Campbell et al v. Facebook Inc.

Filing 148

Exhibits re 147 Administrative Motion to File Under Seal Documents in Support of Facebook's Opposition to Plaintiffs Motion for Class Certification filed by Facebook Inc.. (Attachments: # 1 Exhibit 9 (Unredacted), # 2 Exhibit 10 (Redacted), # 3 Exhibit 11 (Unredacted), # 4 Exhibit 12 (Redacted), # 5 Exhibit 13 (Unredacted), # 6 Exhibit 14 (Redacted), # 7 Exhibit 15 - Part 1 (Unredacted), # 8 Exhibit 15 - Part 2 (Unredacted), # 9 Exhibit 16 (Redacted), # 10 Exhibit 17 (Unredacted))(Chorba, Christopher) (Filed on 1/15/2016) Modified on 1/20/2016 (vlkS, COURT STAFF).

EXHIBIT 14
REDACTED VERSION OF DOCUMENT(S)
SOUGHT TO BE SEALED

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UNITED STATES DISTRICT COURT

2

NORTHERN DISTRICT OF CALIFORNIA

3
4

________________________________

5

MATTHEW CAMPBELL, MICHAEL

)

6

HURLEY, and DAVID SHADPOUR, on

)

7

behalf of themselves and all

)

8

others similarly situated,

)

9
10
11

Plaintiffs,
vs.

13
14

) Case No.

FACEBOOK, INC.,

12

)

) C 13-05996 PJH

Defendant.

) Volume I

________________________________)
HIGHLY CONFIDENTIAL - ATTORNEYS' EYES ONLY

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16

Videotaped Deposition of FERNANDO TORRES,

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taken on behalf of Defendant, at the offices of

18

Lieff, Cabraser, Heimann & Bernstein, 275 Battery

19

Street, San Francisco, California, beginning at

20

8:10 a.m. and ending at 4:42 p.m., on Friday,

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December 18, 2015, before Chris Te Selle, CSR

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No. 10836.

23
24

Job No. 2194240

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PAGES 1 - 307
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economic methods are able to be applied to determine

2

the benefit that Facebook has derived, and, from the

3

alleged actions; and, and that would be, basically,

4

it.

5

Q.

6
7
8

And you said, damages can be measured.

08:36:01

08:36:22

Have you measured damages in this case?
A.

I haven't applied the methodology to the

ideal information, because it has not been produced.

9

Q.

10

information?

11

A.

Well, the data from Facebook.

12

Q.

Is there specific --

13

A.

That --

14

Q.

I'm sorry.

15

A.

That relates exactly to the alleged

16
17
18
19

What do you mean by, the ideal
08:36:46

Go ahead.
08:36:56

actions.
Q.

And what are the alleged actions, as you

understand them?
A.

Well, I would summarize it in the

20

interception of private messages, and the data that

21

I would need is mainly the number of those messages

22

that were intercepted that contained URLs, and the

23

total number of messages for the same time periods

24

to assess the relative importance of those numbers.

25

Q.

When you say, the total number of messages

08:37:07

08:37:40
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that contained URLs, and the total number of

2

messages for the same periods, same time periods,

3

can you explain the comparison.

4

understand the two variables there.

5

A.

08:37:42

I'm not sure I

Well, one of the measures that I would be

6

looking for would be the percentage of messages that

7

contain those URLs and that were intercepted during

8

08:37:53

the class period.

9
10

Q.

And what is your understanding of the

proposed class in this case?

11

A.

Of the definition of the class?

12

Q.

Yes, sir.

13

MR. DIAMAND:

08:38:17

14
15

Calls for a legal conclusion.

You can answer, if you can.
THE WITNESS:

Well, again, that would be in,

16

the actual definition of the class is either on the

17

motions or on my report.

18

you that it would be those members of Facebook that

19

sent private messages and had their private messages

20

intercepted and included URLs during the class

21

period.

22

08:38:29

BY MR. CHORBA:

From memory, I can tell

23

Q.

Do you know what a URL attachment is?

24

A.

A URL attachment?

25

Q.

Yes.

08:38:53

08:39:08
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2
3

A.

I'm not sure I understand the use of that

08:39:15

particular combination of terms.
Q.

Earlier, you mentioned data from Facebook,

4

and you said that the ideal information would be the

5

number of messages containing URLs; is that correct?

6
7

A.

Not exactly.

08:39:30

The ideal information

includes that information that you mentioned.

8

Q.

What else?

9

A.

There's -- well, for example, exactly the

10

advertising revenue from U.S.-based members, because

11

the only publicly-available information refers to

12

U.S. and Canada.

13

Q.

08:39:54

And would that be advertising revenue

14

attributed to the alleged intercepted messages that

15

contained URLs?

08:40:14

16

A.

No.

17

Q.

Were you asked to develop a methodology to

18
19

It's advertising revenue in general.

identify putative class members in this case?
MR. DIAMAND:

Objection.

To the extent that

20

this addresses communications between your counsel

21

and you, caution you not to answer.

22

that without doing that, go ahead.

23

THE WITNESS:

08:40:46

If you can do

So, as, as an economic expert, I,

24

that falls outside of my scope.

25

BY MR. CHORBA:

08:41:04
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opinion in those terms.

2

can't say if it should.

3

BY MR. CHORBA:

4
5

Q.

I can't, as an economist, I

So you are not offering an opinion on as

to whether or not a class should be certified.

6

08:43:04

A.

08:43:15

The matter of should is a legal question.

7

What I'm doing in the report is, assuming it is

8

certified, then it makes sense to analyze damages.

9

Q.

Okay.

So, your report is triggered and

10

your opinion is triggered only if a class is

11

certified.

12

MR. DIAMAND:

Objection.

13

THE WITNESS:

08:43:32

Again, that would be a legal

14

opinion.

15

BY MR. CHORBA:

16
17

Q.

We will do this the longer

way.

18
19

All right.

08:43:44

Are you offering an opinion on any of the
Rule 23 elements, yes or no?

20

A.

I don't even know what the Rule 23 is.

21

Q.

All right, let's go through them.

22

08:43:52

Are you offering an opinion on

23

commonality?

24

A.

25

expert.

I'm not a legal expert; I'm an economics
That's not part of my scope.

08:44:00
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A.

No.

2

Q.

Ascertainability?

3

A.

No.

4

Q.

Superiority?

5

A.

No.

6

Q.

Manageability?

7

A.

No.

8

Q.

If no class is certified, will you have

9
10
11
12

08:44:41

08:44:45

any expert opinions in this case?
MR. DIAMAND:

Objection.

Calls for a legal

08:44:54

conclusion.
THE WITNESS:

I can have the opinions.

13

know if they'll be useful.

14

I don't

BY MR. CHORBA:

15
16
17

Q.

Have you been asked to give opinions if no

class is certified in this case?
MR. DIAMAND:

Objection.

08:45:01

Yes or no.

To the extent that

18

this, again, goes into what I didn't, or with

19

counsel, didn't ask you to do, I'd caution you not

20

to answer.

08:45:13

21

THE WITNESS:

22

if I was asked or not.

23

BY MR. CHORBA:

24
25

Q.

Right.

So, I can't tell you if,

Do you know the answer whether or not your

opinions will be used if a class is certified?

08:45:27
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way in which there would not have been a benefit to

2

Facebook.

3

Q.

08:57:38

And what, based on your understanding of

4

the allegations in the complaint, and your

5

assumption that those allegations are true, what was

6

the benefit to Facebook, as you understand it?

7

A.

08:57:48

Well, the accumulation of the information

8

gleaned from the messages, basically, the edges

9

between members and the marketers and entities

10

identified by the URLs, is accessible through, as

11

part of the social graph, it's accessible to

12

Facebook in developing the targeted advertising

13

services that, that generate this revenue.

14

Q.

Thank you.

08:58:12

That's helpful.

15

Let's assume that the information is

16

accessible to Facebook, as the provider of the

17

service, so, information from messages is

18

accessible.

19

A.

Uh-huh.

20

Q.

I'm asking you this as a hypothetical.

08:58:35

21

It's available, but it's not used for targeted

22

08:58:44

advertising.

