18 February 2021

Facebook is a Ponzi Scheme

I have noted for some time not that even by the rather loose standards of internet advertising, Facebook stands out because of the fraudulent nature of its ad metrics.

Now we have a whistle-blower:

A Facebook employee warned that the company reported revenues it “should have never made” by overstating how many users advertisers could reach, according to internal emails revealed in a newly unsealed court filing.

The world’s largest social media company has since 2018 been fighting a class-action lawsuit claiming that its executives knew its “potential reach metric”, used to inform advertisers of their potential audience size, was inflated but failed to correct it.

According to sections of a filing in the lawsuit that were unredacted on Wednesday, a Facebook product manager in charge of potential reach proposed changing the definition of the metric in mid-2018 to render it more accurate.

However, internal emails show that his suggestion was rebuffed by Facebook executives overseeing metrics on the grounds that the “revenue impact” for the company would be “significant”, the filing said.

The product manager responded by saying “it’s revenue we should have never made given the fact it’s based on wrong data”, the complaint said.


Facebook has argued that the metrics are only estimates. Indeed, advertisers do not pay the company based on potential reach, rather for actual impressions and clicks on ads.


Facebook itself acknowledged that the metric was “arguably the single most important number in our ads creation interfaces” in an internal document cited in the unsealed filing.

The filing also claimed that in early 2018, internal Facebook research found that removing duplicate accounts from potential reach would result in a 10 per cent drop in the figure.


In March 2019, Facebook made some changes to its potential reach, making it based on how many people matching an advertiser’s criteria had been shown an ad in the past 30 days, rather than the number of active users over the same time period. However, the lawsuit alleges that as of 2020, the company “still has not removed the fake and duplicate accounts from its potential reach calculation”.


The lawsuit over potential reach is the second major suit brought by advertisers regarding misleading metrics at Facebook. Several years ago the company settled a complaint filed after it disclosed it overstated video-viewing metrics in 2015 and 2016.

(emphasis mine)

I really want to see Mark Zuckerberg marched out of Facebook headquarters in handcuffs one day. 

Of course, that would require a Department of Justice that wasn't generally opposed to prosecuting white collar crime.


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