Is Facebook’s Ad Model a Scam?

I’ve watched the Facebook phenomenon with considerable skepticism, and have refrained from commenting on it, save linking to stories such as GM canceling all of its Facebook ads because they didn’t see the benefit.

But this item via reader Chuck L was a real eye-opener. It suggests that Facebook may be a large-scale fraud. If not Facebook, who would be running the bots in question? Their second complaint, about the cost of a name change, is merely tacky customer-gouging, but the first suggests that the Facebook business model is a complete fail, whether the clicks are from Facebook bots or other bots.

I’ve snapshotted this page in case it disappears, but this is on Facebook now, from Limited Run:

Hey everyone, we’re going to be deleting our Facebook page in the next couple of weeks, but we wanted to explain why before we do. A couple months ago, when we were preparing to launch the new Limited Run, we started to experiment with Facebook ads. Unfortunately, while testing their ad system, we noticed some very strange things. Facebook was charging us for clicks, yet we could only verify about 20% of them actually showing up on our site. At first, we thought it was our analytics service. We tried signing up for a handful of other big name companies, and still, we couldn’t verify more than 15-20% of clicks. So we did what any good developers would do. We built our own analytic software. Here’s what we found: on about 80% of the clicks Facebook was charging us for, JavaScript wasn’t on. And if the person clicking the ad doesn’t have JavaScript, it’s very difficult for an analytics service to verify the click. What’s important here is that in all of our years of experience, only about 1-2% of people coming to us have JavaScript disabled, not 80% like these clicks coming from Facebook. So we did what any good developers would do. We built a page logger. Any time a page was loaded, we’d keep track of it. You know what we found? The 80% of clicks we were paying for were from bots. That’s correct. Bots were loading pages and driving up our advertising costs. So we tried contacting Facebook about this. Unfortunately, they wouldn’t reply. Do we know who the bots belong too? No. Are we accusing Facebook of using bots to drive up advertising revenue. No. Is it strange? Yes. But let’s move on, because who the bots belong to isn’t provable.

While we were testing Facebook ads, we were also trying to get Facebook to let us change our name, because we’re not Limited Pressing anymore. We contacted them on many occasions about this. Finally, we got a call from someone at Facebook. They said they would allow us to change our name. NICE! But only if we agreed to spend $2000 or more in advertising a month. That’s correct. Facebook was holding our name hostage. So we did what any good hardcore kids would do. We cursed that piece of shit out! Damn we were so pissed. We still are. This is why we need to delete this page and move away from Facebook. They’re scumbags and we just don’t have the patience for scumbags.

Thanks to everyone who has supported this page and liked our posts. We really appreciate it. If you’d like to follow us on Twitter, where we don’t get shaken down, you can do so here:

Needless to say, this finding should prompt similar investigations by bigger players.

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    1. Richard Kline

      Everything reported that Zuckerberg has ever done screams of fraud and fakery, from jacking the company out from under his senior partners, to massively lying to his user base regarding how their iinfo was and is being used, on to the IPO. And yet folks just don’t seem to accept that if it smells like excrement it tastes like that all the way through. One should, by the massive trail of evidence, _expect_ anything related to Facefark to be a fraud unless triple verified otherwise. Faceplant WON’T be different ‘next time’ one logs on of clicks in. At the least, those at Facefail have to know they’re charging for phantom clicks, and thus that their reported financials are materially defective. –But who cares as long as accounts are billable, hey? Ever’body wants to be rich. Anyone doing business with Facefry, and if you have an account there they are doing business on you, has only themselves to blame because the stink of the thing is evident long before the page is in view.

      And with regard to web-advertising, I have never understood how anyone expected that to actually make money. It is a process only the stupidest could fall for. The first fundamental regarding advertising is that The Good Don’t Advertise because demand is brand-driven and supported by word of mouth. So inherently, those advertising are either to new to have a brand (and a track record), or not good. Nearly always the latter. The fact is that if you see something advertised, your best strategy is TO AVOID BUYING IT EVER! So to begin with, when I see a web banner, my first association, valid or not, is ‘loser!’ Yes, as someone below said, it would be better to give away a look or content _for free_ to drive clicks or hits than to pay a third party for click-throughs. And consider this: I did mail order shopping for years and even now I regularly buy many products online. I’m web traffic’s gold: I buy. But I can think of, at most, a half-dozen ads I’ve clicked on since I went online, and most of that handful were for tiny-volume specialty products you’re NOT going to find in your corner dollar store folks, so there was a specific reason. My first assumption for the reason anyone would click-an add is that at that moment they were simply to lazy to go to a site directly, but ‘wanted a look.’ That is, they’re not there to buy but to look. That can have a use for the advertiser, but you can’t build a business out of lazy window shoppers (unless you’re mining their click stream or the like).

