In the weeks since Facebook decided not to take action in a series of controversial Trump posts, including one during racial justice protests that “looting” would lead to “shooting,” the company and its CEO have been confronted with the reaction of employees, politicians and even scientists backed by Zuckerberg’s philanthropic organization. But more than any of these other protests, the advertiser’s boycott could pose a deeper threat to Facebook and its core business. Almost all of Facebook’s annual revenue of roughly $ 70 billion last year came from advertising dollars.
A significant chunk of that came from the big brands, said Laura Martin, an industry analyst at Needham & Co., and the big brands have only become more vital to Facebook as smaller advertisers pull back or close due to the pandemic.
Facebook did not immediately respond to a request for comment. In a statement Friday after Unilever’s announcement, Facebook emphasized steps that have been taken to protect its platform, including banning hundreds of white supremacist organizations and investing in artificial intelligence to find and combat harmful content.
“We invest billions of dollars each year to keep our community safe and to continually work with outside experts to review and update our policies,” said company spokesman Andy Stone. “We know we have more work to do, and we will continue to work with civil rights groups, GARM, and other experts to develop even more tools, technology, and policies to continue this fight.”
Facebook may be vulnerable, but Zuckerberg is not
Despite some similarities, experts say Facebook is less susceptible to outside pressure than most companies. It is chaired by a CEO, Mark Zuckerberg, who exercises complete voting control over the company and cannot be removed by shareholders. And that could greatly complicate the campaign to get to Facebook where it hurts.
“Disney couldn’t do this, and Apple couldn’t do this. They are chaired by a committee,” said Martin. “If it were a committee-led company, they would have to react, because the committee, the board of directors, would be threatening to fire the CEO to protect revenue. That doesn’t have to happen here.”
In fact, Facebook seemed to set a challenging tone earlier in the week. “We made no policy changes related to revenue pressure,” Carolyn Everson, vice president of Facebook for Global Business Group, wrote in an email sent to advertisers this week by CNN. “We establish our policies based on principles rather than commercial interests.”
Whether the boycott will have a measurable impact on Facebook’s results remains highly confusing. This is due in part to the number of participating brands, the timing of the campaign, and environmental factors, such as the pandemic, that can make it difficult to link any potential drop in Facebook revenue directly to the boycott. Plus, there are few alternatives to reach audiences the size Facebook can offer, along with an almost unmatched treasure trove of ad targeting. The sooner any impact can be seen will be when the company reports its third-quarter earnings results this fall.
Of the companies that have joined the boycott so far, only three, Unilever, Verizon, and outdoor equipment retailer REI, are among the top 100 advertisers on Facebook, according to data collected by Pathmatics, a marketing intelligence firm. . In 2019, Unilever was ranked 30th, spending an estimated $ 42.4 million on Facebook ads. Verizon and REI were 88 and 90, respectively, spending an estimated $ 23 million each.
Much of the rest of Facebook’s advertising revenue comes from small and medium businesses, advertising executives say. It would probably take tens of thousands of them, acting over a significant period of time, to make a big dent in Facebook’s bottom line.
The uncertain path ahead
Since the #StopHateForProfit campaign asks companies to stop advertising only during the month of July, companies that strictly adhere to the campaign will only deny Facebook revenue for a matter of weeks. That may appear as hardly a problem, if at all, on Facebook’s quarterly earnings, said Nicole Perrin, chief analyst at market research firm eMarketer.
Nancy Smith, president of advertising consulting firm Analytic Partners, said that a determining factor for many of the participating companies is “brand security”: the desire that their ads not appear alongside conspiracy theories or rhetoric. of hate. As they stop investing in Facebook and Instagram, she said, many marketers will redirect those dollars. Unilever said Friday that it would shift its own digital advertising budget from the US to other platforms.
“For our clients, we would advise them to reallocate those funds,” said Smith. “Reassignment to other social media, potentially; reassignment to other digital publishers; reassignment to linear TV; reassignment to platforms like Hulu.”
Then there is the pandemic, which has already caused a slowdown in the digital advertising industry this year. The companies dramatically cut ad spending in March and April, and some, like Verizon and Patagonia, were just starting to reinvest in Facebook ads when #StopHateForProfit started, according to research by Pathmatics.
As Covid-19 infection rates begin to rise again across the country, the reasons behind any drop in advertising numbers will be “extremely difficult to decipher,” Perrin said.
“It will be a very political argument where people on the boycott side will mean they had an effect, while those on the other side will say the boycott really didn’t work,” Perrin said. “It will be hard”.
Until Zuckerberg himself decides to change the limits of freedom of expression on his platform, Facebook may simply lose brands until only those that do not oppose the company’s conduct or cannot survive without the reach of the platform remain. Martin said.
In that future, it would be difficult to say whether the boycott really “worked.”