Business

Facebook Risks Losing the Trust of Its Only Real Customers

A little over two years ago, Facebook announced that it had messed up. This was before the 2016 election, before Cambridge Analytica, before a data breach exposing the information of 30 million users. Even then, this announcement was still pretty serious. Following a Wall Street Journalreport, Facebook disclosed that it had been miscalculating video viewership for two years — in that same period of time, the social network was heavily pressuring advertisers and media organizations to invest in its video platform.

The initial disclosure said that Facebook had overestimated time spent watching videos by 60 to 80 percent. In an amended complaint, plaintiffs suing Facebook over the issue now contend that Facebook actually overestimated views by as much as 900 percent — and that the company knew about the issue for more than a year. The complaint further alleges that in hiding the issue from advertisers, Facebook committed outright fraud. This scandal is potentially more of a threat to Facebook than any privacy flubs the company has made over the years, as it poses a direct threat to the company’s main source of revenue.

For all of its faults, and there are way too many of those at this point, the one thing that Facebook has generally been pretty good at is making money. Facebook makes gobs and gobs of money every second. This is what Facebook’s defenders often fall back on: Yes, Facebook’s revenue model is predicated on invading users’ privacy, but it helps businesses find customers and build their brands. Facebook itself often trumpets this point. In front of Congress in April, Mark Zuckerberg told the Senate that “more than 70 million businesses” use Facebook. The company often highlights small businesses, which now have a digital megaphone that used to only be available to larger firms with larger budgets.

The one thing Facebook could always use to justify its practices, and its very existence, was its benefit to advertisers — the site’s most important users. It can no longer even do that. What happens to Facebook when it loses the trust of its actual customers?

The internal communications cited in the complaint seem damning.

In June 2016, a Facebook engineering manager finally followed up on advertiser complaints dating back to early 2015, writing that “[s]omehow there was no progress on the task for a year.” But even once it was decided to take action on the metrics, Facebook did not promptly fix its calculation or disclose that the calculation was wrong. Instead, it continued reporting miscalculated viewership metrics for another several months, as it developed a “no PR” strategy to avoid drawing attention to the error. The company decided to “obfuscate the fact that we screwed up the math” by quietly retiring the erroneous metrics and replacing them with corrected metrics under a new name.

In addition, Facebook employees discussed how to slowly change the metric so that clients wouldn’t notice drastic dips in how well their videos were performing. While dealing with a separate earlier metric-calculation issue, the complaint states that Facebook “decided to do a ‘slow launch to fix’ the metric without telling anyone: ‘so advertisers … won’t notice significant changes.’”

When the Journal’s initial report came out, Facebook did not attempt to clarify that, rather than inflate metrics between 60 and 80 percent, the company “had inflated the metrics by some 150 to 900%,” per the complaint. Internal reports used examples showing erroneous viewership increases of 775 percent and 621 percent.

In a statement to The Wall Street Journal yesterday, Facebook said, “Suggestions that we in any way tried to hide this issue from our partners are false. We told our customers about the error when we discovered it — and updated our help center to explain the issue.”

In a September 23, 2016, statement, Facebook VP of business and marketing partnerships David Fischer claimed that the company discovered the issue a month earlier and had promptly informed clients. “As soon as we discovered the discrepancy, we fixed it,” he wrote. Around the same time, according to the complaint, one Facebook employee stated that “we didn’t recently discover a discrepancy.” In November of 2016, Facebook announced it was bringing on third parties to verify viewership numbers.

One can quibble over what constitutes “prompt” disclosure and “recent” discovery in this case, but regardless, it certainly looks like Facebook swept metric issues under the rug even as it was using those same metrics and outsize influence to dictate how advertisers (and media companies, and journalistic outlets) allocated resources.

The people footing the actual bill for Facebook can no longer trust Facebook. That’s a bigger liability for the company than any data breach.