Crowd Siren v Facebook Facebook Online Advertising

1 Eric H. Gibbs SBN 178658 Robert T. Eglet pro hac vice Dylan Hughes SBN 209113 Robert M. Adams pro hac vice 2 David Stein SBN 257465 Erica D.

Entsminger pro hac vice 3 Aaron Blumenthal SBN 310605 Artemus W. Ham pro hac vice GIBBS LAW GROUP LLP EGLET PRINCE 4 505 14th Street, Suite 1110 400 South Seventh Street, Suite 400 Oakland, CA 94612 Las Vegas, NV 89101 5 Telephone: 510 350 9700 Telephone: 702 450 5400 Facsimile: 510 350 9701 Facsimile: 702 450 5451 6 7 8 Andrew N. Friedman pro hac vice 9 Geoffrey Graber SBN 211547 Eric Kafka pro hac vice10 COHEN MILSTEIN SELLERS and TOLL PLLC11 1100 New York Ave. NW, Fifth Floor Washington, DC 2000512 Telephone: 202 408 4600 Facsimile: 202 408 469913 16 Counsel for Plaintiffs and Proposed Class17 1 INTRODUCTION 2 1. In September 2016, the Wall Street Journal discovered that, for the past two years, 3 Facebook were overstating the average time its users spent observing paid video ads.

4 Based on suggestions from advertising agencies who had spoken with Facebook, the Wall Street 5 Journal mentioned that Facebook’s metrics were overstated by between 60 and 80%. 6 2. In response to the media attention, Facebook admitted it made a mistake, but 7 emphasised that it had only found out the mistake “a few month ago,” and that “as soon as we 8 discovered , we fixed it. ” When Plaintiffs filed this class action on behalf of advertisers, that they had 9 no reason to accept as true with Facebook was not telling the reality, and limited their claims to agreement and10 statutory claims, that have already been tested and located viable. 11 3. Internal records currently produced during this litigation indicate, even though, that Facebook’s12 action rises to the extent of fraud and may warrant punitive damages.

Facebook didn’t uncover its13 mistake one month before its public announcement. Facebook engineers knew for over a year, and14 numerous advertisers had reported aberrant results brought on by the miscalculation comparable to 100%15 average watch times for their video ads. Yet Facebook did nothing to stop its dissemination of false16 metrics. 17 4. In addition to Facebook understanding about the difficulty far longer than previously18 recognized, Facebook’s records also show that the impact of its miscalculation was much more19 severe than suggested. The common viewership metrics were not inflated by only 60% 80%; they were20 inflated by some 150 to 900%.

21 5. To the extent anyone at Facebook didn’t fully understand how it was calculating average22 viewership from the beginning as Facebook’s engineers did, it was only on account of Facebook’s23 longstanding reckless indifference to the metrics’ accuracy. The wide disparity among the actual24 average viewership and Facebook’s mentioned metrics must have been corrected automatically. But25 Facebook severely understaffed the engineering team in control of fixing errors—using only as26 few as two engineers—and this led to long delays before errors were fully investigated and27 corrected. As the files produced during this litigation show, Facebook didn’t take verification of28 its metrics seriously, didn’t timely address known disorders, and had never performed an inner 1 FOURTH AMENDED CLASS ACTION COMPLAINT Case No. : 4:16 cv 06232 JSW Case 4:16 cv 06232 JSW Document 165 Filed 10/16/18 Page 3 of 28 1 audit of its metrics.

2 6. Even once Facebook determined to proper the false metrics, it chose not to take action 3 instantly. Instead, Facebook chose to continue disseminating false metrics for several more 4 months while it developed and deployed a “no PR” approach designed to “obfuscate the proven fact that we 5 screwed up the math. ” All the while, Facebook persevered to harvest the advantages from the inflated 6 numbers. 7 7.

Based on this newly found out advice, Plaintiffs are amending their grievance 8 to add a claim for fraud and at the moment are seeking punitive damages. Plaintiffs’ additional allegations 9 appear during this Introduction, in a New Allegations part set that begins on page 14, and in their10 Third Cause of Action and revised Prayer, which begins on page 24. They have also removed the11 allegations relating former plaintiff, Tyler Barnett PR, LLC. In all other respects this Fourth12 Amended Complaint remains unchanged from the Third Amended Complaint, and Plaintiffs are13 carrying on with to pursue their prior to now alleged claims for violation of California’s Unfair Competition14 Law and breach of Facebook’s contractual duty to perform with low cost care. 15 JURISDICTION16 8. This Court has subject matter jurisdiction over this action under 28 U.