23

Would that impact your opinions at all?

24

MR. DIAMAND:

Objection.

Hypothetical.

25

THE WITNESS:

That would be a technical

08:58:58
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Q.

Does your opinion that there were, that

2

there's a methodology to determine damages hinge on

3

whether or not the information resulted in a revenue

4

09:01:27

generating activity for Facebook?

5

MR. DIAMAND:

Objection.

09:01:37

6

THE WITNESS:

So, my methodology determines the

7

benefit to Facebook from a specific action, and

8

that's, that's what it refers to, the alleged

9

action.

10
11

BY MR. CHORBA:
Q.

09:02:00

Why doesn't it examine, your methodology

12

examine, instead of examining benefit to Facebook,

13

why doesn't it examine detriment to the putative

14

class?

15
16
17

MR. DIAMAND:

Objection.

Calls for a legal

09:02:12

conclusion.
THE WITNESS:

So, my report and methodology

18

that I developed was asked to analyze the benefits

19

to Facebook, so that's, so, it doesn't calculate the

20

detriment to the class members, or the potential

21

class members, because it wasn't meant to.

22

BY MR. CHORBA:

23
24
25

Q.

09:02:31

So, you have not developed a methodology

to calculate damages to putative class members.
MR. DIAMAND:

Objection.

09:02:49
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THE WITNESS:

That, that was not my task, no.

09:02:50

BY MR. CHORBA:
Q.

If you can turn to paragraph 7, I'm going

4

to bounce back a little bit, and I'll show you other

5

documents today, but let's keep this one handy.

6

This is Exhibit 1 for a reason.

7

paragraph 7, Mr. Torres, and it carries over from

8

pages 2 to 3, you state there in your introduction

9

assignment and summary of conclusions, under that

09:03:04

And, if you look at

10

heading, you say, the plaintiffs' consolidated

11

amended class action complaint, the CAC, alleges

12

that Facebook utilizes information surreptitiously

13

gathered from purportedly private correspondence

14

sent between Facebook users and uses that

15

information in a number of ways, including, and then

16

it goes on, A, B, C.

17

09:03:23

09:03:40

Did I read that correctly?

18

A.

Yes.

19

Q.

And you assumed, again, this is a place

20

where you assume the specific allegations in the

21

consolidated amended complaint were true; is that

22

correct?

23

A.

Yes.

24

Q.

09:03:50

If we go to A, so, if we flip to page 3,

25

and, again, this is one of the uses in the complaint

09:04:06
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report.

2

don't know what happens.

3

me.

4

BY MR. CHORBA:

5
6

Q.

If in the future no class is certified, I

09:52:15

The future is unknown to

You'd have to conduct a fresh analysis at

09:52:23

that point, is that what I'm hearing?

7

A.

8

MR. DIAMAND:

Objection.

9

THE WITNESS:

I don't know what I would do.

10

I don't know.

BY MR. CHORBA:

09:52:51

11

Q.

Have you ever used Facebook?

12

A.

Yes.

13

Q.

Are you currently a member of Facebook?

14

A.

Yes.

15

Q.

How long have you had a Facebook account?

16

A.

I opened my account around 2009.

17

Q.

And has it been active since then?

18

A.

Well, I checked yesterday, it was still

19
20
21

09:53:03

active, so it hadn't been cut off.
Q.

You never, you never intentionally closed

09:53:25

your account?

22

A.

No.

23

Q.

That was good.

24
25

Have you ever sent a Facebook message?
A.

I think I have.

09:53:46
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2

Q.

Do you recall whether or not you ever sent

09:53:48

a Facebook message with a URL in it?

3

A.

No, I don't think so.

4

Q.

So I assume, then, you never sent a

5

message with a URL attachment?

6

MR. DIAMAND:

Objection.

7

THE WITNESS:

No.

09:54:01

8
9
10
11
12
13

BY MR. CHORBA:
Q.

Do you remember if you sent more than one

Facebook message containing a URL?
A.

09:54:15

As I said, I haven't sent a message

containing a URL.
Q.

14
15

So, one precludes the other.

Oh, I'm sorry.

I misunderstood you.

Is it possible you did, and you just
forgot, or are you pretty confident you didn't?

16

A.

I'm pretty confident I didn't.

17

Q.

09:54:27

Approximately how many Facebook messages

18

in total have you sent in your life?

19

A.

I think it's in the order of two or three.

20

Q.

Have you ever received a Facebook message?

21

A.

Yes.

22

Q.

Do you recall approximately how many

23

09:54:45

you've received?

24

A.

One.

25

Q.

One.

Did that Facebook message contain a

09:54:57
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Which records are you referencing there?

2

A.

10:24:47

So, I would expect class membership to be

3

identifiable, based on Facebook's records as to what

4

messages were sent, what messages could have been

5

intercepted or not.

6

membership identification would belong.

7

Q.

That's where the class

10:25:03

And are you offering an opinion in this

8

case that class membership is identifiable and

9

ascertainable based upon Facebook's records?

10

MR. DIAMAND:

Objection.

11

THE WITNESS:

To the extent that's a technical

12

issue as to what records to look at to identify the

13

membership in the class, that's not, that's outside

14

of my scope.

15

BY MR. CHORBA:

10:25:19

16

Q.

10:25:33

So, are you assuming that class membership

17

is identifiable and ascertainable based upon

18

Facebook records, or are you opining that?

19

A.

I'm considering that that is something

20

that will happen when the class is certified, if it

21

is.

22

Q.

23

MR. DIAMAND:

Objection.

24

THE WITNESS:

10:25:46

I would expect that formal class

25

And so it would occur after certification?

membership would be determined once the definition

10:26:00
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advertising services to marketers.

10:31:52

2

Q.

What do you mean by, marketers?

3

A.

In this report, I mean by marketers the

4

same thing that Facebook defines as marketers, which

5

are their clients, the people responsible for

6

advertising, companies, entities, organizations, and

7

whether they are direct entities or agencies in the

8

advertising market.

9
10
11
12
13
14
15

Q.

Do you have any specific examples that you

can give?
A.

10:32:10

10:32:31
Well, other than an ad agency or a

specific company, like Coca Cola.
Q.

And why did you use this term, this

defined term, Marketers, with a capital M?
A.

Because it's not any marketer.

It's

16

advertisers in Facebook, so it's a shorthand

17

10:32:53

notation for that.

18
19

Q.

Would you include, it says here, third

party websites, parentheses, marketers.

20

Is there, are there other, I guess,

21

entities or individuals that fall under the term

22

10:33:10

marketers that aren't third party websites?

23

A.

The limitation is the other way around.

24

There are other third party websites that are not

25

marketers in the sense of Facebook.

10:33:26
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3
4

private messages.
Q.

10:43:45

And do you lay out these calculations

anywhere in your report?
A.

Well, in the body of the report, in

5

section 4, I lay out the methodology and the

6

beginnings of the calculations that can be done with

7

publicly-available information.

8

the calculations, because I haven't received the

9

precise data from Facebook.

10

Q.

11
12

10:43:57

I haven't finalized

And you said, in section 4 of your report.

10:44:23

Would that be both sections A and B, or is
it one specific section?

13

A.

I would say it's probably both.

14

Q.

And you said you haven't finalized the

15
16

calculations.

10:44:36

What do you mean?

You haven't actually

17

calculated the amount in the aggregate, or for a

18

specific person?

19

MR. DIAMAND:

Objection.

20

THE WITNESS:

Right.

Vague.

So, I have not calculated

21

a final number, and definitely not a final number

22

per person.

23

and I haven't made any estimates or assumptions, in

24

addition, to try to simulate or substitute for that

25

information.

10:44:47

The information has not been provided,

10:45:12
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BY MR. CHORBA:

2

Q.

10:45:19

Does your methodology account for

3

potential benefits to class members from the

4

challenged practices?

5

A.

No.

I mean, in calculating the benefits

6

to Facebook, I don't consider benefits to somebody

7

10:45:36

else.

8
9

Q.

And both methodologies in section 4 A and

4 B measure benefit to Facebook?

10

A.

Correct.

10:45:49

11

Q.

