Facebook has been accused of misleading advertisers by inflating its audience size across the US.
A lawsuit fled by a Kansas aromatherapy fashion firm owner claims Facebook inflated its ‘Potential Reach’ number for how many users were targeted by an advertisement.
The number is critical to advertisers or companies when it comes to evaluating the potential impact of marketing campaigns.
Danielle Singer of Therapy Threads alleges that Facebook’s purported Potential Reach figures for the 18-34 age demographic in all 50 states exceeded the actual population of 18-34 year olds who use Facebook
Facebook makes the bulk of its money from online advertising.
A Facebook spokesperson said ‘this suit is without merit and we plan to defend ourselves vigorously.’
Danielle Singer of Therapy Threads alleges that Facebook’s purported Potential Reach figures for the 18-34 age demographic in all 50 states exceeded the actual population of 18-34 year olds who use Facebook, according to the East Bay Times.
The complaint also draws on information allegedly provided by ex-Facebook employees.
One of the former employees, identified in court papers as ‘Confidential Witness 1,’ said the company’s ‘potential reach’ statistic is ‘like a made-up PR number,’ according to the complaint.
Another ex-employee, ‘Confidential Witness 3,’ allegedly ‘stated that Facebook was not concerned with stopping duplicate or fake accounts in calculating potential reach.’
Because Facebook has inflated its Potential Reach, Plaintiffs and putative class ‘members purchased more advertisements from Facebook and paid a higher price for advertisements than they otherwise would have. Plaintiffs and putative class members accordingly seek compensation and injunctive relief for violations of California’s Unfair Competition Law and for restitution,’ reads the lawsuit.
‘Because Facebook has inflated its potential reach, plaintiffs and putative class members purchased more advertisements from Facebook and paid a higher price for advertisements than they otherwise would have,’ it adds.
The suit is seeking compensation and injunctive relief barring Facebook from touting the allegedly inflated numbers and forcing the company to audit the estimates under California’s Unfair Competition Law.
WHAT IS FACEBOOK’S POTENTIAL REACH FIGURE?
Potential reach is an estimation of how many people are in an ad set’s target audience.
This estimation is a unique calculation by Facebook and isn’t intended to align with third party calculations or population census data.
It updates in real time as you create or edit your ad set to help you understand how your targeting and placement choices affect the number of people you could reach.
The number of people you actually end up reaching depends on your budget and performance.
Different parts of the advertising industry use different methodologies to make these types of estimations.
Facebook uses a set of inputs (examples below) to create real-time estimates that update as you create or edit your ad set.
Potential reach estimates are based on a number of factors, including:
- Facebook user behaviors (ex: Pages people liked)
- User demographics (ex: self-reported age and gender)
- Location data (ex: device technology and information)
Singer bought $14,000 worth of ads on Facebook, targeting big cities like San Francisco.
But when she did her own calculations for Chicago, she found U.S. census data saying there were 808,000 residents in the 18-34 demographic in the Windy City.
Facebook said there were 1.9 million.
‘Even this calculation understates the level of inflation in Chicago since not everyone in the demographic has a Facebook account,’ reads the lawsuit.
The lawsuit also cites a study from the Video Advertising Bureau that calculated how much larger Facebook’s claimed Potential Reach of those 18-34 in all 50 U.S. states compared to the 2016 U.S. census data.
In every state, Facebook claimed they reached more of that demographic than what was reported by the U.S. Census Bureau, according to VAB.