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S. C. 21 9. This Court has personal jurisdiction over Defendant Facebook, Inc. , because22 Facebook, Inc. , is founded in California, and conducts enterprise in the state of California.

23 10. Venue is proper during this Court pursuant to 28 U. S. C. Venue is also proper as a result of Facebook’s terms of carrier require that26 claims are resolved “completely in the U.

S. District Court for the Northern District of California or a27 1 state court observed in San Mateo County…. ”1 2 PARTIES 3 11. Plaintiff LLE One, LLC, d/b/a Crowd Siren and d/b/a Social Media Models is a 4 Nevada restricted liability brand. 5 12.

Plaintiff Jonathan Murdough is a citizen and resident of Pennsylvania. 6 13. Defendant Facebook, Inc. , is integrated in Delaware, and its important place of 7 enterprise is 1 Hacker Way, Menlo Park, CA 94025. 8 FACTUAL ALLEGATIONS 9 14.

Facebook is a Fortune 500 company that operates social media amenities, adding the10 and websites and the WhatsApp Messenger application. 11 15. Facebook. com has 1. 79 billion month-to-month active users. 2 Users do not pay Facebook to12 create a fb.

com account. Once a user opens a Facebook account, the account holder can, at no13 cost, create a profile page, post content material comparable to photographs, videos, and links to articles, make14 chums with other users, and consider content posted by other users. 15 16. Instead of charging account holders to access facebook. com, Facebook earns most of16 its income by promoting advertisements services. For example, in 2015, Facebook’s advertising revenue17 was over $17.

0 billion, more than 95% of its overall income. 318 17. One form of advertising provider Facebook sells is video adverts, where19 advertisers will pay money to have video displayed to Facebook users. 20 18. Facebook videos including video ad merchandise autoplay by default though the audio21 remains off unless users actively turn it on. 4 Facebook allows users to scroll past autoplaying videos22 adding video adverts without ever turning on the sound or staring at more than a few23 seconds of the video.

24 125 Facebook, Statement of Rights and Responsibilities, last accessed: Jan. 9, 2017. 26 2 Facebook, Company Info, last accessed: Jan. 9, 2017. 327 Facebook, Inc.

, Annual Report Form 10 K at 42 Jan. 28, 2016. 4 Eric Blattberg, Like it or not, autoplay video won Apr. 21, 2015,28 . 3 FOURTH AMENDED CLASS ACTION COMPLAINT Case No.

: 4:16 cv 06232 JSW Case 4:16 cv 06232 JSW Document 165 Filed 10/16/18 Page 5 of 28 1 19. As part of Facebook’s video advertising services, advertisers can decide to purchase 2 ads with selected objectives, adding maximizing “Brand recognition,” “Video views,” 3 or “Conversions. ” Facebook says that a “Brand recognition” crusade will “ncrease recognition for 4 your brand,” while a “Video views” campaign will “et more people to view your video 5 content material,” and a “Conversions” campaign will “rive valuable activities to your web page or app. ” 6 20. Facebook video advertisements services comprise advertising and marketing analytics, which enable 7 shoppers to video display and evaluate their video ads’ performance. Marketing analytics 8 refers back to the practice of measuring and examining the functionality of an ads or advertising and marketing 9 crusade using data from various metrics.

One of the most promoting points of online advertisements is10 that it offers more certain and toward real time advertising and marketing analytics than classic media such as11 tv or radio, and online advertisement dealers reminiscent of Facebook have promoted their12 advertising and marketing analytics as a major reason that advertisers should purchase ads on their13 systems. 5 Online advertisers do so as a result of advertisers use these analytics to decide where to14 spend commercials greenbacks and the effectiveness of the dollars spent. As a piece of writing in the Harvard15 Business Review explains, analytics allows corporations to make informed decisions about how to16 allocate their limited advertising and marketing budgets across alternative mediums such as television, YouTube, or17 Facebook, to decide which commercials campaigns to “expand” and which to “kill,” and to18 “with ease adjust or allocate ads in various markets on a month-to-month, weekly, or daily basis—19 and, online, even from one fraction of a second to a better. ”6 Accordingly, it has become a standard20 train in the marketplace for online advertisers like Facebook to contain advertising analytics as part of21 their ads amenities, and online advertising purchasers expect that any advertisements they22 acquire will contain advertising analytics to evaluate the advertising’s performance. 23 21.