So at no point, well, let me ask you, have

12

you attempted to calculate detriment to the putative

13

class?

14

MR. DIAMAND:

Objection.

15

THE WITNESS:

As I said, that, that's not part

16

of my scope.

17

Facebook.

18

10:46:09

BY MR. CHORBA:

19
20

Q.

My scope is to analyze the benefits to

Have you been asked to prepare a rebuttal

opinion to any report prepared by Facebook?

21

A.

No.

22

Q.

10:46:29

Circling back, just in front of you,

23

paragraph 11 B, is your definition of marketers

24

limited to third party websites that have a like

25

button social plugin installed?

10:46:50
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in the disclosures.

2

10:59:54

Yahoo does a bad job about it, because

3

they really don't have enough information about the

4

person, so it's not well-targeted.

5

that there is litigation involving any of those two.

6

Q.

And -- okay.

I don't know
11:00:11

If Twitter were to engage

7

practices, in practices similar to those alleged in

8

this case, would you change your practices with

9

using Twitter?

10

A.

My personal view is that you do have to

11

read what the privacy policy is, and you have to

12

know to expect that if you are not paying for a

13

11:00:35

product, you are the product.

14

Q.

If we look, I'm going to flip back to the

15

report, paragraph 18.

It's a lengthy paragraph, but

16

I'd like to focus on the last two sentences, so it

17

carries over from pages 7 to 8.

18

you are there.

19

It's on line 18, on page 7.

20

advantage stems from the power of leveraging the

21

deep targeted knowledge available from its unique

22

access to an increasingly complete and computerized

23

social network, including by tracking users beyond

24

the Facebook.com website.

25

activities providing online social networking

11:01:13

Let me know when

I will just read it, to focus you.
Facebook's competitive
11:01:36

Consequently, the two
11:01:54
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Q.

But if the claims are not correct, would

2

you have any basis for stating that either Exhibit 4

3

or Exhibit 3 have any information gleaned from

4

11:36:47

messages on Facebook?

5

MR. DIAMAND:

Objection.

11:37:01

6

THE WITNESS:

Again, these documents are

7

marketing documents from Facebook.

This is designed

8

to sell the product and to actually develop the

9

product.

This is designed to market Facebook

10

advertising as a medium to other marketers who are

11

looking into online advertising.

12

What you are asking is about the technical

13

information that would allow somebody to make a

14

technical determination of whether that specific

15

information that is gleaned from the private

16

messages eventually makes its way to one or more

17

advertising campaigns.

18

11:37:16

BY MR. CHORBA:

19
20

Q.

11:37:32

And what kind of technical information

would you need to make that determination?

21

MR. DIAMAND:

Objection.

22

THE WITNESS:

11:37:42

I'm not looking for technical

23

data to do a technical analysis.

What I would need

24

is a technical expert to determine that, in fact, at

25

least in some way, the information gleaned from the

11:37:57
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messages is usable to Facebook.

2

BY MR. CHORBA:

3
4

Q.

11:38:02

You stated earlier that the technical

information has not been produced.

5

A.

To my knowledge.

11:38:10

6

Q.

Do you know whether it's been produced,

7

and you just haven't seen it, or it's your

8

understanding it hasn't been produced at all?

9

MR. DIAMAND:

Objection.

10

THE WITNESS:

My understanding is, it hasn't

11

been produced beyond maybe what pertains to the

12

named plaintiffs, but, information about the class,

13

I don't think it has been produced.

14

11:38:19

BY MR. CHORBA:

15
16

Q.

What about source code?

Are you aware if

11:38:33

source code has been produced in this case --

17

A.

I'm not aware.

18

Q.

-- more than 10 million lines of source

A.

I'm not aware of that, because it's not my

19
20
21
22

code?
11:38:40

task to analyze the source code.
Q.

So, do you have any factual basis to state

23

that either, that any of the targeted options in

24

Exhibit 3 or Exhibit 4 contain information gleaned

25

from Facebook messages?

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basis to state that objects and associations are

2

created from Facebook messages.

3

A.

12:53:33

Again, the factual basis would be

4

technical data, technical information that is not in

5

my scope to analyze.

6

if it's information that is made part of Facebook's

7

resources, it's information that is available to

8

use.

9

Q.

From an economic perspective,

12:53:45

And if Facebook does not create objects

10

and associations based on URLs in Facebook messages,

11

would that impact your damages methodology?

12

A.

12:54:04

Well, to the extent that that hypothetical

13

situation would indicate that there is no, or that a

14

particular course of action or cause of a litigation

15

might not be sustained, my report would not be

16

relevant to that particular hypothetical.

17

Q.

12:54:30

Particular hypothetical, again, if it were

18

not true, you are saying your report wouldn't come

19

in in that instance?

20
21
22

MR. DIAMAND:

Objection.

Calls for a legal

12:54:50

conclusion.
THE WITNESS:

Right.

So, in, under those

23

circumstances that are in your hypothetical, I don't

24

know, I can't know if my report would be either

25

appropriate, or used, or anything else.

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is, Facebook in integration is more effective than

2

it really is.

3
4
5

Q.

01:06:17

Why does it make it appear that the

integration is more effective than it is?
A.

Because the like count is increasing,

6

despite the fact that the person is not clicking on

7

01:06:31

the like button on the third party website.

8
9

Q.

And does that opinion depend on how much

the like counter is increasing, based on messages?

10

MR. DIAMAND:

Objection.

11

THE WITNESS:

Not necessarily.

12

01:06:46

BY MR. CHORBA:

13

Q.

Why not?

14

A.

Because it depends, it would depend on

15

exactly what the proportion of the enhancement is.

16

During some, at some point, according to some of the

17

experiments reported on The Wall Street Journal, the

18

like count was increasing twice, or, or, in a

19

two-to-one ratio, to including the URLs in the

20

messages.

21

01:06:55

01:07:20
So, if that happens to a website, a third

22

party website that has like counts organic like

23

counts of, in the order of one or two, then it's a

24

100 percent increase.

25

If it happens to Coca Cola, and they

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already have 500,000 likes on their third party

2

website, that is a miniscule less than a 1 percent,

3

so, they won't be as influenced or as impressed by

4

the increase.

5

Q.

6

And if you look -- thank you.

01:07:36

01:07:54

If you look at 34 B, it states, benefits

7

from artificially increasing the like count on third

8

party websites using Facebook's social plugins.

9
10
11

What did you mean by, artificially
increasing the like count on third party websites?
A.

01:08:10

Well, because the idea that the, or the

12

description of the counter next to the like button

13

on the third party website is that it represents the

14

number of times people have clicked on that button.

15

And it was being increased not because

16

people were doing that action of clicking there,

17

they were referencing the URL in a private message.

18

Q.

01:08:23

What if someone sent a URL in a Facebook

19

message, knowing and intending that the like count

20

would be increased?

21

an artificial increase of the like count?

22

A.

Would you consider that to be

01:08:43

Well, that could stand as a description of

23

what the experiments reported in The Wall Street

24

Journal article were, that they were noticing that,

25

and the artificial nature of it is that you are

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the like count.

01:16:16

2

A.

Uh-huh.

3

Q.

If somebody is paid to click on the like

4

button on a third party website, would you consider

5

that to be an artificial increase of the like count?

6

A.

01:16:23

In that situation, an artificial increase

7

is something that is not a click by somebody who's

8

interested in the brand.

9

Q.

How about if someone, think of another

10

example, someone is interested in clicking on that

11

brand, but not maybe in the way of developing an

12

affinity or support of that brand.

13

example of a contest.

14

contest.

15

haircut this week, and 100 people enter, only one

16

person gets the, gets the, and they enter by

17

01:16:40

clicking on the like button.

So, let's use an

A local hairdresser offers a

If you like my page, you get a free

18

A.

Uh-huh.

19

Q.

01:16:57

Would those be artificial increases in the

20

like count?

01:17:07

21

MR. DIAMAND:

Objection.

Hypothetical.

22

THE WITNESS:

In that hypothetical situation, I

23

think you would consider, or, economically, you are

24

still considering that it's artificial, that it's a

25

misuse of the original intent of the likes, of the

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like count.

