Facebook accused of deceiving advertisers, sued by investment company

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SAN FRANCISCO, CA – Facebook deceives advertisers by disregarding their ad targeting parameters in order to maximize the tech giant’s own revenue, according to a new federal class action lawsuit. Facebook has long touted its ability to reach an advertiser’s target audience with 89 percent accuracy, but a new investigation suggests that many advertisers experience accuracy rates that are far lower – 60 percent or less, according to one analysis. The lawsuit, brought by an online investment forum, suggests that many small businesses invest heavily in Facebook advertising only to find that Facebook displays a substantial number of their ads to users outside the target audience they defined in Facebook’s Ads Manager.

Louisiana-based InvestorVillage.com, an online platform for individual investors to discuss stock trends, and share investment insights, filed the suit on behalf of similarly situated advertisers nationwide. The complaint alleges that Facebook programs its software to display a high percentage of ads to users who fall outside of advertisers’ specified demographics. Facebook then charges advertisers for those mistargeted ads in order to maximize its own revenue beyond what it could otherwise earn from legitimately targeted ads. Investor Village’s analysis of its own Facebook campaign results indicates that at various points approximately 40 percent or more of its ads were displayed to users who fell outside the audiences it had defined using Facebook’s Ads Manager.

“Facebook is deceiving small businesses nationwide and profiting in the process,” said Seth Lesser, co-lead plaintiffs’ attorney and Partner at the firm Klafter Olsen & Lesser LLP. “It seems clear that Facebook puts its own financial interests ahead of those of its advertisers, and so on behalf of countless businesses that rely on targeted advertising, we are seeking to hold the company accountable for its deception.”

Small businesses are hit particularly hard. A 2016 survey showed that 62 percent of small business owners nationwide believed the ads they bought on Facebook were missing their targets. 

In one scheme alleged in the complaint, Facebook programs its software to deliver ads to users outside an advertiser’s target audience who are serial “Likers” – users who indiscriminately “Like” a high volume of pages. By intentionally displaying ads to these type of users, Facebook generates more “Likes” for an advertiser, and creates the false impression that a particular campaign was more successful than it actually was given the audience the advertiser was trying to reach.

“Like many small companies, Investor Village has a limited ad budget, and we trusted Facebook to display our ads to the demographic that we specified, namely, users likely to value and contribute to our platform,” said Ralph “Blue” Kidd, the CEO of Investor Village. “We were disappointed to learn that Facebook may well have deceived us and untold numbers of similar businesses by deliberately disregarding ad targeting instructions.”

The case is Integritymessageboards.com LLC v. Facebook, Inc., case number 3:18-cv-05286, filed in the U.S. District Court for the Northern District of California.

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