Facebook Inc.’s rapid growth has been tightly linked to convincing advertisers that people are watching more videos on its social network. Now the company is disclosing it has been giving marketers an inflated number for the average time being spent viewing online clips.
The company, owner of the world’s largest social network, boosted the figure by only counting a video as "viewed" if it had been seen for more than 3 seconds. Not included in the calculation was when a person didn’t watch -- or watched for less than 3 seconds. Facebook said it was taking steps to fix the problem and that advertisers weren’t overcharged.
“This error has been fixed, it did not impact billing, and we have notified many of our partners both through our product dashboards and via sales and publisher outreach,” Facebook said Thursday in a statement.
The disclosure may hurt Facebook’s effort to get marketers to augment television campaigns, which carry the largest budgets in advertising, with clips on its social network. The metric Facebook has been giving advertisers doesn’t include the roughly 80 percent of people who don’t watch online videos at all, or quickly browse past them, according to Rob Norman, chief digital officer at GroupM, an advertising company.
"Nobody is saying Facebook is defrauding anybody, but what they are doing is giving specific measurements which some people may find misleading," Norman said.
Facebook’s stock fell 2.1 percent to $127.35 in early trading Friday. It’s up 24 percent this year.
How to classify online video consumption is important to marketers and has long been a source of contention in the industry, Norman said. Figures that show people are, on average, spending a longer-than-expected amount of time viewing an ad may lead a brand to budget more because it shows potential customers are paying attention.
"If you get a report that says your reach on television was 70 percent of your audience, and that by adding Facebook you’re reaching 80 percent of your audience, you may spend more," Norman said.
Martin Sorrell, chief executive officer of WPP Plc, the world’s largest advertising company, said Facebook’s miscalculation increases the need for an independent body like ComScore Inc. to play a bigger role in overseeing important metrics.
“We have also been calling for a long time for media owners like Facebook and Google not to mark their own homework and release data to ComScore to enable independent evaluation,” said Sorrell, whose company owns GroupM and has invested in ComScore. “The referee and player cannot be the same person.”
Facebook disclosed the issue in a posting on its advertiser help center web page several weeks ago. Big advertising buyers and marketers are upset about the inflated metric, and asked the company for more details, according to the report in the Wall Street Journal, which first reported the metric issue.
Video Focus
The social network, which has more than 1.7 billion users, has been making video a centerpiece of its strategy, and its robust growth in mobile advertising has been driven by strong demand for video spots. Chief Executive Officer Mark Zuckerberg said in July he wants Facebook to be a "video-first" company -- and the news feed is likely to be mostly video in a few years.
Facebook’s executives are set to meet with their top advertisers in New York next week during the Advertising Week conference.
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