Forget Fake News: This Is Facebook's Numbers-Related Real Problem

In the wake of last week's U.S. elections, social-media giant Facebook (FB) has found itself in the midst of a firestorm, and its stock has been feeling the burn.

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Although a growing number of Americans have been turning to Facebook to get their daily news fix, a lot of the so-called news stories posted and propagated by the site's users aren't true.

In fact, many people are saying that President-elect Donald Trump's surprising win is in part due to the fake news stories posted on Facebook.

Although a lot of the material published on Facebook is either biased or incorrect, it must be remembered that the site isn't The New York Times. Accuracy and fact-checking are neither Facebook's strengths nor requirements.

Instead, there is a larger, more worrisome challenge facing Facebook and its investors: The company is having difficulty accurately reporting its metrics.

On Wednesday, the company admitted to ignoring several faults in how it has reported its metrics to advertisers and partners.

And this wasn't the first time.

Facebook reportedly discovered three months ago that its report quantifying video viewership hours on its site was also incorrect.

Now Facebook has said that it overstated how long users spent reading its "Instant Articles" and the kind of traction that business pages received on Facebook.

That is crucial, given that Facebook's success is primarily built on two key elements: ad dollars and trust. 

Ad companies and marketers often rely on Facebook to inform them about how well their content is performing.

Facebook's referrals metrics were overstated by 6%, on average. This might seem like a relatively small figure, but it could have swung return on investment numbers positively for Facebook, instead of LinkedIn, Twitter or any other social-media platform.

For its "Instant Articles," Facebook said that it "accidentally" overstated the time spent on stories by 7% to 8%.

Unless Facebook, which trades at a premium valuation of 13.69 times its price-sales ratio, addresses these issues, investor uncertainty could hurt its stock.

If miscalculation and misreporting continues, investors may have to review their logic behind sticking with Facebook shares.

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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.

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