      Web advertising is a loser, for loser, by losers where not by liars. And we have more and more reason to think that its mostly lying liars chasing their ilk across our inadvertently intermediated screens.

      1. Stan Musical

        Good post–especially for a first in the thread ;-). I can pat myself on the back about this since I’ve thought from the first that Suckerberg was a shyster; the unusually shady IPO was the last confirmation of that before this.

        It’s something of a useless point, since whaddya gonna do about it, but his financial success is just a reflection of how out of whack our society’s values have become.

        BTW Of your variations on facebook, I like “faceplant” best :-).

    1. Cat

      If they had 1M ‘clicks’ a day and 800k were bots they may have something here, but if they had 100 ‘clicks’ and 80 ‘clicks’ were bots this is a big nothing burger.

      Big social media sites like FB are being mined constantly.

      1. RalphR

        No, not necessarily.

        1. FB is still charging for the bot generated clicks. And they refused to acknowledge the query. That’s not a good sign regarding their inquiry.

        2. The materialty question is not about this site, but across FB generally. How much of their click revenues come from small sites where bots would generate moat of the clicks? I’d hazard it is 20%. So that suggests 16% of that revenue is based on false charges.

        3. Per comments below, it would not be hard for FB to figure this out, and they apparently don’t because it is in their interest not to.

        1. duffolonious

          Add to this, I’d be curious why data scraping bots would hit the ads. I’d think that would be the last thing you’d want.

          1. Steveax

            You’re assuming that the bots are well written pieces of software. I can assure you that it’s safe to put that notion away :-)

    2. Mark P.

      ‘Surely SOMEBODY would have noticed earlier if this was endemic/a consistent problem…’

      Actually, similar complaints re. Facebook from other business owners/managers surfaced during the pre-IPO countdown. Michael Wolff’s analysis from TECHNOLOGY REVIEW back in late May, had a lede that ran “Facebook not only is on course to go bust but will take the rest of the ad-supported Web with it.”

      Wolff can be a bit of a self-aggrandizing pain, but he’s not stupid. He wrote: ‘I don’t know anyone in the ad-­supported Web business who isn’t engaged in a relentless, demoralizing, no-exit operation to realign costs with falling per-user revenues, or who isn’t manically inflating traffic to compensate for ever-lower per-user value….

      That’s the polite version. Wolff has expressed more specific reservations about Facebook elsewhere, as have other writers, but all are subject to MSM’s editing process/legal constraints (forex, TECHNOLOGY REVIEW is owned by intensely conservative MIT).

      Those who commented in the thread to Wolff’s pieces are not so constrained. Here’s a link to one —

      “This is an email thread between me and a Facebook customer service agent named Neil about my request for a refund for 90 percent of the advertising we did with them recently. I am requesting the refund because I believe Facebook misled us about the nature and value of the clicks they delivered as part of our ‘Like’ campaigns.”

      And then there’s a lot of detailed info about algorithm gaming and so on. There are other complainants out there and they’re all pretty detailed in their various allegation. Essentially, Facebook’s ad business is a joke and all it has to sell is the data that YOU give them.

    3. Jeff

      Remember the old joke about the efficient-market-hypothesis-believing economists who wouldn’t pick up the $100 bill because if it were real someone would have already picked it up?

  1. Capo Regime

    All scams end poorly. If they are well engineered though they can go on for a while though.

    1. jake chase

      It seems to me that only a business school graduate would believe that any actual person would ever click on an ad.

      Of course, they still sell television advertising and nobody with a mute button pays any attention to those ads either.

      Are there enough click happy mor ons to generate enough actual clicks on Facebook ads to justify its business model? Perhaps just asking the question is to answer it.

