Zuckerberg downplays Facebook advertising screwup
Facebook insists it’s no big deal that it inflated numbers on viewership of its video ads — but some advertisers aren’t buying it.
Mark Zuckerberg’s social-networking giant apologized Friday as it admitted that, for the past two years, it has overestimated the amount of time users spent watching video ads by as much as 60 to 80 percent.
Specifically, Facebook said it had only included video views of 3 seconds or longer when calculating the average length of a video views it showed to advertisers, leaving out shorter times that would have brought down the averages.
The “discrepancy,” as Facebook called it, distorted its numbers to its advantage as the company ramped up a fierce battle with Google’s YouTube division for video ads — the most lucrative segment of internet advertising.
Facebook claimed the screwup didn’t affect its “billing” because technically its ad rates are based on the number of clicks a video ad gets rather than how long users linger over it.
Nevertheless, metrics on average viewing time are prominently circulated to advertisers. Don’t be surprised if, in the near term, existing advertisers demand reimbursement, and if prospective advertisers hesitate over launching fresh, high-dollar campaigns, experts said.
“Advertisers will be demanding compensation, and I’ll bet they get it,” said Mitchell Reichgut, chief executive of New York ad firm Jun Group.
Facebook initially disclosed the problem on an obscure Web page for advertisers several weeks ago.
“They tried to bury it in a blog,” Reichgut said. “That’s not how you announce something of this magnitude.”
On Thursday, the issue blew up when the Wall Street Journal reported (paywall) that advertisers including Publicis Group were asking questions, forcing Facebook to come clean.
The incident raises fresh concerns about Facebook’s “walled garden” policy with publishers and advertisers, which is notoriously stingy when it comes to data sharing and has spurred calls for greater third-party monitoring.
Moat, a New York firm that specializes in monitoring Web-page views and whose clients include Facebook, said its measurements of Facebook activity were accurate.
“The metric miscalculation reported by Facebook was independent of Moat,” the company said in a statement.
Facebook shares on Friday lost 1.6 percent to close at $127.96. Wall Street analysts with buy ratings on the stock downplayed the news.
“In our view, this looks like a story in search of a controversy,” wrote Cowen & Co. analyst John Blackledge, reiterating an outperform rating on the shares.
Wells Fargo’s Peter Stabler, who has an outperform rating on Facebook, added, “We haven’t encountered analysis that has dwelled on ‘average view time’ ” in measuring ad campaigns.
Still, some prospective advertisers may get cold feet, said Ryan Urban, CEO of Bounce Exchange, a New York web analytics firm.
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