Size Matters: Facebook Faces Fraud Class Action for Overstating its Massive Potential Reach
On August 15, 2018, plaintiffs filed a putative class action on behalf of advertisers who get less than they pay for when Facebook allegedly overstates its user numbers.
Facebook provides its advertisers with an approximate “Potential Reach,” an “estimation of how many people are in an ad set’s target audience.” The lawsuit alleges that Facebook fudges the numbers.
The complaint alleges that the “purported Potential Reach among the key 18-34 year-old demographic in every state exceeds the actual population of 18-34 year olds.” The lawsuit further alleges that Facebook also vastly overstates the number of total users. For example, the lawsuit alleges that “Facebook asserted its Potential Reach was approximately 4 times (400%) higher than the number of real 18-34 year-olds with Facebook accounts in Chicago.”
Plaintiff Danielle Singer owns an online business that sells aromatherapy fashionwear and accessories, including scarfs, jewelry and essential oils. She spent more than $14,000 on Facebook ads. Her suit asserts claims on behalf of any person or entity who advertised on Facebook.com from January 1, 2013 to the present.
The complaint quotes three former Facebook employees (Confidential Witnesses 1-3) who allege that Facebook “did not give a sh—“ about the accuracy of its actual numbers, that it is only concerned that “advertising revenue not be negatively affected,” and that it had no interest in “stopping duplicate or fake accounts in calculating Potential Reach.”
The lawsuit admits Facebook’s “Potential Reach” includes a disclaimer that:
Estimates are based on the placements and targeted criteria you select and include factors like Facebook user behaviors, user demographics and location data. They’re designed to estimate how many people in a given area could see an ad a business might run. They’re not designed to match population or census estimates. Numbers may vary due to performance reasons. (Emphasis in Pleading).
Citing data from the Pew Research Center, the plaintiff alleges that even this disclaimer is false, since Facebook claims to be estimating how many people “could see an ad,” but there simply aren’t that many people, much less that many Facebook users.
The lawsuit, filed in Federal Court in the Northern District of California, alleges Facebook violated California’s Unfair Competition Law and quasi contract claims, seeking restitution or disgorgement of profit.
It will be interesting to see what happens next; whether: (a) this lawsuit quietly vanishes, with Facebook and Plaintiff/Plaintiff’s counsel reaching quick confidential resolution; (b) Facebook changes its posting regarding its Potential Reach, and/or (c) Facebook stands tall and defends its Potential Reach.