The big news on Facebook over the last four days has been big brands and their agencies are starting to boycott Facebook for advertising.
On Friday, Unilver announced they would halt US ads on Facebook and Twitter for the rest of the year over concerns about polarized politics. In prior days brands including Eddie Bauer, Magnolia Pictures, Patagonia, North Face, and REI all vowed to stop advertising on Facebook. Omnicom owned Ad Agency Goodby Silverstein joined the boycott as well.
Coca Cola has announced that it will pause all Facebook and social media advertising starting July 1st. This pause will happen globally. This move, in particular, is a big deal, because Coca Cola in 2019 spent $4.25B in advertising in 2019 globally. They have some weight to throw around.
This is all about divisive content, and Facebook’s stance on speech.
Here are three reasons why this is interesting to me.
1. The Facebook boycott places them in unfortunate cross-hairs
Conservatives accuse the platform of stifling conservative speech. Liberals say that Facebook isn’t doing enough to counter hate speech on the platform. Facebook is saying they don’t want, and should not be, the arbiter of censorship in the US. They are fully in the middle of a storm of people accusing the platform of doing both too much and too little.
2. Small business advertisers are dominant
There are officially 7 million advertisers on the platform, though I’ve heard from people that it’s over 8 million recently, which means the long tail of advertisers are going to continue to power the company’s ad spending. So, while one, two, or 100 brands may make a difference to Facebook’s bottom line, it won’t have nearly the impact on revenues as I think these advertisers would like. At the end of the day small businesses on Facebook I think are the driving force of their revenue.
3. The opportunity for the rest of us
While big brands are boycotting Facebook, ads are going to continue to be effective for businesses that choose to stay on the platform. Facebook ads continue to have high click through and conversion rates, and beyond just advertising outcomes, Facebook is the best way for consumers to give brands feedback in the form of engagement ads.
So, while this makes news, it’s not going to fundamentally change the business. What has happened, though, is that a new feature has been made available. Facebook has turned on a feature that will place a warning feature on posts that break its rules but are considered newsworthy. This is a tepid move to pacify concerned advertisers. What this does is poke at the current establishment, and creates the possibility of labeling Donald Trump’s posts with a warning.
As a result of this boycott, Facebooks market capitalization has dropped 56 billion dollars. The company started the day at $235.68 and ended at $216.08. This is an 8.4% one day drop on a day the Dow Jones Industrial Average dropped 2.4%. While a lot of money, Facebook’s market cap remains at $616B.
Overall, this seem problematic, but I believe that Facebook will continue to be a leader in advertising revenue spent 2020. So, while this is bad news momentarily for Facebook, small businesses will continue on the platform, their stock won’t take a meaningful hit in the long term, and the company will still be very important for the foreseeable future.
Remember, as a business tool Facebook is a democratizer. Anyone with an idea can get into the platform, post content, buy ads, and have the ability to grow a fantastic direct to consumer business.
As we’ve already seen, advertisers do have the ability to create change on the platform by pulling advertising dollars.