      1. Mark P.

        ‘Are there enough click happy morons to generate enough actual clicks on Facebook ads to justify its business model?’

        Not for Facebook. Only for Google ads and people who click on them did searches precisely for that purpose.

        1. Mark P.

          But this may cast some further light —

          ‘Is 10% of Facebook Revenue Generated By Booklicants?’

          Sample: ‘… from a click inventory perspective the 0.1% of Facebook users who click ‘like’ a lot to improve their Facebook experience in various ways would be equivalent to the 899.1 million of the rest of us combined.’

          Plenty of detailed analysis there.

      2. Matt

        You don’t know what ads are for, do you? The point of ads isn’t to make people Buy Something Right Now. The point is to maintain and build brand awareness, so that *later on* when you’re trying to decide what to buy, you’ll be more comfortable going with the brand you’ve heard of a bunch of times.

  2. Capo Regime

    Add buzz or some socially desireable aspect to the PR and the scam can really takeoff–i.e. subprime loans as Yves noted. Similarly, Facebook is well so revolutionary and a wonder of technology. Yep–lots for scammers to work with here…

  3. Cat

    Without a frame of reference for the raw number of impressions FB was charging them for their analysis is useless.

  4. JustAnObserver

    Running a bot-driven revenue scam all the way through to IPO ? Much though I dislike Facebook’s monetise-your-private-life business model I’d tend to color myself sceptical

    Except … except … Madoff, MF Global, Auction Rate Securities, CDO AAA valuations, Magnetar, …

    1. Steve

      Except…this fits with the rest of Facebook’s business model so well. “How can we rip more data from our members today?” works really well with “How can we rip more ad revenue from our customers today?”.


  5. curlydan

    Basically, the Limited Run has just set a precedent for how all smart advertisers (including the mega-corporations who could force a change) should structure their ad contracts to have some sort of click verification.

    The theory in one of the comments above about data miners being the cause sounds very plausible.

    I think Facebook will be fine in the long run as a portal and social interface and maybe even a stock, but the transition to a “monetized enterprise” is going to be a little awkward.

  6. The Peak Oil Poet

    as much as i detest Facebook i think the above is complete and utter balderdash

    logging sites that access a page is a no-brainer

    and in that logging you have access to IP addresses

    IP addresses can be spoofed but even spoofing can be tracked (and found to be spoof)

    if 80% of the traffic was bots then those bots would likely
    all come from a limited number of IP addresses or a small set of traceable IP address ranges

    the fact is that much of the traffic on the net is bots – bots are continuously scanning the web for changes in information so that they can update their indexing

    if you have a page that has a low level of popularity that increases the likelihood that a high percentage of the traffic will be bots

    making accusations against Facebook of this nature does not aid in educating people about the real problems with Facebook which are more to do with how it uses information stupid people happily give it and how it has the traditional goal of trying to create a monopoly on a large segment of what started life as an essentially 100% open (ie “free”) internet

    fact is that Facebook and Twitter give the sheeple – the dumb-ass low brow general public – the ability to have a “home page” at the cost of sacrificing true control to an organisation that has no qualms whatsoever about using your data for its own purposes

    if schools educated their students better (and did not include much Facebook in that) Facebook would not have a business model leg to stand on


    1. Rob

      “if 80% of the traffic was bots then those bots would likely
      all come from a limited number of IP addresses or a small set of traceable IP address ranges”

      This depends. Legitimate bots–designed to monitor sites in an upfront fashion–would usually exhibit these characteristics. Bots can be made to avoid some of this, though, using services like tor or other proxies, or simply using a small botnet.

      Note that the author does not blame Facebook in this–it is entirely possible that someone is going in through the Facebook ad network for reasons of their own rather than as a deliberate attempt to jack up traffic for Facebook. This may not make it a scam, but it does suggest the traffic provided from Facebook is not worth as much as they say it is.

    2. Walter Wit Man

      Well, regardless of whether it’s dangerous to have so many bots running around, Facebook is charging advertisers to show the bots the adds.

      That doesn’t seem fair. Don’t you think Facebook is aware of the bot issue?

