Facebook Inflates Its Ad Reach, Claims Pivotal Research Analyst

Figures Facebook gives advertisers about its potential reach differ from US census data, an investment analyst said on Tuesday, renewing questions about how tech companies verify the value of their digital marketing space.

Facebook, Alphabet Inc's Google and other Internet companies have faced persistent scrutiny from advertisers about how many people watch ads online and how to measure their views.

Facebook's ad-buying website tells advertisers that the world's largest social network has a potential reach of 41 million 18 to 24 year olds in the United States, whereas US census data shows that last year there were 31 million people living in the country between these ages, Brian Wieser, a Pivotal Research Group senior analyst, said in a note.

The gap persists for 25 to 34 year olds and is not widely known among ad agency executives, Wieser wrote in the client note, adding that the gap may cause large advertisers to step up demands for third-party measurement services.

Wieser, unlike most stock analysts, maintains a "sell" rating on Facebook's shares.

Facebook said in a statement that its audience estimates did not match census data, but added that this was by design as ad reach numbers "are designed to estimate how many people in a given area are eligible to see an ad a business might run. They are not designed to match population or census estimates".

People on Facebook self-report their ages, so these may also vary from census data. The company also uses location data from mobile devices to estimate its reach, meaning that it counts tourists and other visitors.

Some 5.6 million non-residents visited the United States in January, the most recent month for which the US Commerce Department publishes data.

Last year, Facebook apologised to advertisers after finding that the average time users spent viewing online ads had been artificially inflated, because it was counting only videos that were watched for at least three seconds, its benchmark for a "view."

In November, Facebook launched a blog called Metrics FYI to share updates and corrections for its data.

"While Facebook's measurement issues won't necessarily deter advertisers from spending money with Facebook, they will help traditional TV sellers justify existing budget shares and could restrain Facebook's growth in video ad sales on the margins," Wieser said.

© Thomson Reuters 2017