Crowd Siren added fraud claims and a request for punitive damages against the company in an amended complaint filed Tuesday in federal court in Oakland, Calif.
Facebook had told some advertisers that it had probably overestimated the average time spent watching video ads by 60 percent to 80 percent. Tuesday's filing alleged that Facebook had instead inflated average ad-watching time by 150 percent to 900 percent.
That "unethical, unscrupulous" behavior by Facebook constituted fraud because it was "likely to deceive" advertisers, the filing alleged.
"This lawsuit is without merit and we've filed a motion to dismiss these claims of fraud. Suggestions that we in any way tried to hide this issue from our partners are false," a Facebook representative said in a statement. "We told our customers about the error when we discovered it -- and updated our help center to explain the issue."
Facebook Inc.'s growth has hinged on convincing advertisers that people are watching more videos on its social network. The Menlo Park, Calif.-based company is trying to regain trust after a series of revelations that hackers accessed intimate user information and that the platform was manipulated by Russia during the U.S.' 2016 presidential election.
Facebook didn't correct the inflated metrics, according to the filing. Instead, the company engaged in a public relations campaign to deflect attention away from the errors, Crowd Siren said, citing internal company documents and email exchanges.
"If Facebook had immediately corrected its miscalculation in a straightforward manner, advertisers would have seen a sudden and precipitous drop in their viewership metrics," according to the amended complaint. Advertisers "would be less likely to continue buying video advertising from Facebook."
The plaintiffs are seeking class-action status to bring other advertisers into the legal action, plus unspecified damages. They also want the court to order a third-party audit of Facebook's video-ad metrics.
Facebook faces separate allegations in a complaint filed in August that it misrepresents advertisers' estimated audience reach. Facebook has denied the claims.
Information for this article was contributed by Joel Rosenblatt and Sarah Frier of Bloomberg News and by Ethan Baron of The Mercury News of San Jose, Calif.
Business on 10/18/2018
Print Headline: Firm amends Facebook suit, alleges fraud in ad metrics