Last Updated on March 24, 2021 by Shaun Snapp
- Facebook’s business model is based upon both ads and lying to advertisers about its data’s reach and effectiveness.
- We cover how Facebook was able to trick advertisers.
As Facebook faces a DOJ lawsuit for monopolistic behavior, what will happen is Facebook’s business model will be highlighted to more of a degree than before. Facebook has a long history of deceiving its advertisers by overstating advertising statistics. And that is just the tip of the iceberg of how Facebook has developed its deceptive advertising sales model.
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Facebook’s History of Lying to Advertisers and Media Buyers
Dina Srinivasan describes the history of Facebook’s lies to advertisers and media buyers in her paper The Antitrust Case For Monopoly Against Facebook.
For example, in September of 2017, media buyers became aware that Facebook materials
claimed to reach more people in the U.S. than Census data shows even existed. (emphasis added) The false representations are made in Facebook’s self-serve interface that businesses use to evaluate and purchase Facebook advertising and are the subject of a recently filed class action complaint.
To give another example, Facebook recently admitted to a succession of false statements related to ad metrics which induced marketers to purchase Facebook ads. For many years, Facebook did not allow ad buyers to audit and verify Facebook representations directly correlated to Facebook ad billing—despite audit rights being standard practice in the industry.
Facebook advertising is subject to elevated risks of fraud. Unlike print advertising, digital
advertising is shown only briefly to a user and poof disappears forever. In other words, without audit rights, digital media buyers suffer from the risk of sellers charging them for goods not delivered at all. Facebook has long been a hold-out in permitting buyers to audit Facebook deliverables.
This last sentence is somewhat opaque. However, it means that Facebook has stopped advertisers from auditing the impressions of their ads.
This is emphasized as the quote continues.
The head of digital marketing at Wendy’s, who is currently the chief marketing officer of Papa John’s, once explained, “[w]hat frustrates us when we run a campaign [on Facebook] is that there’s almost no acknowledgement that the campaign even existed in the first place.”
After mounting industry pressure and calls of fraud, Facebook capitulated and announced
in the fall of 2015 that it would allow third-parties to audit select metrics. With the impending release of the first audited metrics, Facebook came forward with disclosures of discovered “bugs” that had caused it to inadvertently inflate ad metrics for multiple years.
Once Again Facebook Blames Bugs
Bugs are a constant excuse used by Facebook when they are caught cheating or lying. When caught surveilling users in a where they said they did not, they again blamed bugs. Every bug that Facebook has a problem with invariably benefits Facebook.
In September 2016, Facebook revealed that it had overestimated customers’ video ad view-times for the last two years. Facebook sent a letter to Publicis, one of the largest ad agencies in the world with a market cap of over $12 billion, estimating that it had overstated view times by 60-80%. Publicis had spent $77 million on Facebook ads the prior year. Publicis, in turn, sent a note out to clients: “This once again illuminates the absolute need to have … verification on Facebook’s platform. Two years of reporting inflated performance numbers is unacceptable.”
This is ad fraud. And it illustrates Facebook’s monopoly power that they are repeatedly caught lying to advertisers, and advertisers continue to use them.
The Groupthink of Advertisers With Regards to Facebook
For fifteen years, Facebook has been a prominent place to advertise to access online users. However, this has caused many advertisers to drink Facebook Kool-Aid. It has become something that advertising agencies can market that they are “taking out Facebook ads.” Many companies seeking to advertise go to advertising agencies and are pitched information that they do not know is true. That is, they are expecting the advertising agencies to be domain experts in what is effective. However, in many cases, advertising agencies are just doing whatever is trendy.
And all of this is with the backdrop of the emphasis on technology.
The rise of surveillance capitalism over the last two decades went largely unchallenged. “Digital” was fast, we were told, and stragglers would be left behind. It’s not surprising that so many of us rushed to follow the bustling White Rabbit down his tunnel into a promised digital Wonderland where, like Alice, we fell prey to delusion. (emphasis added) In Wonderland, we celebrated the new digital services as free, but now we see that the surveillance capitalists behind those services regard us as the free commodity. We thought that we search Google, but now we understand that Google searches us. – New York Times
This means that they rushed into advertising through Facebook but did not entirely understand what they were dealing with, and naturally, Facebook took full advantage of this. In fact, what is amazing is how Facebook was able to bamboozle so many media giants and experienced advertisers. This generalizes to Facebook users, who Facebook repeatedly lied to about how their privacy would be respected. Facebook is a company that lies perpetually to all entities that it interacts. That is, lying is an embedded part of Facebook’s culture. Without this lying, Facebook could never have grown to become what it is today, as lying is how Facebook obtains compliance.
Facebook receives our Golden Pinocchio Award for how it lied to advertisers.
Facebook and Google’s business model is based on violating users’ privacy in return for a small amount of money per user. Still, they are wealthy because they have so many users. Do we cover this in the article How Much Do SaaS & AI Companies Really Make from Constant Surveillance?
This means that each individual is being coerced and lied to over their privacy for a relatively small amount of money.
How Much Does Facebook Make from Surveillance?
Facebook has revenues of around $112 for the US and Canada, but then $25 per user for the rest of the world. This is evidence of leveraging user data, and Facebook sells the rights for companies like Cambridge Analytica and many others to query its enormous database of privacy violations.
However, this is their revenue from advertisers. But because both Facebook and Google overstate the benefits to advertisers, and advertisers don’t have very effective ways of tracking the outcomes from advertising (not a new phenomenon specific to the Internet, by the way), the actual amount of goods and services sold to Internet users is most likely significantly below the revenue per user of these tech companies.
Dina Srinivasan receives our score of 10 out of 10 for accuracy.