The need for greater transparency and accountability hit the advertising industry Friday after Facebook confessed that it miscalculated how long site visitors watch video ads and Dentsu admitted to overcharging clients for digital media services by placing fewer ads than promised.
Monthly audits could become the new normal for many more companies. “We recently discovered an error in the way we calculate one of our video metrics,” Facebook said in a statement to The Wall Street Journal.
The WSJ also reports that Facebook introduced a new metric in September. The new metric called “Average Watch Time” will reflect video views of any duration. The old metric — Average Duration of Video Viewed — used for the past two years only counted video views of more than three seconds.
Video views of under three seconds were not factored in, thereby inflating the average, reports the WSJ.
No one will dispute the difficulty in making an ad buy on erroneous information, but the overestimation of key video metrics will likely have a domino effect. It will force companies to audit their ad buys, and may result in restate earnings in public filings.
Let's say a public company reported in a filed earnings statement that it estimate $1 million in revenue earned from the 60 seconds of continues video watched by consumers on Facebook. If the brand discovers it was 30 seconds rather than 60 seconds, would they need to restate earnings or at the least correct the numbers?
At what point will companies need to restate public earnings as a result of this error? Will Facebook need to restate earnings?
In another incident of miscalculation, advertising agency Dentsu admitted to overcharging at least 111 companies for Internet ads, as reported by the WSJ. In some cases, the ads never appeared online.
Dentsu continues to investigate the scale of the "improper billing, but has so far uncovered 633 cases of potential overcharging valued at a total of ¥230 million ($2.3 million)," per WSJ.
Audits of ad buys will become the norm and increasingly methodical as more agencies and brands rely on technology to serve ads to potential and existing buyers at the perfect moment in time.