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Facebook said revenue it ‘should never have generated,’ official said

A Facebook employee warned that the company said revenue it “never should have made” by overestimating the number of users advertisers could reach, according to internal emails revealed in a newly unsealed court case.

The world’s largest social media company has been leading a class action lawsuit since 2018 claiming its executives knew its “potential reach metric,” used to inform advertisers of the size of their potential audience, was overdone but did not. corrected.

According to sections of a record in the lawsuit that were not redacted on Wednesday, a Facebook product manager in charge of potential reach proposed changing the definition of the metric in mid-2018 to make it more precise.

However, internal emails show that his suggestion was rejected by Facebook executives overseeing the measures on the grounds that the “revenue impact” for the company would be “significant”, according to the file.

The product manager responded by saying that “this is revenue we should never have made since it is based on faulty data,” the complaint states.

Several other employees echoed his concerns, one writing that “the status quo in estimating advertising reach and reporting is deeply wrong,” according to the file, parts of which were initially sealed in. largely on the grounds that they were commercially sensitive to Facebook.

The lawsuit, which was filed in northern California in 2018 by a small business owner, alleges that Facebook knowingly included bogus and duplicate accounts in its measure of potential reach, misleading unwitting advertisers.

He cites research showing Facebook had suggested potential reach in some states in the United States and higher demographics than actual populations. A Financial Times survey in 2019, similar discrepancies were seen in Facebook’s Ad Manager, an online tool to help advertisers create campaigns.

Facebook argued that the measurements are only estimates. This is because advertisers don’t pay the company based on potential reach, but rather for actual impressions and clicks on ads.

Nonetheless, the lawsuit claims that advertisers use the metric to decide where to allocate their budget in the first place.

Facebook itself acknowledged that the metric was “arguably the most important number of our ad creation interfaces” in an internal document cited in the unsealed dossier.

The filing also claimed that in early 2018, internal Facebook searches found that removing duplicate accounts from potential reach would result in a 10% drop in figure.

“Facebook had known for years that its potential reach was misleading and covered up this fact to preserve its own results,” says the latest file.

A Facebook spokesperson said in a statement that “the allegations are baseless and we will vigorously defend ourselves.”

In March 2019, Facebook made some changes to its potential reach, based on the number of people who matched an advertiser’s criteria who had seen an ad in the last 30 days, rather than the number of active users in the last 30 days. the same period. However, the lawsuit alleges that as of 2020, the company “still hasn’t removed fake and duplicate accounts from its potential reach calculation.”

The company is waging an ongoing battle against fake accounts on its platform, which are often used for spamming, and has invested in automated systems to detect and eliminate them. In the last quarter of 2020, it deleted 1.3 billion fake accounts, according to its latest transparency report. The company reported 2.8 billion monthly active users globally in its latest quarterly results.

The potential scope lawsuit is the second major lawsuit filed by advertisers over deceptive Facebook metrics. Several years ago, the company settled a complaint filed after it revealed it overestimated video viewing parameters in 2015 and 2016.

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