2

01:17:23

I think that's what's behind Facebook changes

3

to just using like as the operating verb, and trying

4

to make it more nuanced, going forward.

5

BY MR. CHORBA:

6
7

Q.

9

What are you referring to there?

sorry, I lost you.

8

A.

01:17:37
I'm

When you said it's --

Well, lately, Facebook has hinted at

introducing other alternatives for people to express

10

their response or reaction to posts and things like

11

that.

12

if somebody posts a death or reports a death in the

13

family, that the summary way to show your, your

14

awareness of the message, or anything else, is to

15

click on like.

16

01:17:49

I mean, it's always been a curious thing that

Q.

01:18:14

I follow you, but, for now, we're just

17

dealing with this case, and it's the like, and I'm

18

trying to understand.

19

So, in that contest hypothetical, you

20

would view that as an artificial like, correct, from

21

an economics perspective?

22
23
24
25

A.

Within the context of that hypothetical,

Q.

01:18:23

And, just to be clear, if the web page had

yes.

a like button, but no counter next to it --

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Q.

Mr. Torres, the reporter's just handed you

2

a document that bears the title, we've marked it as

3

Exhibit 5, it bears the title Facebook Q2 2015

4

01:27:14

Results.

5

Can you please take a look at that.

6

A.

Yes.

7

Q.

And is this, have you seen this document

8

before?

9

A.

Yes.

10

Q.

Is this the document upon which you relied

01:27:23

11

for purposes of determining that $1.593 billion

12

figure?

13

A.

Yes.

14

Q.

01:27:31

Was there any other material you relied

15

upon?

01:27:41

16

A.

For that number, no.

17

Q.

Precise.

I appreciate it.

And, more

18

specifically, as stated in footnote 66, you took the

19

numbers from slide 9 of this Exhibit 5 --

20

A.

Uh-huh.

01:27:54

21

Q.

-- is that right?

22

A.

Yes.

23

Q.

If you can turn to slide 9.

Can you just

24

briefly walk me through how you came up with that

25

number.

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A.

So, the four numbers in the dark portion

2

of the columns of the bars, those are the revenue

3

01:28:05

numbers for the U.S. and Canada region.

4
5

Q.

So that's for Q3 2014 through Q2 2015,

those four columns; is that right?

01:28:28

6

A.

Yes.

7

Q.

So, the numbers, let's just read them off,

8

so we're clear:

1514, 1864, 1739, and 1967?

9

A.

Yes.

10

Q.

And, what, did you add those together?

11

A.

Yes, and then average them.

12

Q.

And how did you average them?

13

A.

Divide by four.

14

Q.

And that's how you came up with the

15

$1.593 billion figure?

16

A.

No.

01:28:41

01:28:53

Like it says there, I did another

17

adjustment to, in an attempt to exclude the data

18

from Canada, so I applied 89.96 percent to take into

19

account of the ratio of Canadian population to U.S.

20

population.

21

Q.

Thank you.

01:29:12
And what was the ratio that

22

you used there, what was the data?

23

It was Census

data?

24

A.

Yes.

25

Q.

Is it commonly accepted economic practice

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to rely on Census data to back out Canadian revenue

2

versus U.S. revenue?

3

A.

01:29:27

Well, in the absence of the right

4

information, because Facebook is not reporting just

5

the U.S. information, so, in the absence of that

6

information, which I believe was asked for, one way

7

to estimate it is to assume that the penetration

8

rate is the same in the U.S. and Canada, and that

9

also means that the ratio population is the same as

10
11

the ratio of users.
Q.

12
13
14

01:29:40

01:30:03

But you said that's one way.
Is that the best way, in your experience,

in lieu of the breakdown from -A.

That's a, that's a, I believe, a

15

reasonable approximation, because one of the

16

underlying reasons that companies oftentimes

17

conflate the U.S. and Canada is that the populations

18

are relatively similar for these purposes, so they

19

have the same penetration, they have the same

20

attitudes.

21

language, and --

For the most part, they share a

22

Q.
A.

-- it's a small percentage.

24

Q.

01:30:44

Have you relied on -- sorry.

23

01:30:21

I didn't mean to interrupt you, sir.

25

Have you relied on Census data before to

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make this type of breakdown in giving an expert

2

opinion or making a valuation?

3

A.

Yes.

4

Q.

01:30:57

And then you deducted expenses of

5

40.75 percent; is that correct?

6

A.

Yes.

7

Q.

01:31:08

Why did you deduct expenses of

8
9
10

40.75 percent?
A.

Because I want to determine profits, not

total revenue.

01:31:18

11

Q.

Do you know the actual expenses?

12

A.

The actual expenses are not disclosed by

13
14
15
16

user geography.
Q.

Is it possible that this understates

Facebook's expenses?
A.

01:31:29

Because it's an average for the overall

17

company, it's just as likely to understate it as to

18

overstate it.

19
20

Q.

But it's possible it understates the

expenses, correct?

01:31:42

21

A.

A lot is possible.

22

Q.

But it is possible?

23

A.

Well, strictly speaking, there are going

24

to be expenses that cannot be allocated to either

25

one of the geographies, so, in the end, even if we

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had full access to the information, an apportionment

2

was going to be necessary.

3

Q.

01:32:07

And on slide 9, you understand that slide

4

9 concerns revenue by user geography, as noted at

5

the top of the page, correct?

01:32:25

6

A.

Correct.

7

Q.

And do you understand that the term,

8

revenue, for purposes of slide 9, includes more than

9

just revenue generated by advertising?

10

A.

Yes.

Did --

01:32:43

11

Q.

Look at slide 8.

12

A.

Yeah, so I probably, so, there may have

13

been a mistake in the, in the page number, because I

14

used most of these slides, but the idea is

15

advertising revenue, which is on slide 10.

16
17
18
19
20

Q.

01:33:09

So, you intended to use the figures in

slide 10, rather than the figures in slide 9?
A.

I think I, that's what I used in the

calculations.
Q.

I would have to double-check.

Well, I will represent to you, we did the

21

math, and the figures are based on slide 9.

22

want to take a break and do the calculations again,

23

01:33:31

they are based on slide 9, as cited in footnote 66.

24
25

If you

So, is this a mistake in your report?
MR. DIAMAND:

Just a minute.

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THE WITNESS:

2

01:33:49

approximation.

3

Well, it's an error in the

BY MR. CHORBA:

4
5
6

Q.

And that would be an error in the

approximation on page 18, table 1?
A.

Yes.

01:33:52

It might have adjusted a little bit,

7

because advertising revenue is 90-some percent of

8

the total revenue, so the error, if any, is less

9

than 10 percent.

10
11

Q.

What if I told you the error was

01:34:10

$1.2 billion?

12

Is that a little bit, in your opinion?

13

A.

That would be incorrect.

14

Q.

Why?

15

A.

I don't think there's a way that ad

16

revenue, which, for example, just to take the actual

17

numbers, in the second quarter of '15, advertising

18

revenue from the U.S. and Canada is 1826, and total

19

01:34:20

revenue is 1967.

20

Q.

Well, help me understand --

21

A.

That's a difference of 100 million.

22

Q.

Look on table 1.

23

01:34:38

Which figure there is populated by your

24

error in relying on slide 9 instead of slide 10?

25

Which number is that?

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A.

I don't understand the question.

2

Q.

You said that you used slide 9 in your

3

report.

4

were looking at, and, if you can turn to page 18 in

5

your report, I'm just trying to figure out where

6

this impacts your report.

7

this table is impacted by using slide 9 instead of

8

slide 10?

01:34:53

You intended to use slide 10, which, if we

01:35:04

Table 1, which figure on

Is it the annual profit column?

9

A.

Yes.

10

Q.

And would it be each, each instance

11
12
13
14

01:35:19

3.776 billion is used?
A.

Well, yes, although those would be

discounted at different rates.
Q.

Correct, but, if you add them up over

15

eight years, would you be surprised that the net

16

impact is $1.27 billion difference?

17

01:35:35

$15 billion, and it's 13.8 billion.

You have

18

A.

But you can't add the numbers in that

19

column.

20

Q.

Which column?

21

A.