  7. Paul Tioxon

    Ever get a phone call on yr cell for medical insurance? Or a text from the wrong tweener? Maybe the Chinese are figuring something out just in case of a people’s revolution and probing with massive distributive onslaught. Or data miners are gearing for selling more useless sales lead lists. But charging money for access to 800 million users, who do they think they are, ebay?

  8. Robert Consoli

    The basic high-traffic bots are well known. Nearly every web master has a list of such bots in robots.txt or in .htaccess in order to identify and exclude them from the site. If Yahoo is allowing bots free rein to its pages and then charging for the ‘clicks’ then, yeah, that’s a problem. Yahoo could easily change its algorithm to exclude ‘clicks’ from bots as real clicks.

  9. Robert Consoli

    Yves asks ‘who would be running the bots in question?’ I’m sure it isn’t YAHOO. There are zillions of bots on the Internet. I’ll be happy to provide a list.

  10. Walter Wit Man

    I love the part about leaving Facebook for Twitter. From one fraud to the next.

    Oh well, we’re all victims of this insane corporate propaganda.

  11. Maximilien

    “Economics vouchsafes us few dramatic turning points.”
    —–John Kenneth Galbraith

    But one of those rare dramatic turning points was Lehman in ’08. And now maybe the Facebook IPO debacle of 2012 will be another one.

    Maybe this will mark the moment when retail investors finally throw in the towel after decades of investing in a rigged market and getting nothing but fleeced. Nothing like the flame-out of the largest tech IPO in history to make the average investor (especially if young and unseasoned) vomit when he thinks of Facebook in particular and stocks in general.

    Facebook invited people to buy in at $38 a share May 18. It closed today at $23, down 40% in 2 1/2 months. Those who did buy, and those who’ve watched the slaughter, are they finally ready to say, “Never again!”?

    Could Facebook have a “moment” named after it, just like Lehman has had?

  12. JCC

    I ran a couple of websites for 10 years, small potatoes compared to facebook. These sites would average anywhere from 10 hits a day to 300 hits a day. On no one day did I ever see anything near 80% of my traffic coming solely from search engines/bots, etc.

    Admittedly nothing I ran ever had the popularity of facebook, but still… 80% traffic on ads from bots? That’s suspicious, to put it mildly.

    Even if it’s 100% legitimate hits (whether by bad guy bots looking for private info or search engine bots, etc.), which I doubt, it obviously says one very important thing; Facebook’s numbers are bad and their “business” model is about 20% as valuable as they and others have been touting.

    1. Michael Walls

      I am a web professional, and yes – it is very feasible that the majority of traffic can come from search engines – if your site is set up professionally. Search engines are a match game – if your site has the text copy of the search, you get displayed. That requires doing research on what people are searching, and implementing it on your site.

      Small sites don’t do as well because they have less copy for the bots to peruse. Amateur built sites also don’t have the right search engine presentation protocol and do poorly. But that doesn’t mean the system doesn’t work. It does work – I do it every day.

      However, Facebook ads only attract people on Facebook – who are absorbed with their social mission – not buying your product.

      Search engines draw queries from the open frontier of the entire web. When a person enters a search phrase, he is not socializing, but on a mission to find something specific.

  13. mario

    Without any regard to the “bot clicking”… More and more companies claim the have a piece of the same pie. And I don’t believe users do more clicking :)

  14. katiebird

    Every now and then I click on a Zappos ad. But never once has it taken me to the shoe that attracted me. It’s astonishing how infuriated that makes me!

    I can’t think of any other ad that’s inspired me to click. So the utter failure of the one ad (or series of ads) that breaks through my resistance to satisfy my curiosity seems significant.

  15. steve

    Any one using Facebook particularly for social use is mad. we call it tracebook, absolutly open to data mining , abuse and tracing private activity. Eventually the share price will go below $20.00 and perhaps keep sinking. There is a rumour that the CIA are involved with it.

    1. Michael Walls

      That is no rumor – it is public knowledge that CIA front companies – “In-Q-Tel” for one – has invested millions in Facebook.

      Facebook is a never-before-dreamed-of survailance resource

  16. Mel Rabang

    Actually I’m not tech guy but, I,ve read about Facebook loosing about 17% on stock value (about 2.3 billion loss to Zuckerberg)because of a failure to have clear policy on mobile advertising.

