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Concerns about the Accuracy of Advertising Reach on Facebook

Earlier this month, Michelle Castillo of CNBC wrote an article on how the Video Advertising Bureau (VAB) evaluated Facebook’s advertising reach for viewable and pay-per-click ads. The VAB found that Facebook’s estimated user reach for certain locations was significantly higher than state census numbers for those areas. This discrepancy was especially heightened in major US cities. When similar past discrepancies have arisen, Facebook has said that their estimated reach numbers are higher than the number of residents in an area due to people who are traveling. These findings are very concerning for advertisers especially because in 2016, advertisers spent more money on online advertising than TV advertising for the first time. The majority of their advertising money went to giants like Facebook and Google. Advertisers are still skeptical of Facebook’s reach numbers because when they use their own data, they calculate a lower reach. Companies that advertise on Facebook and other websites like Google are concerned they are not getting their money’s worth because they do not know how many people they are actually reaching. This is an issue on all online platforms because it’s hard to determine how many distinct individuals see the ads due to people having multiple devices or sharing media accounts. Websites that advertise collect and report their own data to advertising companies so reach measures vary across platforms. The VAB and other advertisers want Facebook and similar companies to use an independent third-party company to make universal standards to measure advertising reach.

This article relates to our discussion of how the search industry makes its money. In class, we talked about how search engines like Google and large media companies like Facebook can either charge for impressions (or views of an ad) or make advertisers pay-per-click on their ads. Companies often use generalized second price auctions to sell ad slots. Advertisers’ values of different slots are dependent on the number of clicks (or views) a certain slot gets. This article questions the validity of the number of clicks for different ad slots that search engines report. Advertisers bid on different slots and search engines determine market clearing prices based on the assumption that the number of clicks for different ad slots is accurate. If the actual number of clicks is lower for certain ad slots than what the search engines say it is, advertisers will receive a negative payoff.

https://www.cnbc.com/2017/10/13/facebook-under-fire-from-advertisers.html

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