The column of annual profit.

22

Q.

Oh, I understand.

01:35:55

You are going to fix

23

the annual profit column.

It'll be the same number.

24

We'll come back to that, why you are using the same

25

number based on just one quarter, but it would be

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the same number, once corrected, for the whole

2

column, correct?

3

A.

Yes.

4

Q.

Okay.

01:36:08

5

And then you'd multiple it by the

discount factor, and you'd get the discounted value.

6

A.

Right.

7

Q.

01:36:15

But, if the annual profit number comes

8

down 10 percent each year, the discounted value

9

column is going to come down, as well, correct?

10

A.

Right.

So, the ratio in which it would

11

come down would be in the ratio of, roughly, the

12

01:36:27

difference is 125 million here, so, 125 in 1800.

13

Q.

In one quarter.

14

A.

Yes, but the ratio is, is, happens in all

15
16

four quarters.
Q.

01:36:47

Mr. Torres, didn't you add up four

17

quarters, then divide by four, then multiply by

18

89 percent?

19

A.

That's an average, so that ratio, the

20

ratio is the same across the four quarters,

21

approximately the same, so that ratio is the ratio I

22

would expect the numbers to come down.

23
24
25

Q.

01:36:56

But what would you expect the total value

of $15 billion in -A.

I would have to --

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(The following portion was read:

2

Q.

3

01:37:14

value of $15 billion -- )

4
5
6
7
8

Q.

-- in table 1, what would you expect that

to come down to?
A.

01:37:17

I would have to revise the calculations to

make a determination.
Q.

9
10

But what would you expect the total

And I've done that.
And would it surprise you that it's

$1.27 billion off?

01:37:24

11

MR. DIAMAND:

Objection.

12

THE WITNESS:

But it's not, you are not talking

13

about 1.27 in the quarterly number; it's 1.27 in

14

the --

15

BY MR. CHORBA:

01:37:33

16

Q.

That's what I said, sir.

17

A.

-- in the capital amount.

18

Q.

In the total discounted value, total value

19

at the end, where it's 15 million, that's

20

1.27 million overstated, correct?

21
22
23
24
25

A.

01:37:41

So, the ratio is the same, 1/16th,

approximately.
Q.

Do you think a $1.27 billion calculation

error is insignificant?
A.

It depends on its relation to the total,

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so that's why I'm saying it's a 1 in 16 error.

2

Q.

But it's still an error.

3

A.

01:37:57

It's an error in the calculation, if what

4
5

you are saying is correct, because -Q.

Well, is what I'm saying incorrect?

6

What's incorrect about it?

7

01:38:11

slide 9 versus 10.

8
9
10

A.

We just went through

I didn't say it was incorrect.

I said, if

it is correct.
Q.

Well, okay, Mr. Torres, which number is

11

correct?

12

01:38:21

slide 9, or slide 10?

13

A.

14

slide 10.

15

Is it, should the figures be based on

The calculations should have been based on

slide 10.

16

I thought I had done it on the basis of
01:38:36

MR. CHORBA:

Do you want to take a break and

17

look at, do the quick calculation to test?

18

done it, but I need his testimony on what's right,

19

so we can, let's take a break.

20

allotted time for him to recalculate his table.

21

MR. DIAMAND:

23

THE VIDEOGRAPHER:

I'm not using my
01:38:48

Shall we go off the record?

22

We've

24
25

Okay.
It is 1:38.

We are going

off the record.
(Recess:

1:38 p.m. to 1:49 p.m.)

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THE VIDEOGRAPHER:

2

01:49:35

It is 1:49.

3

We are back on the record.

BY MR. CHORBA:

4

Q.

Mr. Torres, when we broke, we were looking

5

at table 1, and I think you'd left to just

6

double-check the calculations.

7
8
9

01:49:41

Do you have any corrections to make to
that table?
A.

Well, like I, I confirmed that the

10

adjustment that would need to be made to the number

11

derived on line 18 of paragraph 39 is a reduction in

12

the order of 9.17 percent that affects the total

13

value determined in table 1.

14

Q.

So --

15

A.

So it's within the order of magnitude that

01:49:54

16
17

01:50:14

I thought.
Q.

Let's put aside the order of magnitude of

18

the error.

19

line 18, 3,776,000,000 per year.

20
21
22
23
24
25

What is the correct number?

It says on

What's the correct number?
A.

Well, I didn't make a note.

01:50:26
It's

9.17 percent less than this.
Q.

What's the correct number in paragraph 39

in your report?
A.

It's slightly less than this by

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2
3

9.17 percent.
Q.

01:50:43

You are not going to tell me what the

number is?

4

A.

I don't have the number at hand.

5

Q.

What did you calculate when we left?

6

What

01:50:47

did you do?

7

A.

8

number.

9

have used.

10
11
12

Q.

I used the spreadsheet to calculate the
I did the sum of the numbers that I should

Can you bring that spreadsheet in so we

01:50:57

can get the correct numbers.
MR. DIAMAND:

Hold on.

I don't think we

13

realized that what you were expecting was the

14

corrected number for line, or line 18 --

15

MR. CHORBA:

16

MR. DIAMAND:

17
18

It is.

Let's break and get it.

We will provide that.

not what our understanding was.
MR. CHORBA:

Okay.

That was

I'm sorry.

Fair enough.

19

Let's break.

20

That's fine.

I should have been clear.

corrected figures in the report.

21

MR. DIAMAND:

22

THE VIDEOGRAPHER:

23

01:51:11

We want the
01:51:17

Okay.
Okay.

It's 1:51.

We're

going off the record.

24

MR. DIAMAND:

25

MR. BATES:

Hold on.
Just so we don't go off the record

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again, I just want to make sure we get exactly what

2

you want, so --

3

MR. CHORBA:

4

MR. BATES:

5

MR. CHORBA:

6

MR. BATES:

7

Yeah.

We're trying to -I understand.

01:51:36

-- provide you with what you

MR. CHORBA:

9

MR. BATES:

11

Mr. Bates --

wanted --

8

10

01:51:28

I understand.
-- the last time around.

MR. CHORBA:

So, paragraph, in paragraph 39 and

01:51:36

in table 1 on page 18, the corrected figures.

12

MR. BATES:

13

For every single -- okay.

MR. CHORBA:

Yeah.

I mean, I want the right

14

numbers so I can ask him questions today and not

15

bring him back again.

16
17

MR. BATES:

Do you want like all the way

through?

18

MR. CHORBA:

19

MR. BATES:

20

THE VIDEOGRAPHER:

21

Yes.
Okay.
It's 1:51.

We're going off

01:51:56

the record.

22
23

01:51:50

(Recess:

1:51 p.m. to 2:05 p.m.)

THE VIDEOGRAPHER:

24

It's 2:05.

25

We're back on the record.

BY MR. CHORBA:

02:05:57
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Q.

Mr. Torres, when we broke, you were going

2

to take another look at the figures cited in

3

02:05:57

paragraph 39, footnote 66, and table 1.

4

Do you have corrections for us?

5

A.

Yes.

02:06:06

6

Q.

Can you give those to me, please.

7

A.

Okay.

So, starting in paragraph 39, at

8

the end of line 13, the advertising revenue is in

9

the order of 1,459,000,000 per quarter.

And in

10

footnote 66, at the end of the second line, the four

11

quarters would be the four quarters between

12

July 2014 through June 2015.

13

02:06:31

1,622,000,000.

The correct number is

14

Q.

That's in place of the 1771?

15

A.

1771.

Yes.

And then in line 18, at the

16

beginning of the line, the profit is 3,459,000,000

17

02:06:52

per year.

18

MR. DIAMAND:

Would you permit me to make one

19

additional point, which is that there's a reference

20

to slide 9 in footnote 66.

21

MR. CHORBA:

22

MR. DIAMAND:

23

02:07:11

Thank you, Nick.
Which would be, I think, now,

slide 10.

24

MR. CHORBA:

25

MR. DIAMAND:

Thank you.
I apologize for the objection.

02:07:18
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BY MR. CHORBA:

2
3

Q.

02:07:23

So, those three corrections on page 15, is

that all, Mr. Torres?

