FACEBOOK AD BOYCOTT GROWS.

Sales at risk as Starbucks, Lululemon bail; GM plans review

Facebook Inc. fielded criticism from a growing number of North American and international consumer companies over harmful content on its sites, with Starbucks Corp. and Lululemon Athletica Inc. pulling back on ad spending and General Motors Co. planning to review its social media marketing strategy.

Lululemon joined two other Canadian retailers, Mountain Equipment Co-op and Arc’teryx, following Starbucks, Unilever, Coca-Cola Co. and several other companies in saying they will cut ad spending, part of an exodus aimed at pushing Facebook and its peers to limit hate speech and posts that divide and misinform.

Microsoft Corp., which was Facebook’s third-largest advertiser last year, has paused global ad spending on the site because of concerns about ads appearing next to inappropriate content, according to a person familiar with the matter. The list of companies taking similar action lengthened on Monday. Britvic Plc, which supplies a wide range of soft drinks, Patreon Inc. and The Clorox Co. all said they will stop advertising on Facebook while GM said it’s “reviewing and reinforcing” its marketing guidelines.

While a single advertiser can do little to hurt a company that generated US$17.7 billion in revenue last quarter, the rising tally creates peer pressure on other brands, and civil rights groups say they expect more corporations to join a boycott. Combined with a pandemic-fuelled economic slowdown, the threat to Facebook is deepening.

“Given the amount of noise this is drawing, this will have significant impact to Facebook’s business,” Wedbush Securities analyst Bradley Gastwirth wrote in a research note. “Facebook needs to address this issue quickly and effectively in order to stop advertising exits from potentially spiralling out of control.”

Shares gained 2.1 per cent Monday to close at US$220.64 in New York, after dropping 8.3 per cent on Friday. Unilever, one of the world’s largest advertisers, said it would cease spending on Facebook properties this year, eliminating US$56 billion in market value and shaving the net worth of CEO Mark Zuckerberg by more than US$7 billion.

Facebook was already bracing for weakness in the second quarter, which ends this week. Chief financial officer Dave Wehner said in an April earnings call that he saw the “potential for an even more severe advertising industry contraction.”

The number of coronavirus cases in the U.S. has surged in the intervening months, prompting many parts of the country to slow or roll back reopening efforts and giving advertisers added justification to rein in spending.

Advertiser boycotts in July could cost Facebook more than US$250 million in the third quarter if 25 per cent of its top 100 buyers pause spending, and as much as US$500 million if 50 per cent of the top advertisers stop, according to Bloomberg Intelligence analyst Jitendra Waral.

Lululemon said it would pause paid advertising on Facebook and Instagram. The Vancouver-based yoga-wear maker indicated its support for the boycott on Saturday, saying in a tweet, “We believe we all have a responsibility to create a truly inclusive society and are actively engaging with Facebook to seek meaningful change.”

MEC announced last week it was pulling its organic content and paid ads from Facebook and Instagram until the end of July. The company said it wants to raise “awareness of the harmful, racist content and misinformation that is shared on these social platforms.” Clothing retailer Arc’teryx said in a statement Facebook profits “will never be worth promoting hate, bigotry, racism, antisemitism & violence.”

Others who have joined the boycott incude Diageo PLC, the world’s largest spirits maker; Levi Strauss & Co.; and Adidas AG, which said it and subsidiary Reebok will pause advertising on Facebook and Instagram globally throughout July. Ford Motor Co. said it would pause advertising on all social media platforms in the U.S. for 30 days