Analyst accuses Facebook of exaggerating its ad reach numbers

Carolyn Everson

On Tuesday, Brian Wieser, a senior analyst in online advertising at Pivotal Research Group, called Facebook out for claiming to reach 41 million young adults between the ages of 18 to 24 in US, even though recent census data only counts 31 million people in the that age range.

Facebook's Ads Manager claims to have a potential reach of 41 million people in the US between the ages of 18-24, according to Wieser's investor note released Tuesday. While Census numbers are always estimated at some level and come with a margin of error, the margin here may be too large to be credible in the case of Facebook's claims, as Reuters reports, and the over-estimate extends to the next demo as well, 25- to 34-year-olds.

"While Facebook's measurement issues won't necessarily deter advertisers from spending money with Facebook, they will help traditional TV sellers justify existing budget shares", Wieser wrote in his investor note.

In a statement, a Facebook rep said the audience-reach estimates in Ads Manager "are not created to match population or census estimates". They are not created to match population or census estimates. Of 44 analysts with ratings on Facebook, only Wieser and Société Générale's Simon Baker have sell ratings on the stock, according to FactSet data.

Facebook said estimates of reach are based on a "number of factors, including Facebook user behaviors, user demographics and location data from devices".

For example, Facebook may count non-residents or visitors to a region, as well.

"This just an estimator and campaign planning tool", the Facebook spokesperson added. In addition, age data on Facebook may vary from census data because not everybody on Facebook uses their real age.

But one analyst points out that the social media giant's own figures about its audience differ considerably from US census data.

The census figure discrepancy is likely to be a setback for Facebook with advertisers and a boon for outside measurement companies like Nielsen and ComScore, particularly as Facebook vies to make video advertising a bigger part of its business, Mr. Wieser said.

Facebook no doubt knows this, which is why it launched a blog past year, Metrics FYI, to be more upfront about any errors or bugs it finds in its advertising system. Facebook also captures travelers in the US. The company also fessed up to overstating the amount of time users spend watching videos on Facebook. The company has also taken some credible steps to improve the quality of its ad data.

Although the social networking giant did not turn down the possibility of ads on WhatsApp, it did mention that the current focus is on business features.

Facebook Inc shares rose $0.36 (+0.21%) in premarket trading Wednesday.

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