Facebook Reaches Proposed Settlement in Video Measurement Lawsuit
October 07 2019 - 5:30PM
Dow Jones News
By Sahil Patel
Facebook Inc. could pay $40 million to settle a lawsuit from
advertisers over miscalculated video metrics.
The legal battle began in 2016 after Facebook disclosed it had
incorrectly calculated the average viewing time for video ads on
its platform. For two years, the tech giant had only counted video
views that lasted at least three seconds, ignoring those of shorter
durations and artificially pushing the average length of a view
higher. Facebook said it discovered the problem only a month before
going public with it.
A group of small advertisers sued in California federal court,
alleging that Facebook engaged in unfair competitive practices by
providing inaccurate information. The plaintiffs later added claims
that Facebook knew about the incorrect metrics long before it
ultimately fixed them and that the error was larger than what
Facebook told some advertisers.
The legal battle centered on how much the inflated metrics
impacted advertisers' businesses and the claim that Facebook knew
about the inaccuracy of the information sooner than it had
admitted.
Facebook argued that the impact was minimal because the company
doesn't bill advertisers based on video watch time.
The plaintiffs disputed that, calling average viewing time a
common indirect barometer to guide ad-buying decisions: Clients
would want to spend more on the video ads that people were actually
watching.
"Video completion rate is still the reigning king out there from
a [key performance] perspective, but watch time is absolutely one
of the indicators that clients look at for business performance,"
said Kait Boulos, vice president of marketing for Varick, an ad
agency owned by MDC Partners Inc. "Marketers want to understand
what percentage of people watched for the first quarter, half or
even three quarters of a video."
Under the terms of the proposed court settlement, Facebook would
acknowledge it made an error in calculating its metrics but
wouldn't admit to any other allegations.
"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 a statement.
Attorneys for the plaintiffs declined to comment.
If approved, Facebook's penalty will cost the company the $40
million settlement. But the case doesn't seem to have damaged the
continuing growth in its advertising business. In the second
quarter of 2019, Facebook generated more than $16.6 billion in ad
revenue, up 28% year over year. Facebook and Alphabet Inc.-owned
Google are expected to account for 60.9% of U.S. digital ad revenue
in 2019, according to eMarketer.
"This is a recurring theme that we keep seeing: Facebook gets
called out on something, but marketers continue to use the
platform," said Ms. Boulos. "It does not seem that we're close to
any straw breaking the camel's back in terms of something hindering
or pushing marketers away from the platforms."
Write to Sahil Patel at SahilPatel@wsj.com
(END) Dow Jones Newswires
October 07, 2019 17:15 ET (21:15 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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