Facebook Lawsuit Reveals The Company May Have Purposefully Mislead Customers
Over the years, Facebook has faced a lot of accusations of bad business behaviors. Some of these claims have even led to the social media giant being sued. In one of the latest lawsuits against Facebook, some shocking information has been revealed.
Lawsuit Alleges Facebook Sold Overpriced Ads to Customers
One of Facebook's main forms of revenue is by selling ads to other companies. They claim that companies can attract business by targeting potentially interested Facebook users. This is a multimillion dollar business that involves some of the biggest companies in the world. However, it turns out that these ads might not be as effective as they seem. A lawsuit filed by DZ Reserve and others alleges that Facebook behaved unethically in the sale of ads.
According to the lawsuit, Facebook has overvalued the price of their ads. Businesses were told that the ads would reach a large number of users. However, after paying inflated prices for these ads, businesses then found that they did not actually reach that many people at all. The plaintiffs believe that Facebook purposefully misled them, causing them to pay for a service they did not receive. If the plaintiffs win their case, they could get compensation for the overpriced ads.
Company Emails Reveal Facebook Knew Their Metric Was Wrong
In the recently unredacted court filings, several private emails between Facebook employees were revealed. The emails show that product manager Yaron Fidler noticed the way Facebook calculated an ad's potential reach was wrong. The estimation did not take into account all the fake and duplicate accounts, so it essentially calculated a higher customer base than a company could ever actually reach.
Fiddler then emailed Facebook COO Sheryl Sandberg to alert her to the problem. While Sandberg acknowledged the issue in an email, the company decided not to change their potential reach metric. Sandberg's email notes that it would harm revenue if they made the change. Though Fidler argued that "It's revenue we should never have made given the fact it's based on wrong data," Facebook continued to use the false metric.
In addition to recognizing the metric was wrong, company emails also linked the metric directly to ad sales. An internal Facebook statement acknowledged that the unreliable potential reach metric had a huge impact on ad sales. Since companies use this metric to figure out their ad strategies and budgets, a high potential reach metric could influence businesses to spend more money on ads.
Facebook Claims Emails Are Being Misinterpreted
The revelation of these emails has been met with quite a bit of outrage. Many consumers feel that these emails paint Facebook as an unethical company, purposefully making false claims to justify high prices. However, Facebook has already released a statement that attempts to counteract this view. In an interview with Financial Times, Facebook states that the lawsuit's "allegations are without merit...these documents are being cherry-picked to fit the plaintiff's narrative."
According to Facebook, the potential reach metric is not directly related to how much Facebook charges for an ad. Therefore, they believe that its false estimate is not directly fraudulent. Facebook denies the idea that companies agree to ad costs because of the potential reach metric. It is Facebook's view that the potential reach metric might encourage companies to pay for more ads, but companies are not actually promised a certain amount of views for each ad they purchase.
Next Steps for the Lawsuit
The new evidence is certainly very damaging, but revealing it does not mean Facebook automatically loses the suit. Like any other big lawsuit, it will take quite a while for the trial to reach its conclusion. Right now, both sides have presented their initial arguments, and the court has denied Facebook's request to dismiss the lawsuit.
This essentially means the court thinks there is some merit to the plaintiff's original argument. Though it does not guarantee the plaintiffs will win, it shows there is at least enough of a discrepancy to require further investigation. There is still a lot of time left in the lawsuit, so more information could be revealed that has an impact on the case's eventual outcome.
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