How Facebook is allegedly 'mischaracterizing its growth' to investors

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(Image credit: KIRILL KUDRYAVTSEV/AFP via Getty Images)

Facebook is finding that young people and teens are spending less time on its flagship social network. And despite the fact that the company has "spent years" studying such trends, executives "have been markedly less forthcoming about those concerns in public," writes Bloomberg, according to documents shared by Facebook whistleblower Frances Haugen.

The tech giant's success otherwise has "masked the persistent issues with young people," meaning user decline among teens and young adults has "been almost invisible to outsiders." That resulting discrepancy pushed Haugen to file a formal complaint with the SEC alleging Facebook to have "'misrepresented core metrics to investors and advertisers' for years by showing overall growth but excluding details that show slowdowns in key demographics," per Bloomberg.

Furthermore, as highlighted by Haugen, many profiles on both Instagram and Facebook are secondary accounts owned by one individual, which allows Facebook to "misrepresent its total audience size to advertisers" and continue "mischaracterizing its growth," writes Bloomberg.

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"All of these variables, from declining user engagement to duplicate accounts, suggest that Facebook hasn't been transparent with investors and advertising clients about its core business," Haugen alleges, per Bloomberg. She believes Facebook has violated U.S. securities laws by failing to disclose how key user cohorts have been on the decline. Such information, as well as the issue of duplicate accounts, could also affect the company's advertising appeal, which Haugen purports to contain "extensive fraud." A Facebook spokesperson said the issue of ads reaching duplicate accounts is disclosed in the company's "Help Center."

Additionally, the documents reveal Facebook how has yet to find a way to reverse its fortunes with the declining younger demographics. "What should we (particularly) optimize for among young adults?" reads one internal report. "We don't know enough to know."

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