  17. Paul Walker

    This reminds me of the classic falsely boost circulation to maintain illusion of pricing scam to gouge advertisers in newspapers and magazines, with whatever other goodies can be scooped up along the way. A noteworthy example is found in the actions of the Wall Street Journal, Europe aired in 2011.

    Reminds me of taking a 6 month magazine subscription from frequent flyer miles and noticing it still arrives 3 years later. More profitable to print and distribute free copies to keep ad revenues flowing than to actually charge subscribers.

    1. Art Eclectic

      Exactly. The advertising revenue model is broken and nobody who’s invested in it wants to admit it as long as the cash is still coming in the door.

      Smart businesses find ways to attract new customers outside of paid advertising.

      Yet, some are STILL advertising in phone books – so there’s always a steady supply of businesses that just don’t get it and wil continue to pump dollars into a dead-end business model.

      There’s just too much advertising, it has become ubiquitous and inescapable, which leads people to tune it out.

  18. Lambert Strether

    1. I can’t imagine clicking on a FaceBook ad. I’m there to interact (at a reasonably arms-length level) with colleagues and friends. I don’t want to click through on the ads for the same reason I wouldn’t try to involve my social circle in some sort of sleazy multi-level marketing scheme (which is a pretty good definition of Faceborg’s business model, if it comes to that).

    2. Maybe we should just go ahead and assume that anything that can be botted, will be botted (Lambert’s Law…). I remember having discussion during the 2008 primaries, for example, on the idea that “small contributions” over the web would be a great way launder money into a campaign, since (a) contributions under a certain amount don’t need to be reported, (b) the web-based contribution process would be easy to automate, and (c) people like hedgies and hip young investment bankers and HFS techies would have both technical and financial chops to set up a system like that. Now, let me see…. Was there a candidate in 2008 supported by demographic (c). Let me think, let me think…. Not that I’m foily.

  19. Lambert Strether

    Actually, I don’t think it’s the FaceBorg bots that are the issue (modulo fraud). Surely the magic of the marketplace will price the bots in.

    The real issue is that FB asserted IP rights over the name. That’s because FB, like AOL before it — yes, I’m so old that I remember when AOL was hot — is a walled garden, so they can assert ownership over your name. (I can’t believe that any serious activist would use FB as an organizing tool, because you can lose your content with no recourse, but people apparently regard FB as the public utility it isn’t (and perhaps should be)).

    It’s the walled garden that’s the real issue. iPad and i* are the same way. Every time you turn around, you’re either “giving away” your location or your identity, or paying “the store” for something. I dread the day when all the news sites have adopted the “walled garden” model because that will make content like Links (and certainly Campaign Countdown) much more difficult to create and deliver — to the great loss of the citizenry and the discourse.

    As usual, “It’s all about the rents!”

    1. indio007

      Yes, a walled garden. I’ve never heard of that term used for a government.

      Yes that’s what these proprietary networks are. They are their one government.
      Ever notice that statutes and laws of all the States and the United States are copyrighted?

      Back to the point. There is no trademark/tradename law “WITHIN” the Facebook government.

      I think walled city would be a more apt term.

  20. Michael Walls

    Though I was unaware of the bot scam I advise all my clients against Facebook ads on other grounds.

    While people who use a search engine are on a distinct mission to find products, services or information, those on Facebook are there to chat, socialze, promote religion and politics or play mindless hacks like Farmville.

    Facebook uses thumbnails of attrative women to grab attention and draw clicks – no matter what the advertiser represents. Many social surfers will click the girl, out of curiosity, then click off when they see no full size image – the client of course gets charged for the clicks.

    That is truly deceptive, but a wise advertiser should catch this. Anyone who thinks someone would click on a girl then be overwhelmed by their political ad, etc, deserves to lose his money. However, many do not monitor their ads – also foolish.

    The bot issue is truly despicible, but in view of Facebook’s policy of licensing hackers and scammers to operate on their turf and fleece their members is hardly surprising!

  21. Michael Walls

    PS – I, likewise, have a term for a Facebook-like environment – I call it a “gated community”. But unlike Facebook, the management companies of bricks and mortar gated communities hire security guards to keep thieves out.

