Facebook misled investors about shrinking user base, ex-employee alleges

Enlarge (credit: Getty Images | Chesnot)

Facebook has been misleading investors about its "shrinking" teen and young-adult user bases and about the actual number of Facebook users, former employee Frances Haugen alleged in a whistleblower complaint filed with the US Securities and Exchange Commission. "For years, Facebook has misled investors and advertisers about [its] shrinking user base in important demographics, declining content production, and the true number of recipients of 'Reach & Frequency' advertising," the complaint said.

Noting that "Facebook's stock valuation is based almost entirely on predictions of future advertising revenue," the complaint cites "evidence showing that Facebook has, for years past and ongoing, violated US securities laws by making material misrepresentations and omissions in statements to investors and prospective investors, including... through filings with the SEC, testimony to Congress, online statements, and media stories."

"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)," the complaint said. Facebook's advertising algorithms did not properly account for what the complaint calls Single Users with Multiple Accounts (SUMA), and the company thus "systematically overcharg[ed] advertisers" by misrepresenting the number of individual users, Haugen alleged.

Read 15 remaining paragraphs | Comments