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Media reports recently indicated that Facebook, Inc. (FB - Analyst Report) may have been reporting inflated data for video views, thereby misguiding advertisers and marketers.

The reports state that the company had earlier disclosed its calculation method in a post on its “Advertiser Help Center”. It only took into account video views of greater than three seconds. Exclusion of video views of lesser time lead to greater than actual average view metrics.

Facebook’s Response

The social media giant stated “We recently discovered an error in the way we calculate one of our video metrics.” It went on to clarify that “This error has been fixed, it did not impact billing, and we have notified our partners both through our product dashboards and via sales and publisher outreach. We also renamed the metric to make it clearer what we measure. This metric is one of many our partners use to assess their video campaigns.”

The new metric named “Average Watch Time” will factor video views of any duration said the company. Though the company has accepted the mistake and said it is rectifying the same, it is still unnerving for investors who were optimistic about the company’s consistent claims on robust video performance for a long while now.

What About Advertisers?

It appears that Facebook had notified marketers about this discrepancy after it realized the “mistake”.

But the issue has naturally stirred advertisers and publishers, who, led by inaccurate data, had been spending more on Facebook’s platform instead of peers like Alphabet’s (GOOGL - Analyst Report) YouTube, Twitter (TWTR - Analyst Report) and TV networks. Moreover, these companies have also been modifying their ad content based on the performance metrics provided by Facebook.

A couple of ad buying companies, Publicis Media and GroupM, a unit of WPP plc (WPPGY - Analyst Report) , who were notified of the error by Facebook, have openly expressed their discontent on the issue. A note from Publicis Media stated “This once again illuminates the absolute need to have 3rd party tagging and verification on Facebook’s platform. Two years of reporting inflated performance numbers is unacceptable.”

Bottom Line

Such instances raise serious concerns about the credibility of Facebook. The company stated that it realized the metrics were incorrect only after they were in use for over two years, which is quite a long time in the tech world. The issue gets more serious if we consider the fact that these social platforms generate the maximum share of their revenues from advertisements.

FACEBOOK INC-A Price and Consensus

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At present, Facebook carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

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