Facebook Settles With Advertisers

Facebook (NASDAQ:FB) has agreed to pay $40 million to settle a case with advertisers that it maintains is “without merit.”

Advertisers claim that Facebook moderated viewing metrics that made them spend more on the platform. But as it turns out, the problem related to the way viewing metrics were recorded in the first place, and that was actually known to everyone. Facebook has added that it related to videos advertisers were providing free, on which Facebook didn’t directly earn anything.

Facebook’s system recorded a view only when it was longer than 3 seconds. While this left out some views, it appeared that average viewing times were longer than they actually were. Advertisers claimed that this led then to misread the popularity of their content, which made them increase their spending on the platform. And naturally, when they increased spending, Facebook benefited.

Facebook says that although it was not at fault, settling was a better way to finally put this thing behind it (the case related to what happened between 2015 and 2016, Facebook announced that this thing was happening in 2016 and was sued in October of that year). The company maintains that it was not aware of the happening a year before its public announcement, as claimed by some based on the fact that the watch time increased by up to 900% in some cases.

Whether at fault or not, the matter increased awareness about the need for independent auditing of ad metrics and led Facebook and other industry players like Alphabet (NASDAQ:GOOGL) -owned YouTube and Twitter (NYSE:TWTR) , to get their metrics audited by the Media Rating Council.

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Facebook shares carry a Zacks Rank #2 (Buy). Buy-ranked stocks worth investing in instead are Sohu (NASDAQ:SOHU) , Akamai Technologies (NASDAQ:AKAM) and Dropbox (NASDAQ:DBX) . Also see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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