Facebook Accused of Hiding Inflated Ad Metrics Back in 2015

(Bloomberg) -- Facebook Inc. knew in early 2015 that it misled advertisers about the average time users spent viewing online video clips -- and then lied about it, according to a lawsuit.

The owner of the world’s largest social network acknowledged in September 2016 that it had inflated the metric for marketers, and said it fixed its calculations. Crowd Siren, the online marketing agency that sued over the misrepresentations, now claims that Facebook knew as early as 2015 that it was over-reporting the figures.

Crowd Siren added fraud claims and a request for punitive damages against the company in an amended complaint filed Tuesday in federal court in Oakland, California.

“This lawsuit is without merit and we’ve filed a motion to dismiss these claims of fraud. Suggestions that we in any way tried to hide this issue from our partners are false,” a Facebook representative said in a statement. “We told our customers about the error when we discovered it -- and updated our help center to explain the issue.”

Facebook Inc.’s growth has hinged on convincing advertisers that people are watching more videos on its social network. The Menlo Park, California-based company is trying to regain trust after a series of revelations that hackers accessed intimate user information and the platform was manipulated by Russia to help Donald Trump win the 2016 U.S. presidential election.

Facebook didn’t correct the inflated metrics, according to the filing. Instead, the company engaged in a public relations campaign to deflect attention to the errors, Crowd Siren said, citing internal company documents and email exchanges.

“If Facebook had immediately corrected its miscalculation in a straightforward manner, advertisers would have seen a sudden and precipitous drop in their viewership metrics,” according to the amended complaint. Advertisers “would be less likely to continue buying video advertising from Facebook.”

Facebook faces separate allegations in a complaint filed in August that it misrepresents advertisers’ estimated audience reach. That complaint was brought by Cohen Milstein Sellers & Toll PLLC, one of the law firms that drafted Tuesday’s filing. Facebook has denied the claims.

The case is LLE ONE v. Facebook, 16-cv-06232, U.S. District Court, Northern District of California (Oakland).

©2018 Bloomberg L.P.