Facebook Inc. today said that it has underreported the effectiveness of iOS ads to some businesses that advertise on its platform and pledged to roll out updates to address the issue.

The social network’s share price declined more than 4% on the news. Investor concerns about the ad effectiveness reporting issues may have to do with a previous incident in which Facebook shared inaccurate ad data with brands. That incident led to a class action lawsuit against the social network.

Another potential factor behind the decline in Facebook’s stock today is Apple’s recent changes to privacy settings on iOS. Since April, Apple devices prevent apps from collecting data for advertising purposes unless users opt in. Facebook said today that it expects the privacy update to impact its iOS ad business in the third quarter to a greater degree than it did in the second quarter, reiterating an announcement executives first made earlier this year. 

When marketers launch an ad campaign on Facebook, they receive access to a data analytics dashboard that displays information on the effectiveness of their advertising. The issue disclosed today affects the information that Facebook displays about iOS web conversions. On Facebook’s platform, iOS web conversations are sales-related events such as a purchase or an app download that occur after an iOS user engages with an ad.

The social network said today that it has been underreporting iOS web conversions by about 15% in aggregate. The number is said to vary between individual advertisers. This means that Facebook ads on iOS have been driving 15% more purchases, app installs and other sales-related events than what businesses were led to believe by the social network’s data analytics tools.

Facebook has announced a series of changes to address the issue. The company recently implemented features that will enable businesses to measure more accurately the value of sales events driven by iOS ads and the overall return on investment from their campaigns. Facebook has also enhanced the one- and seven-day ad click summaries that it provides.

Going forward, yet more changes are planned. Facebook will make it easier to trace sales events to ads for businesses that use Apple Inc.’s SKAdNetwork technology. SKAdNetwork is a popular tool that helps companies collect data on ad performance. While at it, Facebook is simplifying the task of measuring ad effectiveness for online retailers that host their storefronts on outside websites such as e-commerce marketplaces.

While the ad reporting issue is being fixed, the social network is recommending that businesses take steps to gain more accurate information about their ads’ effectiveness. Facebook says that users should wait at least 72 hours before they start evaluating a campaign’s performance. Additionally, the social network suggests that businesses assess the effectiveness of an entire campaign rather than individual ads or sets of ads.

For more tech-savvy users, Facebook is suggesting modifications to some of its ad tracking tools’ default settings to improve results. One suggested step businesses can take is to enable the social network’s Conversations API feature, which helps with some of the tasks involved in processing information about ad campaign effectiveness. 

Photo: Eston Bond/Flickr