Facebook Measurement Mistakes Test Advertisers' Ardor
(Bloomberg) -- Facebook Inc. built a colossal business based on measuring something older advertising methods cannot: the granular details about people. Two months ago, the company copped to a flaw in that measurement. Then Facebook did it again. And again.
On Friday, Facebook revealed faulty metrics with Instant Articles, its mobile publishing system, the fourth disclosure of a measurement error since September. The admission sharpened calls for more independent organizations to monitor the performance of digital advertising. And some large firms that buy a lot of ads said they will more closely scrutinize their spending on the social networking giant and could shift marketing dollars elsewhere.
"People will take a step back and certainly look again where Facebook sits in their marketing mix," said Rob Norman, chief digital officer for ad buyer GroupM. "My sense is that a more pragmatic air will prevail," comparing the relationship between advertisers and the company to a marriage moving beyond the honeymoon stage.
In recent years, Facebook has taken an increasingly massive share of marketing budgets. Its revenue is growing by more than 50 percent, and with Alphabet Inc.'s Google now accounts for 68 percent of U.S. digital ad spending, according to data from the Interactive Advertising Bureau and Pivotal Research Group.
Facebook's torrid rate of expansion could slow if advertisers are more cautious and users don't continue to increase the time they spend on Instagram and its other services, Norman said. "There will be much greater circumspection in the board room and the advertising department," he added.
Indeed, company executives suggested in November that it probably won’t be able to maintain its explosive growth much longer. Facebook declined to comment on Friday.
In September, Facebook shared its first measurement error: inflated viewership numbers for its video ads, a relatively new product. Two months later, the company disclosed additional metric errors along with new tools for third-party measurement companies, including ComScore and Nielsen, to track its system more closely.
Problems persisted. Earlier this month, a report in Marketing Land, an industry publication, spotted a discrepancy between Facebook's internal metrics on how articles where shared and public measurements. Facebook confirmed the error. "That shouldn't happen," said Brian Wieser, senior analyst, Pivotal Research Group. "If anyone was concerned that Facebook's self-audit was not sufficient enough, they just proved it."
Some in the ad world agree. Facebook's partners and competitors see its disclosures as further proof that additional parties are needed for these audits and uniform rules for how ads are counted, bought and sold across the web. Ad buyers said these types of measurement errors existed before, including with Google's YouTube. But Facebook has opted -- or been pressured into -- disclosing them.
"It's a sign of maturity that Facebook is owning this issue and embracing third-party measurement," said Joe Zawadzki, chief executive officer of marketing technology firm MediaMath. "That's good for brands, good for consumers, good for Facebook."
It may not be all good for Facebook, though. Marketers, nervous about wasted spending, could shift budgets elsewhere. The wave of disclosures are likely to turn some advertisers away, Wieser said. Google ad sales staff were among the first to call media buyers when Facebook's initial disclosure came, hoping to wrestle dollars away, the analyst noted. A Google spokesperson declined to comment.
Yet Wieser expects any Facebook ad sale losses to be small.
"Facebook is still the foundation of your digital campaign," he said. "It will hurt. But we'll never be able to know with certainty."
To contact the author of this story: Mark Bergen in San Francisco at email@example.com.