    A good analogy for Facebook would be – a gated community that licenses certain thieves to “work” the residents without fear of capture & arrest.

  22. Guy Goebl

    Advertising is one source of revenue, so something “of value”. The other thing of value in FB is the personal information about users and their connections. This would have a very high value to any number of companies, including intelligence agencies, political survey groups, also spy agencies, domestic or foreign.
    If FB does monetize this information -and why wouldn’t they not try to-, where would it show? Having Goldman Sachs endorsement in its initial stages smells “government”, or really government masters if you want to entertain that possibility.
    Remember in the cold war era, East Germany was employing nearly everyone to spy on each other. And they maintained huge centers to collect and organize that information.
    With FB the users do it for free. It has to have some value to the right groups.

  23. Marc Andelman

    To understand Facebook’s behavior, look no further than their partners, the big banks, specifically Goldman Sachs. One of their other holdings was reported to be the largest online agency for child prostitition, on which they are also on the board. In truth, there is not a toilet big enough to put all those government employee pensions into, so these things have to be fabricated. Also, because all those schoolteachers and prison guards do not educate themselves or care about where their money goes, it goes to Wall street to be stolen. Quite simple and elegant really. They have to have QE3 to prop up this stock charad. The hell of it is, the underclass do not own stocks, and, they are only enriching the elite, and, the masses who they pay off, just like in any other corrupt banana republic or middle eastern dictatorship. Look at this as a semi-stable equilibrium, or a steady state, and nothing is going to happen until something triggers a “phase change”. That trigger in WWI was a complete bleeding to death of society, in France it was starvation. When people cannot eat, they will quickly look at the few who can, and blame them.

  24. Boston Scrod

    “Needless to say, this finding should prompt similar investigations by bigger players.”

    The following are some of the articles have been published about the Facebook bots in the last 24 hours:,2817,2407871,00.asp,0,1602559.story

    And as of noon Tuesday, FB shares are down another 4.5%…

  25. JWnFlorida

    Move too Google Plus.. or at least until the Google Nazi’s have to start censoring due to ad revenue giants demanding they do so.. like everywhere else!

    *** Google Plus ***

    Let the CIA / FBI care of the NSA’s new Mega Server Property know everything there is too know about the on-line you..

    Google Plus Makes You use a Real Name.. it is supposed to keep the trolling down.. or more likely to keep the Idiots over at the NSA better informed so when they pass your file to the FBI it will be easier to make a case!

    Power to the Lucky Sperm Club!!

    We need to defeat those Starving Poor Children! Down with Welfare for the People!! ONLY! Welfare for Wall Street!

    Sorry trying to make nice with the idiots who frequent here!

    Here is $16 Trillion of the $100 Trillion in Secret Wall Street Welfare Loans.. while all those un-employed free loaders keep turning down manufacturing *jobs..

    *jobs =’s manufacturing jobs in China for slave wages!
    Here are 7 million manufacturing jobs (50,000 per month on average for the last 11 years, since Bush executed the WTO docs! For Free Trade! Obama will out do Bush with the TPP though so don’t worry! And before all of that there was Clinton and NAFTA! WOOT!!) that We the Tax Paying Sheepeople PAID! Wall Street to move to china!

  26. Gopal Das

    I think everybody should check out the Scam Detector app. I believe they’re online as well.

  27. Charlie

    I would have to say I do have some major skepticism about facebook’s numbers. The responders to ads seem extremely unrealistic within a short period of time. On top of that, your numbers (i.e. people talking about this, reach) it drops significantly once you stop the ads. Seems weird to have such a high response rate during ads and then they complete vanish off the face of the earth within a couple of days after an ad? Anyways, the point is there were many times that I personally knew that people were talking about my page based on actual personal contact after a post, and people responding – yet the numbers do not go up? Is this facebook’s way of trying to lure you into paying for another ad? How is it that with a significant increase of followers, your popularity numbers dwindles to zero after you stop running an ad? When I first started – without any ads – before the privacy changes, my numbers seemed a bit more realistic. Once I started with the ads – they now seem off. I am definitely completely turned off by facebook and really considering closing down my page very soon. Well, what do you expect from a company ran by a CEO who stole the business to begin with?

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