Facebook May Lose Accreditation Over Falsified Ad Measurements

Given that social media generally, and Facebook in particular, have seen declines in advertising due to the coronavirus pandemic, the loss of accreditation might have an even more significant impact than it would have in 'normal' times.

This is especially due to the company's history of dissimulation on a range of issues related to how it makes money. JL

Jeff Horwitz and Suzanne Vranica report in the Wall Street Journal:

Facebook is at risk of losing a key seal of approval that gives companies confidence they are getting what they pay for when it comes to advertising. The audit arose after the revelation that Facebook overstated its video viewing statistics for more than two years. The media industry’s measurement watchdog has warned Facebook could be denied accreditation due to deficiencies in how its reports on the effectiveness of advertising. Losing that certification could influence how some brands allocate money to Facebook in the future.

Facebook Inc. FB -1.19% is at risk of losing a key seal of approval that gives companies confidence they are getting what they pay for when it comes to advertising with the social-media giant.

The media industry’s measurement watchdog has warned Facebook that it could be denied accreditation due to deficiencies in how its reports on the effectiveness of advertising on its products, according to a letter reviewed by The Wall Street Journal.

The letter highlights continued tension between the world’s largest social network and advertisers, who are seeking to verify what they are getting in exchange for billions of dollars spent on Facebook’s platforms.

The notice from the Media Rating Council says that Facebook has failed to address advertiser concerns arising from a 2019 audit performed by Ernst & Young, most notably concerning how it measures and reports data about video advertisements.

“The Committee felt strongly that the lack of response and detailed action plans by Facebook within 60 days would lead them to take negative action,” the letter says. “This feedback should be considered a strong message to Facebook.”

Accreditation from the watchdog is considered a signal of trustworthiness to advertisers. Losing that certification wouldn’t have a formal consequence, but could influence how some brands allocate money to Facebook in the future.

The audit is being closely watched in the industry, according to one advertising executive that has seen the letter. “We need these audits completed. They are grading their own homework, so we have to know that their measurements can be trusted,” the executive said.

In its earnings announced on Wednesday, Facebook said it collected more than $17 billion in advertising revenue in the first quarter.

Facebook said it was disappointed that the letter was made public.

“These exchanges are part of the audit process. We will continue working with MRC on accreditation, as we have since 2016.”

George Ivie, MRC’s executive director, said the Facebook audit is “at an interim stage” and declined to comment further.

The audit process arose after the revelation in 2016 that Facebook had overstated its video viewing statistics for more than two years. The erroneously calculated statistic—which Facebook acknowledged had inflated reported viewing times by as much as 80%—created pressure for the company to open its metrics for review.

With Chief Operating Officer Sheryl Sandberg pledging to “get it right,” Facebook agreed to provide the MRC with the access and data needed to evaluate its compliance with industry standards on an annual basis.

The letter suggests the audit process has had rough patches. While the council decided to maintain an accreditation already granted to Facebook for 2018, it closed the audit for that year without granting the company additional certifications. Among the issues is the company’s failure to adequately separate statistics for video advertising from those for static display ads, which prevents advertisers from making meaningful comparisons among those platforms.

The committee “is looking for a proper accounting for video in a compliant manner,” the letter says. Failure to comply within 60 days could result not only in Facebook being denied accreditation both for video ad views but in the broader display advertising category it has already been granted.

The letter listed several other lines of questioning. The watchdog wants more information about Facebook’s efforts to monitor fake accounts on the platform and data about ad impressions served to “invalid accounts.”

The group also asked to discuss Facebook’s apparent request to temporarily halt a separate process intended to reconcile the company’s statistics with third-party data from independent measurement firms. Facebook had asked Ernst & Young for an indefinite delay citing the difficulty of managing its platforms during the Covid-19 pandemic, the letter said.