Social media giant Facebook reported $27.6 billion in revenue in 2016, and nearly all of this income was generated by advertising. However, a recent series of data mishaps and inaccuracies in its tools used for measuring ads and calculating fees has threatened the company and its bottom line.

As a result of the ongoing issues, Procter & Gamble, the largest advertiser in the United States, recently threatened to pull its advertising unless the company accepted the Media Rating Council’s (MRC’s) standards for advertising viability and also allowed third-party measurement companies to verify the company’s advertising metrics independently.

In light of this demand, Facebook recently announced that it would begin to undergo audits by the MRC as requested, and it would provide new granular data to independent third-party measurement firms to allow them to perform independent verification of Facebook’s rates. Furthermore, Facebook rolled out new advertising options for companies to consider when they next place advertising orders. For example, companies now have the option to pay only for video advertisements that run to completion. Companies also will no longer be charged for advertising that does not run for at least 2 seconds—in line with the standards set forth by the MRC.

The changes were announced in a presentation to the board of the Association of National Advertisers. In addition to the MRC audits, Facebook will provide new information to advertisers about how many ads from a given campaign have been viewed, how long they appeared on each user’s screen, and whether or not a user’s sound was on while this consumer viewed a video advertisement. These new data in turn should help brands and advertising companies design better marketing communications that appeal to specific social media audiences. At the same time, companies might find ways to tweak their existing campaigns for better results.

The changes made by Facebook were generally well received by the industry. The chief brand officer for Procter & Gamble—arguably the largest actor applying pressure on Facebook to enact the changes—called the company’s revisions “A positive step forward.” It remains to be seen though if other social media platforms will follow suite to provide more transparency and verifiable performance metrics that companies can truly rely on when considering advertising opportunities.

Discussion Question:

1. How effective do you find advertisements that appear on Facebook and on other social media platforms?

Source: Sapna Maheshwari, “Facebook Takes Steps to Improve Advertising Data After Criticism,” The New York Times, February 10, 2017; Mike Shields, “Facebook Agrees to Audit of Its Metrics Following Data Controversy,” The Wall Street Journal, February 10, 2017