Is this even legal? It seems this is used to mislead the customer.
If a company asks me to implement something I believe is illegal I ask for clarifications from a lawyer. Since I wasn't asked to implement this in a "wrong" way, I never looked into it further.
To be clear, I’m referring to an implementation that just uses a number that looks good, disconnected from any sort of metrics.
My educated guess it that only reason it happens anywhere at all - is within "smaller" websites/companies which:
a) don't know better because they are mostly just tech people that didn't heave to deal with big company bureaucracy, they have no legal/ethics team - or (hopefully not big chunk) they do know it's not legal, but count on ...
b) they are small enough that no one bothers to deal with until amount of money company is making suddenly makes it go over whatever amount makes it worth the effort
Why not?
The SEC doesn't take that attitude when they catch people artificially manipulating the frequency at which something is trading.
In the case of holiday and hotel websites, they're selling expensive packages.
If you are selling 10_000 items, with uniform demand (just toy example), you need like 3 million unique visitors per day in order to show 'one other person is looking at this item in the last 5 minutes, (24*7)
If I show 1 + random(5) are looking at each item, my competitor has to have enormous amount of visitors to compete.
Sadly, unless its illegal to lie, organizations are disincentivized to do the right thing.
And for the majority of mid to big websites - visitors/buyers will look only at minority of products/pages. Let's say it's like Pareto 80/20 percent principle. Though if not 90/10 - for tourism/travel/flights - because places like London, Paris [France, not dozens of them in USA https://en.wikipedia.org/wiki/Paris_(disambiguation)], Rome, Las Vegas, Ibiza ...etc are much, much more interesting/visited than say Anchorage/Alaska.
And unless you've got uniform spread of visitors/customers around the world - which I'm thinking that even Facebook/Google/Amazon don't really have (because Flipkart/WeChat/etc are used more in India/Chrina/etc). You're likely to see a daily (per hour), weekly (per work vs weekend days) pattern /where west is different than Israel and predominantly Muslim countries/ - the min/max difference even within one day/week is easily 2 to 5 times.
All of that is to say that by far majority of your revenue will likely be during workday afternoon in your target audiences time-zone, and from those 10_000 items it will probably be <=100 that are seen/bought by majority of your visitors.
And though there is legally gray area - majority of that tends to clearly be not ethical...
But you know - Elon "promised" self driving cars in just a month/quarter or so - how many years ago? IIRC he even said it would be good, no not good but best investment because such a car could earn you money on it's own ...
Yet neither we got those self-driving cars, nor Elon is in trouble due to those "forward looking statements" ¯\_(ツ)_/¯