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Why Facebook's metric flub won't drive away advertisers

Think about how many times you’ve started watching a video on your Facebook (FB) newsfeed only to quickly scroll down after a mere second or two.

For the past two years, Facebook has not been counting video views under three seconds when calculating a crucial metric for advertisers: the average duration of time a video was viewed. This means the company has been dramatically overestimating how long users watch ads on its platform when selling to advertisers. By only including video views of over three seconds, Facebook inflated the average watch time by between 60% and 80%, according to a letter Publicis Media sent to clients that was obtained and reviewed by The Wall Street Journal.

In a recent post on its help center for advertisers, Facebook disclosed that it had “discovered an error in the way we calculate one of our video metrics” about one month ago. According to the company, the error was fixed, and partners were notified about the mistake.

It’s not likely that this gaffe will stop advertisers from turning to Facebook because it has unparalleled reach with brands like Instagram and Facebook Live. This April, Facebook CEO Mark Zuckerberg said the average user spends 50 minutes a day on the website. That’s 50 minutes of advertising opportunity.

And the company is trying to convince advertisers that this is a one-time mistake. In a statement on his own Facebook page, the company’s VP of business and marketing partnerships David Fischer acknowledged “the miscalculation overstated the metric.” However, he wants “clients to know that it has not and will not going forward have an impact on billing or how media mix models value their Facebook video investments.”

Though Fischer fully acknowledged the flub on Facebook’s end, he did put some responsibility on advertisers themselves, insinuating they should do their own due diligence rather than blindly accept internal metrics: “Our clients’ trust and belief in our metrics is essential to us and we have to earn that trust. That is why we also give marketers choice by offering third-party video verification options with companies like Nielsen and Moat.”

Where advertisers stand on Facebook

It would be utterly false to say advertisers are slowing down on Facebook ads — in fact they’re speeding up.

This month, RBC Capital Markets conducted its eighth annual survey of over 1,100 advertising professionals. RBC internet analyst Mark Mahaney found that, unsurprisingly, Facebook and Google (GOOG, GOOGL) had the strongest results of the platforms with the largest budget allocations. Similar to prior surveys, 19% of Facebook advertisers spend more than 30% of their online budgets on the platform and 64% of advertisers expect to increase their ad spend on the platform over the next year (compared to 52% of advertisers on Google). Plus, 69% of surveyed advertisers were positively inclined toward Facebook’s auto-play ads.

Though brands may not be spending fewer advertising dollars on Facebook, they are changing their strategy. Procter & Gamble (PG), the biggest advertiser in the world, announced this summer it would change its Facebook ad strategy and step away from targeted ads because it wasn’t seeing a high enough return on investment. P&G’s decision to reallocate money from narrow, costlier ads to a broader audience may reflect a larger trend for big brands — getting specific may not pay off.

Another opportunity for advertisers lies in Facebook Live, which started rolling out 15-second commercial breaks during broadcasts in an attempt to appease advertisers. This comes after Facebook committed more than $50 million to have established publishers and celebrities create content for Facebook Live. Of that $50 million, $2.2 million was dedicated to internet influencers like YouTube star Ray William Johnson or Viners Jon Paul Piques and Logan Paul.

Though it remains unclear whether Facebook will let the internet stars create sponsored content on Facebook (like YouTube does), this possibility could excite advertisers, because it would provide them with a way to target a younger audience through a human platform that already has millions of fans.

Inevitably, advertisers still recognize Facebook’s gargantuan reach of nearly 2 billion users. Meanwhile, advertisers are flocking to Instagram, which is owned by Facebook. The photo-sharing app announced on its blog on Thursday that it had topped more than 500,000 advertisers (up from 200,000 this February). Since Instagram rolled out ads a year ago, there have been 1 billion actions taken on the platform.

Bottom line: Companies will continue to invest heavily in Facebook, but those dollars will likely be reallocated into Instagram and Facebook Live.

Melody Hahm is a writer at Yahoo Finance, covering entrepreneurship, innovation and technology. Follow her on Twitter @melodyhahm.

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