Facebook chose to maximise engagement at users’ expense, whistleblower says

Facebook has misled investors about the size of its audience and concealed a years-long decline in younger users in the US, said Frances Haugen, a whistleblower, in a complaint to the US Securities and Exchange Commission.

The drop in younger users continued even during the coronavirus pandemic, when overall social media use surged. “During Covid, every cohort’s use of Facebook increased, except for those 23 and under, which continued to decline,” the complaint said.

Haugen, a former Facebook product manager, pointed to internal company projections that a drop in engagement from American teens could drive an overall decline in its US daily users by as much as 45 per cent between 2021 and 2023.

The latest allegations that Facebook “misrepresented” its “reach and frequency” metrics form one of eight complaints filed to the SEC, which were first reported by CBS News.

Lawyers for Haugen cite internal company documents dating back several years to support the whistleblower’s allegations of “material misrepresentations and omissions” to investors, including through SEC filings and testimony to US Congress.

The data scientist, who worked at Facebook until May, will appear before US senators in Washington on Tuesday after a series of damning interviews on CBS’s 60 Minutes and the Wall Street Journal, engulfing Facebook in its biggest reputational crisis for years. The social network also suffered a significant outage on Monday, with all of its platforms, including WhatsApp and Instagram, going offline for several hours.

In letters to the SEC written by Whistleblower Aid, a non-profit legal organisation that has identified itself as representing Haugen, Facebook was also accused of failing to take action against extremism, hate speech, human trafficking and ethnic violence on its apps, including Instagram.

The complaint about Facebook’s reach said that “for years, Facebook has misrepresented core metrics to investors and advertisers including the amount of content produced on its platforms and growth in individual users”, especially in “high-value demographics” such as American teenagers.

“By delivering too many ads to users that the advertisers did not want to pay for, Facebook overcharged advertisers on a vast scale,” the complaint said.

Haugen’s legal team cited internal Facebook records showing that more than 15 per cent of new accounts created by teenagers are secondary or duplicates. Facebook usage among young adults aged 18 to 24 “continues to decline”, according to excerpts from internal documents in the SEC filing, while young adults “spend less time, produce less and send fewer messages” on the social network.

Jason Kint, head of Digital Content Next, a trade body representing online publishers, and a persistent Facebook critic, said in a series of tweets that the allegations were “deadly” and “incredibly damning”.

Facebook is already fighting a class-action lawsuit in California over claims that its estimates of advertisers’ “potential reach” included duplicate and fake accounts. Earlier this year, court filings showed that Carolyn Everson, then one of Facebook’s top advertising executives, warned colleagues to “prepare for the worst” over the claims. Everson resigned from Facebook in June.

Facebook has previously argued that estimates of potential reach are a “planning tool” and do not form the basis of advertisers’ billings.

The company did not immediately respond to a request for comment on the whistleblower’s SEC complaints. Facebook has described Haugen’s range of allegations against it as “misleading”.

“Protecting our community is more important than maximising our profits,” Lena Pietsch, Facebook’s director of policy communications, said in a statement on Sunday following the 60 Minutes broadcast.

The post Facebook chose to maximise engagement at users’ expense, whistleblower says appeared first on Investing Recent.

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