Facebook Inflated Its Advertising Audiences to Generate More Revenue, Companies Say in Lawsuit

"Facebook knew for years its Potential Reach was inflated and misleading," lawyers in the class action suit contended in the filing.

Facebook Inflated Its Advertising Audiences to Generate More Revenue, Companies Say in Lawsuit

The suit was filed about two years ago, and Facebook has since modified the Potential Reach tool

Highlights
  • Facebook gets majority of revenue from the sale of targeted advertising
  • Facebook knew for years its Potential Reach was inflated and misleading
  • Facebook made a deliberate decision not to remove duplicate or accounts

Facebook knew that its estimates of user numbers were unreliable and artificially high, but ignored the problem in order to generate more advertising revenue, companies said in legal documents unveiled Thursday.

The social networking giant has been facing a class action lawsuit since 2018. The plaintiffs claim that the platform's managers knew that its so-called "Potential Reach" measure was inflated, but did not seek to rectify the situation so as not to lose revenue. 

The California company derives the overwhelming majority of its revenue from the sale of targeted advertising. Prices vary according to many criteria, starting with the number of users likely to see the campaign.

"Facebook knew for years its Potential Reach was inflated and misleading," lawyers in the class action suit contended in the filing.

The suit argued that Facebook made a deliberate decision not to remove duplicate or fake accounts from the Potential Reach tool metrics.

And the legal documents cited a Potential Reach product manager who wrote in an internal email: "it's revenue we should have never made given the fact it's based on wrong data."

The Internet giant contended that a Potential Reach estimate feature at issue in the suit was merely a "free tool" advertisers had the option of looking at and did not affect delivery of advertisemts, according to court documents.

The Potential Reach tool lets advertisers put in budget and other criteria into a software programme and be given an estimate of how many people they could reach on the Facebook platform.

"Facebook did not merely 'drag its feet' in providing inaccurate and misleading Potential Reach. Rather, Facebook knew for years its Potential Reach was misleading, and concealed that fact to preserve its own bottom line," plaintiffs' attorneys argued in a February 10 filing.

Facebook did not reply to an request for comment. The suit was filed about two years ago, and Facebook has since modified the Potential Reach tool.

Lawyers representing plaintiffs in the case called on a federal court in San Francisco to reject a request by Facebook that the two-year-old litigation be dismissed.


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