Tech giant Meta has landed in legal trouble with regards to its advertising practices and data transparency as advertisers in the US filed a class-action $7 billion lawsuit against Facebook and Instagram in San Francisco, California.
The US-based Meta’s advertising revenue in 2023 stood at $132 billion.
Advertisers allege they were unlawfully charged excessive prices to advertise on Facebook and Instagram as Meta exaggerated ad viewership figures by up to 400 per cent, measuring the number of social media accounts—which could include bots and other fake accounts—rather than individual users.
The Indian Society of Advertisers (ISA) has taken note of the case and is currently looking into the matter, Co-chair of the ISA Media Forum, Ankit Desai told e4m. Desai, who heads the media and digital marketing (India and Global Centre of Excellence) at Marico, didn’t comment further.
Notably, Indian advertisers are spending a substantial amount of their digital ad budget on Facebook and Instagram, sometimes more than 50 per cent. Small and Medium Size Businesses (SMBs) often spend their entire advertising budget on these social media platforms as consumers are spending most of their time online.
Meta India’s advertising revenue in FY23 alone was Rs 18,300 crore, a 13 per cent increase even in the year of economic downturns, which indicates advertisers increasing reliance on Meta platforms in India. The Mark Zuckerberg-led firm commands nearly one-third share in India’s digital advertising market.
“The US lawsuit is significant as it represents millions of advertisers, including SMBs, who may have overpaid for ads on Instagram and Facebook. If the case proceeds to trial, more affected advertisers could potentially seek compensation. This may surely have some implications in India as well,” an advertiser said.
“Advertisers pay for ad impressions and clicks, but if a significant portion of these interactions are coming from bots or fake accounts, they are essentially wasting their ad spend on audiences that have no real interest in their products or services. This can lead to a poor return on investment (ROI) and undermine the effectiveness of advertising campaigns,” industry experts said.
As per reports, the lawsuit was initiated by former Meta advertisers DZ Reserve and Cain Maxwell in 2018, and the San Francisco Court has now allowed the complainants to pursue legal action against Meta for monetary damages. The case might go to trial or get resolved through a settlement that includes financial compensation for advertisers.
Rahul Vengalil, CEO and Co-founder Tgthr, recalls, “In 2018, there was a huge ruckus on this issue which prompted Facebook to delete millions and millions of fake accounts/bots. After the action, the reach numbers/universe dropped by a big margin.”
However, things went back to “normal” gradually as the social media giant continued to expand its presence across the globe. “The reality is that consumers are hooked onto the Meta ecosystem for a considerable future and no amount of bravado is going to have a serious impact. Super large advertisers will take some steps and Meta will make some changes, and soon advertisers will realize that they can't survive without Meta ads,” Vengalil pointed out.
e4m reached out to the Meta India team for a statement on the matter. Their response was not received till the time of writing this story.
As per US media reports, Meta has denied the allegations, stating that ad prices are based on performance metrics, not the “Potential Reach Metric” as claimed in the lawsuit.
