Shares of Facebook Inc (NASDAQ: FB) were trading lower by almost 2 percent Friday following a Wall Street Journal report that the social media company overestimated the average viewing time for video ads on its platform.
A Facebook statement read: "We recently discovered an error in the way we calculate one of our video metrics". By not counting video views less than three seconds, Facebook effectively undercounted total time spent watching in pursuit of a more favorable average time figure. So all you musicians out there claiming that your videos get way more views on Facebook than YouTube, I encourage you to take a step back and actually check your Facebook video analytics.
For the past two years Facebook only counted video views of more than three seconds when calculating its "Average Duration of Video Viewed" metric.
The miscalculation was so high that it overestimated viewing time by 60% to 80%.
Facebook has overestimated how much video people have watched for the last two years, the firm has admitted.
Media companies, many of which have invested heavily in Facebook as a platform for video, are also affected, meaning many of their calculations about how content performs on the platform will be inaccurate.
And we remain bullish on the Facebook stock price in 2016 and beyond.
Crucially, average video view time isn't what Facebook calls a "billable event".
The news will be embarrassing for Facebook, which has defined its future in video.
The error could possibly affect marketing spend of ads on the social networking platform. The result was an artificially inflated metric regarding the average time people spent watching ads on its site.
However, Facebook has become such a dominant source of traffic for publishers that they may have little choice but to accept Facebook's mistake and move on. Australian MD Stephen Scheeler told AdNews in a recent interview that video is "the backbone" of the platform, so this is an embarrassing mistake to make over a key metric. However, by failing to include these lost views, the company was swelling view times, and therefore, overstating the engagement videos were receiving. Our clients' trust and belief in our metrics is essential to us, and we have to earn that trust.