Video Clips A Major Part of Facebook’s Growth Push
It seems there is no dearth of bad news from Internet companies these days.
The day when Yahoo! Inc. (NASDAQ:YAHOO) admitted that hackers got access to the private information of 500 million subscribers, Facebook, Inc. (NASDAQ:FB) disclosed that it inflated the time people spent on its network watching videos.
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This means that the darling of the social media world was not giving a true picture of people’s desire to watch its online clips, one of the major sources for its income, used to convince advertisers to offer more services on its network.
The operator of the world’s largest social network was distorting this matrix by counting a clip as “viewed” if a visitor watched it for over a mere three seconds. Those who watched for less or not at all were not counted in the numbers given to advertisers.(Source “Facebook Says It Gave Advertisers Inflated Video Metrics,,” Bloomberg, September 23, 2016.)
The company added that advertisers didn’t pay more because of this internal error.
“This error has been fixed, it did not impact billing, and we have notified many of our partners both through our product dashboards and via sales and publisher outreach,” a spokesperson for Facebook explained. (Source: “Facebook drops after video view inflation admission,” Financial Times, September 23, 2016.)
Investors were reacting negatively to the news as Facebook stock declined about two percent during early trade in New York, trading at $128.10.
“Nobody is saying Facebook is defrauding anybody, but what they are doing is giving specific measurements which some people may find misleading,” said Rob Norman, chief digital officer at advertising company GroupM. (Source: Bloomberg, September 23, 2016, op cit.)
The Video segment contributed massively to Facebook’s earnings in the second-quarter. Mark Zuckerberg, chief executive officer of Facebook, said the company was very pleased with the performance in Video segment growth.
“Our community and business had another good quarter,” Zuckerberg noted in the second-quarter earnings statement. “We’re particularly pleased with our progress in video as we move towards a world where video is at the heart of all our services.” (Source: “Facebook Reports Second Quarter 2016 Results,” Facebook, Inc., July 27, 2016.)