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The significance of analytics is obvious in the aggressive online video advertising24 market. YouTube, LinkedIn, Twitter, and Facebook all have online video commercials choices and25 all emphasize the worth of their analytics structures. When Facebook was first getting into the online2627 5 See, e. g. , Yahoo, Yahoo!Gemini, “Measure the impact of your campaigns and drive better effects by having access to actionable insights .

. . ”. 28 6 Id. 4 FOURTH AMENDED CLASS ACTION COMPLAINT Case No. : 4:16 cv 06232 JSW Case 4:16 cv 06232 JSW Document 165 Filed 10/16/18 Page 6 of 28 1 video advertising space, it knew that its analytics can be the secret to its success.

In a November 2 2013 inner most presentation to its commercials partners “November 2013 Presentation”, Facebook 3 offered talking points on how to persuade potential customers to purchase Facebook video 4 ads in its place of alternative video ads, corresponding to YouTube ads or television 5 advertisements. The presentation recognized that some of the weaknesses of Facebook’s video 6 ads platform was the relatively basic level of metrics it offered to video purchasers. The 7 presentation stated, “Currently, we only report on video plays, which is a weakness compared to 8 YouTube, which reports on video views, completed views, and average period of view. We are 9 working on building out our video insights to offer advertisers a higher sense for the way videos are10 appearing. New video insights target launch: Q1 2014.

”711 22. In May 2014, Facebook began imparting video advertisements consumers with more12 analytics, including video views, accomplished views, and common length of view, as part of13 Facebook’s video commercials facilities. Facebook told its users that the goal of the recent analytics14 was to assist video ads purchasers “learn what’s resonating with people and decide how to15 more effectively create and sell your videos on Facebook. ”8 Facebook said its Audience16 Retention analytics in certain, reminiscent of Average Duration of Video Viewed, would assist video17 ads consumers in figuring out underperforming videos and finding “the real moment when18 most people lost hobby and stopped looking at. ”9 Facebook knew and admitted that “having access19 to dependable metrics is important to the hundreds of thousands of companions who use our amenities to grow their20 businesses. ”21 23.

“Average Duration of Video Viewed,” which is the common amount of time that users22 watched a video, is one of the vital crucial analytics used in comparing video ads’23 performance. Average Duration of Video Viewed is a measure of “retention,” which advertisers24 7 Josh Constine, Leaked Facebook Video Ad Pitch Deck Reveals Plans To Steal TV and YouTube25 Dollars, TechCrunch Dec. 13, 2013, youtube. 26 8 Facebook, Introducing Video Metrics May 5, 2014,27 oming Soon Video Metrics. 9 Id.

28 1 care about because the longer people watch an advertisement, the greater the advertisement’s impact 2 on the viewer. 10 One study of video advertising campaigns on Facebook found that increasing 3 retention of a viewer from the 3 second mark to the 10 second mark in a video ended in a 57 4 % augment in ad recall, a 103 percent augment in brand recognition, and a 64 % increase in 5 “purchase intent” the intent to the purchase the marketed product. 11 And because advertisers place 6 higher value upon video adverts that are viewed for longer classes, they’re willing to pay 7 more for such adverts. 8 24. After Facebook introduced and released its new video analytics platform in May 9 2014, Plaintiffs and putative class participants purchased video commercials services from Facebook10 with the realizing that video advertisements analytics were included in the purchased advertising11 facilities.

12 25. Upon introducing the new video metrics in their analytics platform, Facebook didn’t13 disclose that its new video metrics weren’t audited or approved by the Media Rating Council, the14 marketing marketplace’s primary bearer for accurate measurements. 15 26. As acknowledged by Facebook in its deepest November 2013 Presentation and public16 statements, Facebook created and disseminated the hot video analytics platform and its video17 metrics to induce users to acquire Facebook’s video advertising services. 18 27. Among the new video metrics offered by Facebook were “Average Duration of19 Video Viewed” and the “Average Percentage of Video Viewed.