In 2015, Meta had a problem with its ad business. The company, then Facebook, was reckoning with a slowdown in ad pricing growth, caused by a shortfall in data needed to train its system that personalized ads and other content for users. Against this backdrop, Meta in 2017 launched in-house streaming platform Facebook Watch. It announced plans to spend more than $1 billion on the vertical, signing splashy deals for original content starring Elizabeth Olsen, Bill Burry and Catherine Zeta-Jones, among other names, and licensing premium content with plans to become an exclusive TV hub. By Meta’s thinking, the service could be a goldmine of user data it could exploit for targeted ads.
Last year, Meta quietly shut down its original programming arm for the streaming platform. A proposed class action, filed in Illinois federal court on Monday, points to the shuttering of the service as part of an allegedly anticompetitive agreement struck by the company to cede the video-streaming market to Netflix by hobbling Facebook Watch. In exchange, Netflix funneled customer data and ad spend to Meta, the lawsuit claims.
In a statement, Meta denied the allegations. “This suit is baseless, and there is no evidence that any such agreement exists,” a company spokesperson said. Netflix declined to comment.
For nearly a decade, Meta and Netflix, whose then-chief executive Reed Hastings sat on Facebook’s board, enjoyed a special relationship. Netflix bought hundreds of millions of dollars in ads and agreed to custom partnerships intended to supercharge Meta’s ad targeting and ranking models while receiving unique insight into user data on the social media platform, which gave the streamer access to users’ private messages.
This partnership was threatened by Meta’s streaming endeavors. At an industry conference in 2017, Hastings hinted at competition down the road. “There’s not a big conflict yet,” he said.
Behind the scenes, Hastings arranged a deal, the lawsuit claims. In return for Facebook hobbling its streaming arm, Netflix would continue to give subscriber data to Facebook and purchase significant sums in targeted ads on the social media platform, according to the complaint.
“Facebook was willing to kneecap its Watch video service in exchange for extremely valuable consumer data from Netflix as well as Netflix’s dramatic increase in its spending on Facebook advertising,” the lawsuit states.
Until 2019, Hastings headed Facebook’s committee on compensation and governance. This relationship juiced various data-sharing agreements between the two companies. Netflix was one of three companies that got access to Facebook users’ private messages, including the ability to read, write and delete users’ private messages, and to see all participants on a thread. For this information, Netflix sent detailed reports to the company about which videos its users were recommending to their friends, among other things, according to the complaint.
Amid the abrupt pivot in Facebook’s video strategy, the company’s data partnership with Netflix “reached new heights,” with the two sides entering into a series of new deals, according to unsealed court documents in a class action from advertisers against Meta that Monday’s lawsuit references. Netflix also allegedly increased its ad spend on Facebook from roughly $40 million in 2017 to $150 million the next year after the social media company started to dismantle its original content business.
The agreement allowed Netflix to increase prices by cementing its dominance in streaming, the lawsuit says. The proposed class action seeks to represent anyone who subscribed to Netflix since 2017 and brings a claim for a violation of section one of the Sherman Act, an antitrust law that bars restraints on trade and allows for treble damages.
English (US) ·