Facebook knew it was misreporting video ad data a year before telling clients and was underestimating the problem, lawsuit says

Key Points
  • Facebook claimed that it had overestimated ad viewing time averages by 60 to 80 percent, but the lawsuit says the actual miscalculation was 150 to 900 percent.
  • The company also knew about the issues for more than a year before reporting it to advertising clients, the lawsuit states.
Mark Zuckerberg testifies before the House Energy and Commerce Committee in the Rayburn House Office Building on Capitol Hill April 11, 2018.
Chip Somodevilla | Getty Images

Facebook knew that it was providing inaccurate data on ad viewership for over a year before telling clients in 2016, according to an updated lawsuit filed on Tuesday. And the problem was much worse than what Facebook reported.

In September 2016, Facebook admitted the that it overestimated video ad viewing time averages by up to 60 percent to 80 percent for two years because of a calculation error. According to the lawsuit, which a group of small social media agencies and marketing consultants initially filed in a California court October 2016, Facebook wasn't sharing the whole picture.

The plaintiffs claim that Facebook inflated ad viewing time averages by 150 percent to 900 percent, much higher than reported. When Facebook discovered the issue, it stalled fixing it for more than a year while it came up with a plan to make it seem like it wasn't a big problem, the lawsuit says.

"But rather than correct the metrics immediately in January 2015 and tell advertisers, Facebook recognized that 'a 40% drop will be too significant and might hurt user trust,'" the lawsuit claims.

Facebook said it only learned of the issue in August 2016, and it fixed it before making the statement public the next month. Facebook also said it did not overcharge marketers.

In an emailed statement to CNBC, Facebook said the lawsuit is without merit and the company has filed a motion to dismiss the claims.

"Suggestions that we in any way tried to hide this issue from our partners are false," Facebook said. "We told our customers about the error when we discovered it — and updated our help center to explain the issue."

The plaintiffs are requesting compensatory, punitive damages, legal fees and other relief, but did not disclose an amount.

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