Facebook knew it had provided advertisers with "inflated and misleading" ad metrics for years, the Financial Times reported citing court documents that were recently made public. According to the documents, not only did the company's senior executives know that its "Potential Reach", a forecast that allows advertisers to see how many people their ad campaign can possibly reach, was misleading, but that they failed to deal with the issue because it kept bringing Facebook money.
The court documents are part of a 2018 lawsuit filed against the company by a group of small businesses. It says that Facebook's "Potential Reach" is confusing as the firm's predictions claim to show the number of people when in fact it measures the number of accounts.
According to the aforementioned court documents, the problem with Facebook's ad metrics concerns duplicate or fake accounts. The suit claims the company knew that removing fake or duplicate accounts from "Potential Reach" would cause a 10 percent fall in figures.
The suit also said that an employee working on "Potential Reach" had approached higher-ups about the issue and proposed to make the forecast more accurate – so that it did not include words like "people" or "reach" and spoke about the number of accounts an ad could impact.
"We should have never made [this revenue ] given the fact it's based on wrong data", the employee said as cited by the court documents.
The lawsuit, however, claims the employee's concern was dismissed by senior executives "because 'the revenue impact' for Facebook would be 'significant'".
Ad sales are Facebook's primary source of revenue and have made the company one of the biggest digital ad players both in the United States and across the world. Last year, the company earned $84.2 billion.
How Has Facebook Responded?
"These allegations are without merit and we will defend ourselves vigorously", a company spokesperson said in a statement, commenting on the latest developments.
Facebook later issued another statement, saying that the court documents "are being cherry-picked to fit the plaintiff's narrative".
The firm said that its "Potential Reach" is an "estimate" and not a guarantee of results. On CNN Business, company spokesperson Joe Osborne described it as a helpful campaign tool, noting "We make clear how it's calculated in our ads interface and Help Centre".
The company's website provides a confusing description of the service.
"Potential Reach estimates how many people your ad could potentially reach depending on the targeting and ad placement options you select while creating an ad", reads the first sentence.
It then says that the feature "isn't an estimate of how many people will actually see your ad, and may change with time".
"The number of people your campaign actually ends up reaching depends on your budget and performance", reads the statement.
This is not the first time that Facebook has been caught providing misleading forecasts.
In 2017, the company's Ads Manager claimed to have a potential reach of 41 million people in the United States aged between 18-24. However, an analyst at the Pivotal Research Group noticed that the data provided by the Census Bureau showed there were only 31 million people in that age range in 2016.