Social media giant Facebook Inc (NASDAQ:FB) is in hot water with publishers and advertisers today, after the company admitted the way it’s been calculating average video viewing time was artificially skewed to the upside.
The crux of the controversy is FB’s “Average Duration of Video Viewed” metric. For the past two years, the company was only counting videos viewed for more than three seconds when tallying this important average.
This practice of ignoring the shortest video viewing times inflated the average by a huge amount. No one is exactly sure how much the numbers were fudged, but the advantage was no doubt enormous. From the WSJ (emphasis mine):
Ad buying agency Publicis Media was told by Facebook that the earlier counting method likely overestimated average time spent watching videos by between 60% and 80%, according to a late August letter Publicis Media sent to clients that was reviewed by The Wall Street Journal.
Average viewing time is a highly important metric for media and ad companies, which use the number to help them make decisions on the types of content to produce and promote.
Advertisers are understandably upset about the error, which borders on fraud if Facebook failed to disclose the exact way the metric was calculated. The company could even face penalties from regulators if it’s found to have deliberately misled its partners.
Facebook has admitted the error in its reporting, but stopped well short of conceding any wrongdoing, and didn’t issue an apology. Said Facebook via statement:
“We recently discovered an error in the way we calculate one of our video metrics. This error has been fixed, it did not impact billing, and we have notified our partners both through our product dashboards and via sales and publisher outreach. We also renamed the metric to make it clearer what we measure. This metric is one of many our partners use to assess their video campaigns.”
Apparently the company was trying to obfuscate the problem all along, and only admitted to the major issues with its reporting after media execs prodded them for more information. The company quietly replaced its old “Average Duration of Video Viewed” metric with a new one dubbed “Average Watch Time,” which does include the shortest video views when calculating its average.
Some ad agency executives who were also informed by Facebook about the change started digging deeper, prompting Facebook to give them a more detailed account, one of the people familiar with the situation said.
Publics, which bought $77 billion in ads on behalf of global clients last year, is livid over the issue. The company said via memo to its clients:
“In an effort to distance themselves from the incorrect metrics, Facebook is deprecating [the old metrics] and introducing ‘new’ metrics in September. Essentially, they’re coming up with new names for what they were meant to measure in the first place.”
“This once again illuminates the absolute need to have 3rd party tagging and verification on Facebook’s platform. Two years of reporting inflated performance numbers is unacceptable.”
Facebook shares fell $2.33 (-1.79%) to $127.75 in premarket trading Friday. Year-to-date, FB has gained more than 24%.