Will Facebook's Video Metric Miscalculation Hurt Its Bottom Line?

Several weeks ago, Facebook Inc FB posted on its “Advertiser Help Center” that the company has repeatedly miscalculated a key advertising metric called “Average Duration of Video Viewed.”

According to the Wall Street Journal, Facebook’s calculations didn’t include any video views that lasted less than three seconds. As a result, the average video engagement time Facebook reported to advertisers may have been inflated by as much as 80 percent.

Why Does This Metric Matter?

Last quarter, Facebook reported $2 billion in quarterly profit. Almost all of that profit came from advertising. In Q2, the company also reported its price per ad was up 9 percent.

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Advertisers pay Facebook based on the exposure they believe their ads are getting on Facebook’s platform. The overestimated video metric may have driven advertisers to pay a higher price than they otherwise would have. In addition, the inflated metric may have helped convince advertisers to choose Facebook’s platform over other digital advertising platforms like Alphabet Inc GOOG GOOGL’s YouTube or Twitter Inc TWTR.

Perhaps the most costly part of the mistake is that advertisers may now question all of the metrics that Facebook shares with them. With extremely limited third-party confirmation, advertisers must mostly trust the metrics that Facebook presents to them.

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