Could Facebook be abusing advertisements for more profit?

Advertising on Facebook should be one of the most profitable approaches possible, due to the massive amount of traffic the service gets. With some initiatives, such as Sponsored Stories, it could even convince more internet-aware users to check out advertised services. Yet Facebook might not be as clear-cut with the companies sharing these ads. Limited Run claims – it is worth pointing out it is merely a claim at present – that Facebook was attempting to exploit them.

Limited Run is a company focusing on selling products to fans. They're ideal for celebrities or those with significant online personae, and their focus is on offering a system for building an online store to sell your wares from. When the service was preparing to relaunch, it began experimenting with advertising on the world's biggest social network, but reportedly found some peculiar things.

Facebook was charging for advert clicks, but they could only verify around 20% of the clicks even reaching their site, and began to doubt their analytics company. Deciding to see what could happen, they changed analytic companies. Even then they could not verify more than 20% of their received clicks. Now they were suspicious, and did what any developer would do in a situation like this: they built their own analytic system.

Their findings are not too pleasant. For about 80% of the clicks they received, JavaScript wasn't enabled. That makes it hard for an analytics company to verify the click. According to the company, 80% of people without JavaScript is extremely odd. That figure should be 2% at most. With curiosities piqued the company went ahead and built a page logger, to count the number of times the page was loaded. That 80% of clicks? All bots. Facebook was charging for clicks to a site that wasn't being visited by more than a fifth of people clicking.

It gets better, the company needed to change its name. Previously they were known as Limited Pressing, but they changed their name to Limited Run. They contacted Facebook to see about changing their name, and they could on one minor condition. Spend more than $2000 on advertising monthly. The team don't like this, and are severing their Facebook ties from here on. Even now, their Facebook page is identified as Limited Pressing.

How much legitimate traffic could ads like these be getting?

Their status has more than 3000 likes at the current time, and more than 300 comments. Some of the comments are praising the group for their decision, and some are asking them to release the data and prove their claim. It certainly would be nice to see the data alongside, for it would validate their claim. If it turns out Limited Run are right and Facebook is swindling advertisers, then the company could be punished for this. When you're an industry leader, all eyes are on you. Something like this happening is only going to focus the attention of those eyes further. People who have always said they doubted Facebook and its practices now just have more fuel for their fire.

We can't say for sure whether it's a coincidence or not but the sheer volume of users without JavaScript is certainly irregular. Without more evidence to pull in either direction than just a status, we can't say for sure that the service is screwing its enterprise users. If there was conclusive evidence then it could be extremely bad news for the company, whose stocks have reached a new lowest-ever mark.

Source: Facebook status

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13 Comments

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I have a feeling FB is slowly dying. It's not going to happen today, tomorrow, or even a year from now, but all the blunders are speeding it along. I still use it because my family does, but I won't think twice about jumping ship to G+ if I have to. The difference between the two is barely there anymore, spare the annoying notifications.

im told you, Facebook does not have the millions of users that they are claiming to own. And it does not include the amount of inactive users.

FarCry3r said,
I always enabled AdBlock Plus for Chrome so I never get those 'Sponsored' ads anyway

Indeed, I had forgotten that Facebook had ads.

If Facebook is committing fraud - or complicit in it - then that needs to be exposed, as that would mean the company is only worth a fraction of its current valuation.

Facebook has been going downhill for a long time now and unless they address the very legitimate concerns of users it could very easily become the next MySpace.

I doubt Facebook is going downhill. None of the users I talk to have "very legitimate concerns".

You forgot to say "IN MY OPINION, Facebook has been goign downhill"

andrewbares said,
I doubt Facebook is going downhill. None of the users I talk to have "very legitimate concerns".

You forgot to say "IN MY OPINION, Facebook has been goign downhill"

User's don't matter. Advertisers matter. If this become public knowledge and is found to be true two things happen:

1. Facebook doesn't fix it. Advertisers start allocating their internet advertising dollars to Search (Google || Bing (lulz). Facebook loses amazing amounts of revenue.

2. Facebook does fix it. They see an 75 to 80% reduction in revenue unless advertisers continue buying ad clicks/impressions at the same rate. Facebook Loses amazings amounts of revenue

Make no doubt about it, unless this is not true, this is a huge blow to Facebook. Facebook now has shareholders to please in the public market. If users start seeing tons of ads all over their Facebook experience to counteract the reduction in revenue, they'll start having legitimate concern.

andrewbares said,
I doubt Facebook is going downhill. None of the users I talk to have "very legitimate concerns".

You forgot to say "IN MY OPINION, Facebook has been goign downhill"

Well I also think that Facebook is going downhill. Some stats proves it, do a little google search.

I also see previously "facebook addicted" people dumping their account.

Facebook was bad to begin with and now their choice are making it look even worst. (IMO)

Is it just me, or is this an extremely explosive claim? If facebook knew most of their ads were coming from bots, yet charged the prices they did to advertisers, then isn't this fraud? Especially true because they were valued so high and received far more cash then they would otherwise have from their IPO.

If facebook were charging the actual market value for ads that came from real human-beings, then they probably would have never been profitable.

AWilliams87 said,
Is it just me, or is this an extremely explosive claim? If facebook knew most of their ads were coming from bots, yet charged the prices they did to advertisers, then isn't this fraud? Especially true because they were valued so high and received far more cash then they would otherwise have from their IPO.

If facebook were charging the actual market value for ads that came from real human-beings, then they probably would have never been profitable.

Yes, it is a fraud, and a pretty nasty one.

What I think is more concerning is the number of fraud sites that are being advertised on Facebook - the best example recently was a website called 'buy365' operating out of China. Where was Facebook ensuring that the advertiser isn't a scammer? as long as you throw some money at Facebook they're happy to throw up what ever advertisement on their website?

Mr Nom Nom's said,
What I think is more concerning is the number of fraud sites that are being advertised on Facebook - the best example recently was a website called 'buy365' operating out of China. Where was Facebook ensuring that the advertiser isn't a scammer? as long as you throw some money at Facebook they're happy to throw up what ever advertisement on their website?

Even television networks let fraud companies advertise...