4

A.

Yes.

And then that feeds into the table

5

1, where the annual profit numbers would be

6

3,459,000,000, and the discounted values in that

7

line, for the whole line, for the full column, would

8

be 2915, 2457, 2070, 1745, 1470, 1239, 1044, and

9

880, for a total of 13,820,000,000.

10

Q.

Thank you.

11

A.

Yes.

12

Q.

Thank you for doing that.

02:07:32

13

Was that everything?

02:08:18

I appreciate

it.

14

Is, you referenced earlier a spreadsheet.

15

Do you have a working sheet that has the

16

calculations for table 1 that you then used to

17

02:08:27

generate table 1?

18

A.

Yes.

I have a model set up in my

19

software.

20

*RQ

21

a copy of that, electronic copy of that model?

22

maybe I should direct this to you, Mr. Diamand, but

23

we have, I'm slightly off, and I think it may be

24

just rounding errors on our part.

25

consult that with our expert, and look at the actual

MR. CHORBA:

Would it be possible for us to get

02:08:46

And

I'd like to just
02:09:00
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formulas, just to make sure.

2

MR. DIAMAND:

3

MR. CHORBA:

4
5

02:09:03

Okay, we can address that.
Thank you.

BY MR. CHORBA:
Q.

So, setting aside the mathematical error

6

that we discussed, Mr. Torres, do you have any other

7

concerns about the accuracy of the information

8

02:09:16

provided in paragraph 39 on page 15?

9

A.

Not concerns.

These, because these are

10

estimates, we're still waiting for the information

11

that corresponds to U.S. advertising revenue.

12

are just my estimates of that number.

13

02:09:34

These

So, when we get it, we'll substitute it,

14

and there won't be any question of these

15

calculations.

16

Q.

17
18
19
20
21

02:09:49

You said there's U.S. advertising revenue.
What information are you waiting for?

A.

The advertising revenue that reflects only

the U.S.
Q.

And it's your understanding that's been

02:10:03

requested?

22

A.

Yes.

23

Q.

Are you assuming that all advertising

24

revenue to Facebook is attributable to the social

25

graph?

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that determination, that determination would

2

constitute a quantification of the potential overlap

3

of the calculations, so, if there is information to

4

determine that, by somebody else, I could make a

5

count of that potential overlap.

6

BY MR. CHORBA:

7
8
9
10
11
12

Q.

02:13:24

But in your report, as stated, you haven't

developed a methodology to account for that overlap?
A.

As the methodology states, I don't have

that information available.
Q.

02:13:39

What if an individual, the same individual

sent the same URL in multiple Facebook messages?

13
14

02:13:08

Would each message be accounted for
separately, under your damages methodology?

15

MR. DIAMAND:

Objection.

02:13:58

16

THE WITNESS:

The methodology depends, is

17

structured in two stages.

One is to determine

18

eventually the value per link, and then I would

19

incorporate the number of links captured that fall

20

under the definition of a class.

02:14:20

21

So, it's a technical determination.

22

take that number from the technical analysis.

23

BY MR. CHORBA:

24
25

Q.

I would

Turning back to paragraph 39, how did you

determine that the average cost of revenue,

02:14:34
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have you excluded expenses for research and

2

development?

3

A.

Yes.

4

Q.

But not in all of them?

5

A.

No.

02:17:20

In some valuations, yes.

It depends on what is being measured.

6

In some valuations, the research and development is

7

the only aspect it would take.

8

02:17:30

you would exclude, so, it depends.

9

Q.

In some, it's one

And in, staying on slide 13 of Exhibit 5,

10

why did you pick these four quarters of Q3 2014

11

through Q2 2015?

12

A.

02:17:46

Both in the revenue and the expenses, I

13

used the last four quarters, so, the trailing 12

14

months as of the latest information that I had

15

available by the time I did the report.

16
17
18

Q.

02:18:02

Are you assuming that costs do not change

over time, or will not change over time?
A.

No.

The implicit assumption is that I'm

19

using the cost structure that was prevalent on

20

average in the last, in the trailing 12 months.

21

Q.

02:18:15

If you were tasked with valuing the social

22

graph of Myspace in 2007, would you have used a

23

similar methodology as one that you've used here?

24

MR. DIAMAND:

Objection.

25

THE WITNESS:

Well, in that hypothetical

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situation, I would have to, to perform a series of

2

due diligence and preliminary analyses.

3

sure that Myspace had the same revenue model, so I

4

would have to reconsider the revenue model then,

5

and, to see if that is sufficient.

6

BY MR. CHORBA:

7

Q.

02:18:46

I'm not

02:19:06

What about the discount factor?

Would you

8

have used the same methodology to come up with a

9

discount factor?

10

A.

Yes.

The general methodology that I use

11

for the discount factor is the same everywhere.

12

This is the generally accepted way of determining

13

02:19:16

that discount rate.

14

Q.

In table 1 on page 18, are you assuming

15

the social graph will generate the same annual

16

profit every year?

17

A.

Approximately, yes.

02:19:29

The underlying

18

assumption is that in valuing the asset, I'm not

19

considering further growth of the asset.

20

just the asset as it was in, at the end of the

21

second quarter of 2015.

22

That asset doesn't go away.

This is
02:19:52

It's an

23

asset, so it continues to generate revenue for, on

24

average, an eight year remaining useful economic

25

life.

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Q.

So at the end of paragraph 44, you say,

2

therefore, the impact of additional information

3

intercepted from private messages on Facebook's

4

revenue flows directly to the bottom line,

5

parentheses, profits.

02:25:24

6
7

02:25:34

What's the basis for that statement?
A.

The definition of profits.

Profits is,

8

or, the incremental profits are the incremental

9

revenue minus incremental costs.

If incremental

10

cost is zero, incremental profit is incremental

11

revenue.

12
13
14

Q.

02:25:50

And if incremental profits isn't zero,

then there would be a change, correct?
A.

Yes.

If incremental costs are greater

15

than zero, then the profits would be a little lower

16

than revenue.

17

Q.

Thank you.

02:26:01

I will read paragraph 45.

18

Again, I'll read it:

19

information, I would estimate the value of the

20

enhancement to the social graph as commensurate with

21

the ratio of, one, intercepted URLs in private

22

messages during the class period, to two, number

23

two, the total number of links on the social graph.

24
25

With the relevant quantitative

02:26:16

What is the relevant quantitative
information that you require?

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A.

The number of intercepted URLs in private

2

messages during the class period, and the number of

3

02:26:35

links on the social graph.

4

Q.

So, it's those two numbers, one and two?

5

A.

Those two classes of numbers.

The number

6

is different every day, so there will be a periodic

7

02:26:46

report during the class period.

8
9
10

Q.

And how would you determine the number of

intercepted URLs in private messages during the
class period?

02:27:01

11

MR. DIAMAND:

Objection.

12

THE WITNESS:

It's not my task to determine

13

that.

14

take it from the technical determination.

15

BY MR. CHORBA:

16

That's a technical determination.

Q.

I would

02:27:12

And if it were not possible technically to

17

determine the number of, quote, intercepted URLs,

18

would you be able to complete your analysis?

19

A.

In that situation, it would still be the

20

case that I have to rely on whatever is the

21

determination of what the accused activities

22

resulted in, so it would require considering a

23

different measure if intercepted URLs and private

24

messages is not the right one.

25

Q.

So, let me just make sure I understand.

02:27:26

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member sends the same number of messages on average

2

per month, for purposes of this analysis?

3

A.

No.

4

Q.

Why not?

5

A.

I didn't have to, because I didn't

02:37:53

6

consider those, that's not part of the, the analysis

7

02:38:01

in the report.

8

Q.

Why not?

9

A.

Because I don't have the information about

10

what, how many messages each user sent, et cetera,

11

how many fall into the definition of the class, and

12

I'm going to wait to get that in order to, to use

13

any information in that realm.

14

Q.

02:38:14

Did you undertake any analysis of the

15

number of messages that the named plaintiffs in this

16

case have sent?

17

A.

No.

18

Q.

Have you ever seen those figures?

19

A.

No.

20

MR. CHORBA:

02:38:32

21

Let's mark the next one Exhibit 6.

02:38:43

(Exhibit 6 was marked for identification

22

by the court reporter and is attached hereto.)

23

MR. CHORBA:

24
25

And let's do 7, while we're at it.

(Exhibit 7 was marked for identification
by the court reporter and is attached hereto.)

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organizations that contemplated hundreds and, if not

2

thousands, of advertising.

3

BY MR. CHORBA:

4

Q.

Which ones?

5

A.

So, for example, the Comdesk, Nielsen, and

03:32:04

6

the study, in particular, that's behind table,

7

table, table, table 3, from social code, that

8

analysis considered 5 million ads placed over, by 50

9

03:32:11

companies.

10

So I, I reference those kinds of studies

11

that cover a broad spectrum of advertisers, not any

12

03:32:38

one advertiser in particular.

13

Q.

And, again, that's just one survey, but

14

you didn't familiarize yourself with the practices

15

of every marketer that advertises on Facebook.

16

MR. DIAMAND:

Objection.

17

THE WITNESS:

03:32:57

I would think that it's virtually

18

impossible to familiarize yourself with the

19

practices of every advertisers on Facebook.

20

BY MR. CHORBA:

21

Q.

Agreed.

03:33:09
Turning back to paragraph 62 in

22

your report, we'll save some time if you just keep

23

it open, because we're going to concentrate on that

24

section.

25

And, again, you didn't perform any actual

03:33:26
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2

THE WITNESS:

Yes.

03:34:25

BY MR. CHORBA:

3

Q.

Which case?

4

A.

In the Fraley v. Facebook case.

5

Q.

Did that report ultimately provide an

6
7

03:34:31

estimated amount of damages to the putative class?
A.

If I recall correctly, I may have an

8

estimate, but I don't think I, I gave a definite

9

number, because the -- I have an estimate based on

10

broad averages based on one study that was done by

11

Facebook.

12
13
14
15
16

Q.

03:35:00

And do you have a broad estimate based on

averages for damages in this case?
A.

In this section of the methodology, no;

that's why I'm using the literals Y and Z.
Q.

03:35:14

And how about for your other portions of

17

your methodology?

18

damages?

19

A.

No.

Do you have a rough estimate of

I have a rough estimate of part of

20

the components of the methodology.

21

the full information about the messages that are

22

subject to the class.

23
24
25

Q.

I'm waiting for

03:35:28

And what is your rough estimate of the

amount that you were able to calculate?
MR. DIAMAND:

Objection.

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THE WITNESS:

So, I only calculated the, as an

2

estimate, the value of the social graph as of the

3

second quarter of 2015.

4

03:35:45

BY MR. CHORBA:

5

Q.

And what is that value?

03:35:56

6

A.

That's the value from table 2.

7

Q.

That's the one that we corrected earlier?

8

A.

Yes.

9

Q.

So, $13 billion?

10

A.

13.8 billion, yes.

11

Q.

And have you opined on how, if that's a

Table 1.

12

component of the damages, how those will be

13

03:36:12

allocated, apportioned to putative class members?

14

MR. DIAMAND:

Objection.

15

THE WITNESS:

Yes.

16

03:36:26

in the report.

17

I believe that is in the,

BY MR. CHORBA:

18

Q.

Where are you pointing, sir?

19

A.

To paragraph 60, on page 22, where it says

20

that it's, it is my opinion that a proper

21

attribution of damages among plaintiff class

22

members, calculated as benefits derived by the

23

defendant, should be based on the number of links,

24

URLs intercepted.

25

Q.

So, how would you apportion that, pursuant

03:36:42

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to that statement, how would you apportion the

2

$15 billion, or I think it's now $13 billion?

3

MR. DIAMAND:

Objection.

4

THE WITNESS:

03:36:57

Well, first, the 13 billion is

5

not the amount of damages.

6

social graph.

7

That's the value of the

BY MR. CHORBA:

8

Q.

9

MR. DIAMAND:

Objection.

10

THE WITNESS:

I didn't calculate it.

03:37:07

11

What's the amount of damages, then?

BY MR. CHORBA:

12

Q.

13

MR. DIAMAND:

14

03:37:15

How are you going to calculate it?
Objection.

Asked and answered.

BY MR. CHORBA:

15

Q.

How are you going to calculate it?

16

MR. DIAMAND:

Also, objection.

17

THE WITNESS:

Applying the methodologies set

18

out in section 4 A.

19

03:37:20

BY MR. CHORBA:

20

Q.

Are certain class members under your

21

methodology going to get more than other putative

22

03:37:33

class members?

23

A.

I don't know for a fact.

24

Q.

Will certain class members get zero

25

It is possible.

dollars, under your methodology?

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THE WITNESS:

Correct, so I don't have in front

2

of me the information that I would need to make that

3

determination.

4

that's my answer.

5

BY MR. CHORBA:

03:40:46

6

Q.

So, assuming complete information,

03:40:59

So, again, I'm asking you to assume that

7

there was no social plugin on this Craigslist

8

website on July 11, 2012.

9

there wouldn't be damages under section 4 B for that

If that's true, then

10

particular message, correct?

11

There might be under 4

A, but not under 4 B.

12

MR. DIAMAND:

Objection.

13

THE WITNESS:

03:41:11

So, in that hypothetical

14

situation, if the information that has not been yet

15

provided fits that construct, probably not.

16

BY MR. CHORBA:

17

Q.

03:41:25

And the information that has not been

18

provided would be whether or not that Craigslist

19

website had a social plugin at the time of that

20

message.

21
22
23

A.

03:41:42
For this aspect, yes, that's what we would

like to know.
Q.

Thank you.

Let's turn back, and, again,

24

I'm in your report, I think we're on paragraph 62,

25

where you have the X, excuse me, the Y and the Z

03:41:52
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A.

Yes.

03:45:57

2

Q.

And what is that market?

3

A.

I believe there are reports that marketers

4

are able to acquire likes, or increases to their

5

counts, for a fee.

6

Twitter, et cetera.

7

Q.

I see that advertised on

03:46:11

And does, to the extent there is such a

8

market, does the market value all likes the same

9

way?

10

MR. DIAMAND:

Objection.

11

THE WITNESS:

The concept of the market value

12

refers to everything in the market, depending on the

13

definition of the market.

14

the same, but not all likes have the same value,

15

depending on their use.

16

03:46:28

BY MR. CHORBA:

17

Q.

So, in that sense, it's

03:46:54

And would the likes differ based on the

18

third party website, for example, Coca Cola versus a

19

personal blog?

20

MR. DIAMAND:

Objection.

21

THE WITNESS:

Yes.

03:47:05

In principle, each like can

22

be leveraged in different ways so it's valued

23

differently.

24

Facebook, ultimately.

25

BY MR. CHORBA:

The point is, the benefit is to

03:47:21
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2

Q.

And it's your opinion that that benefit to

03:47:21

Facebook is the same?

3

MR. DIAMAND:

Objection.

4

THE WITNESS:

No, that's not my opinion.

5

BY MR. CHORBA:

03:47:29

6

Q.

What is your opinion?

7

A.

That Facebook benefits from the aggregate.

8

Q.

So the aggregate, even though if

9

individual increased likes are valued differently,

10

in the aggregate, it's benefiting from the

11

collective total of all of those.

12

MR. DIAMAND:

Objection.

13

THE WITNESS:

Yes.

03:47:42

That's, that's the type of

14

economy that Facebook works in.

15

BY MR. CHORBA:

16

Q.

03:48:00

If you look at paragraph 64 on the next

17

page, in the middle of the page, or middle of that

18

paragraph, and you can review the whole paragraph,

19

but I want to direct your attention to like 11,

20

where it states, while the cost is relatively

21

straightforward to ascertain, in the digital

22

advertising environment, gains from advertising are

23

susceptible to estimation in a variety of ways, such

24

as by the number of visitors to a web page, the

25

number of incoming links, the activity on social

03:48:24

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3
4

overcompensated in that hypothetical?
MR. DIAMAND:

Objection.

03:57:18

Misstates prior

testimony.
THE WITNESS:

In that hypothetical situation,

5

you are also assuming that the URLs were intercepted

6

by Facebook during the time when they were

7

incrementing the likes, and the methodology is

8

attributing, is not measuring the effect, the

9

detriment, for example, to the class member, so it's

10

allocating to class members as a whole the benefits

11

to Facebook as a whole.

12

03:57:28

BY MR. CHORBA:

13

Q.

I understand.

03:57:57

But, once it's allocated --

14

that's how you are measuring it -- but, then, once

15

you get to the stage when you are allocating it to

16

individual class members, if it is allocated to a

17

class member who sent a message containing a URL,

18

but there was no incrementation of the like count,

19

would you agree that that would overcompensate that

20

specific class member?

21

MR. DIAMAND:

22

03:58:08

03:58:21

Objection.

BY MR. CHORBA:

23

Q.

Yes or no?

24

A.

No, it wouldn't, because it would be,

25

actually, it would be exact, because Facebook had to

03:58:26
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inflated like count; do you know that?

2

A.

I don't understand the question.

3

Q.

What is the value?

4

MR. DIAMAND:

Objection.

5

THE WITNESS:

04:04:52

The numeric value?

6

04:05:00

BY MR. CHORBA:

7

Q.

Yeah, let's start there.

8

A.

I don't know what the number is.

9

Q.

What would you need to know that?

10

A.

So, the information that I list here is

11

the, how many URLs were intercepted that had, that

12

eventually led to like counts being increased, and

13

the ratio of those increases to the total like

14

counters, and that applied to the value of the

15

advertising revenue perceived by Facebook.

16

04:05:07

small portion.

17

That's a

04:05:37

That, divided by, so, that value divided

18

by the inflated like count, the total inflated like

19

count, gives the value of the average or the, of,

20

each, an average, in my sense there, is the same.

21

Q.

04:06:00

How do you propose, or do you propose a

22

way to determine the number of URLs that you claim

23

were intercepted?

24

MR. DIAMAND:

Objection.

25

THE WITNESS:

No.

That's a technical question

04:06:13
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THE WITNESS:

So, not here, but, typically, in

2

statistical inference, a 5 percent error is

3

customary and generally accepted.

4

04:08:54

BY MR. CHORBA:

5

Q.

And if you are dealing with many billion

6

number of messages, in the aggregate, not containing

7

URLs that had like counts incremented, but I'm

8

referring to table 2, what would a 5 percent error

9

04:09:07

rate, in your estimation, translate into?

10

A.

It wouldn't translate into a number that

11

can be compared to the number of messages.

12

5 percent refers to something else, to the

13

probability of making a mistake in the calculation

14

04:09:25

of the average with respect to the population mean.

15
16

Q.

The

So you said, a 5 percent error rate is

04:09:45

customary and generally accepted.

17

Would the error rate be higher or lower

18

when you are dealing with tens of billions of

19

messages?

20

MR. DIAMAND:

Objection.

21

THE WITNESS:

Again, in a statistical analysis,

22

the error rate refers to those two probabilities.

23

It does not refer to multiplying it by the number of

24

elements in the set.

25

BY MR. CHORBA:

04:09:56

04:10:08
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Q.

2

So, are you able to say the bare minimum?

04:10:08

Well, let me ask you, based on the

3

messages that are contained in Exhibits 6 and 7, are

4

you able to come up with an estimate?

5

MR. DIAMAND:

Objection.

6

THE WITNESS:

An estimate of what?

7

BY MR. CHORBA:

8
9
10

Q.

An estimate of the number of intercepted

A.

I don't understand the question.

URLs?

11
12
13

04:10:19

04:10:26

Based on, based on what?
Q.

Based on the messages that are summarized

in Exhibits 6 and 7 in the chart.

14

MR. DIAMAND:

15

Objection.

THE WITNESS:

04:10:38

16
17
18

BY MR. CHORBA:

19

Q.

20

A.

04:10:49

21
22

The reference point I would take or the

23

comparison that I would do is that a 5 percent error

24

rate for a sampling of the U.S. population requires

25

a sample size in the thousands of people.

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So, a poll, to be statistically

2

significant to represent the views of 300 million

3

people, would need to take a look at 5 or 6,000.

4

depends on the estimates of the variance that's

5

04:11:18

relevant for the variable being measured.

6

large proportion of the population in the U.S., I

8

would expect that a proper determination of the

9

04:11:35

So, because Facebook is covering such a

7

It

sampling techniques that would be applicable if

10

Facebook doesn't come up with the actual

11

information, would be in the order of the thousands

12

of people, as, as a representative sample that would

13

give, its averages would give a statistically sound

14

representation of the population mean.

15

Q.

And so it wouldn't be a number of

16

04:12:14

messages; it would be a number of people who use

17

04:11:54

Facebook?

18

MR. DIAMAND:

Objection.

19

THE WITNESS:

Well, I would think that it would

20

depend more on the number of members, because the

21

number of messages per member can vary, but it might

22

be necessary to consider the joint distribution of

23

messages and members, as well.

24

BY MR. CHORBA:

25

Q.

Turning to paragraph 73 --

04:12:28

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this benefit may have been converted to advertising

2

revenue benefiting Facebook.

3
4

04:25:07

Do you know what the fraction of the
benefit is?

5

A.

Not as of this date, no.

6

Q.

And does your report assume that

7

advertisers would have passed 100 percent of their

8

04:25:18

cost savings on to Facebook?

9

A.

Is that my assumption, that they would --

10

Q.

Yes.

11

A.

No.

12

Q.

What is your assumption, then?

13

A.

That a fraction would have been converted.

14

Q.

Which fraction?

15

MR. DIAMAND:

Objection.

16

THE WITNESS:

I don't have the information to

Is that your assumption?

17

04:25:49

determine that fraction.

18

04:25:37

BY MR. CHORBA:

19
20
21
22
23
24
25

Q.

Can you tell me if it's more than

50 percent?
A.

04:25:55

I can't tell you, because I don't have the

information to determine it.
Q.

So you can't give me any estimate on the

range of zero percent to 100 percent?
A.

No.

Without information, all I can tell

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spending, because there is an overlap in the time

2

periods, and that is basically what creates that

3

overlap that has to be accounted for.

4

04:29:13

So, if it were to be the case that benefits

5

from one perspective are the same as the benefits

6

from the other perspective, then, yeah, the overlap

7

with, would mean that you wouldn't add them

8

together.

9

BY MR. CHORBA:

10

Q.

04:29:28

You would just have one.

And what if the benefits were greater than

11

the calculated effect from the incremental

12

advertising revenue?

13

04:29:42

negative number?

14

A.

That would result in a

In, it would be a very strange

15

hypothetical situation where that would even be the

16

case, because of the length of the time period.

17
18
19

Q.

04:30:06

But, if it were the case, it would be a

negative number?
A.

So, whatever the methodology determines

20

for those two numbers would have to do the analysis

21

of the overlap, and, if the overlap overwhelms the

22

situation, then only one of them would be

23

appropriate.

24

Q.

25

04:30:16

So, you would never have a negative

number; you'd just pick the higher one?

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2
3

A.

No.

The net.

I would always pick the net

04:30:32

damages.
Q.

But how would the net, if you are saying

4

that you would deduct the amounts, the analysis in

5

this section shall be deducted from the benefits

6

calculated under the methods described in the

7

previous section, okay, I'm saying, if the benefits

8

were greater than the calculated --

9

A.

04:30:43

Now, what this means is that --

10

MR. DIAMAND:

Objection.

04:30:59

11

THE WITNESS:

-- what this means is that the

12

overlap has to be taken into account.

That overlap

13

can be calculated, when everything is said and done,

14

and that overlap means that only one of the two

15

calculations will prevail.

16

BY MR. CHORBA:

17

Q.

One of the two, meaning A or B?

18

A.

04:31:12

So, if you add A and B, you would then

19
20

have to take away the overlap.
Q.

I see.

Okay.

So, that calculation is

21

just attempting to deduct that overlap for the time

22

period.

23

A.

Yes.

24

Q.

04:31:21

Does your damages methodology account for

25

It would avoid double-counting.

the possibility that the benefit of the challenged

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