Drinks gi­ants join Face­book ads boy­cott

Even the ex­o­dus of ac­counts like Coca-Cola and Unilever will have min­i­mal im­pact in the long run when 8m others still ad­ver­tise ‘The crit­i­cal mass of ad­ver­tis­ers needed to squeeze it is im­pos­si­bly high’

The Daily Telegraph - Business - - Front Page - By Matthew Field

TWO of the world’s big­gest bev­er­age com­pa­nies have called time on their Face­book ad­ver­tis­ing bud­gets.

Star­bucks, the Seat­tle cof­fee chain, be­came the lat­est ad­ver­tiser to bring its so­cial me­dia mar­ket­ing spend to a grind­ing halt yes­ter­day.

Di­a­geo, the FTSE 100 firm, also joined a flood of ad­ver­tis­ers warn­ing that they would sus­pend spend­ing amid con­tro­ver­sies sur­round­ing hate speech.

Some of the world’s big­gest ad buy­ers, in­clud­ing Unilever, Coca Cola and Pep­siCo, have fol­lowed calls from cam­paign­ers to sus­pend so­cial me­dia ad­ver­tis­ing. The Stop Hate for Profit cam­paign has called on brands to halt spend­ing on Face­book in July.

Unilever said it would stop ad­ver­tis­ing on Face­book and Twit­ter for the rest of this year.

While an ad­ver­tiser boy­cott is un­likely to cause a sharp drop in Face­book’s quar­terly rev­enues of $17.7bn (£14.4bn), it caused its share price to slump by more than 8pc on Fri­day.

Star­bucks said it would pause all ad­ver­tis­ing on so­cial me­dia while it con­tin­ued dis­cus­sions “with civil rights or­gan­i­sa­tions in the ef­fort to stop the spread of hate speech”.

The chain spent $95m on Face­book last year.

Di­a­geo said: “From 1 July, we will pause all paid ad­ver­tis­ing glob­ally on ma­jor so­cial me­dia plat­forms.”

Face­book has been crit­i­cised for al­low­ing Don­ald Trump, the US pres­i­dent, to make posts at­tack­ing Black Lives Mat­ter protests.

On Fri­day, Face­book said it would ban ad­verts that claimed a race, eth­nic or other mi­nor­ity group could threaten the health or safety of others.

The Face­book ad­ver­tiser boy­cott that be­came a global phe­nom­e­non last week is a smart piece of mar­ket­ing. Dur­ing eco­nomic down­turns, ad­ver­tis­ing is one of the first things to be cut, and mar­ket­ing chiefs to­day are deal­ing with sub­stan­tially smaller bud­gets than they had planned for six months ago. What bet­ter way of spin­ning this than claim­ing they are cut­ting spend­ing on prin­ci­ple?

Per­haps this is an overly cyn­i­cal read­ing of the cam­paign to pull ad­ver­tis­ing dol­lars from Face­book, which gath­ered mo­men­tum last week. Af­ter a hand­ful of fa­mously vir­tu­ous brands such as Patag­o­nia and Ben & Jerry’s said they would pause ad­ver­tis­ing on Face­book, the boy­cott gath­ered steam in the sec­ond half of last week, when Ver­i­zon, Coca-Cola and Unilever all said they would do the same.

This was enough for the mar­ket to sit up and take no­tice. Face­book’s shares, which had hit all-time highs ear­lier in the week, fell by more than 8pc on Fri­day, enough to knock $56bn (£45bn) off Face­book’s mar­ket value and make Mark Zucker­berg more than $7bn poorer.

Unilever’s move car­ried par­tic­u­lar weight not only be­cause the An­glo-Dutch gi­ant is one of the world’s largest ad­ver­tis­ers, but be­cause it said it would stop ad­ver­tis­ing on Face­book for the rest of the year, rather than the one-month pause that most ad­ver­tis­ers had an­nounced.

Face­book is re­liant on ad­ver­tis­ing, which ac­counted for 99pc of its $70.7bn rev­enue last year (sales of VR head­sets, video call de­vices and cor­po­rate soft­ware made up the rest).

And the con­cerns that the ad­ver­tis­ers boy­cotting the site have iden­ti­fied are real. Face­book is both in­creas­ingly po­larised and po­lar­is­ing. While the com­pany’s re­cent con­tro­ver­sies have cen­tred on its de­ci­sion not to mod­er­ate posts from Don­ald Trump, this is only a symp­tom of the wider prob­lem. In the run-up to Novem­ber’s US elec­tion, the site will be­come in­creas­ingly un­like the sort of en­vi­ron­ment con­ducive to sell­ing sugar water.

So nat­u­rally, the com­pany spun into cri­sis­re­sponse mode. On Fri­day, Zucker­berg promised to tweak Face­book’s poli­cies to bet­ter ad­dress hate speech, in­clud­ing la­belling posts that break its rules, and ban­ning ad­verts that claim spe­cific races or im­mi­grants are a threat to others (some ex­pressed shock that this was not al­ready a pol­icy).

It ben­e­fits Face­book to ap­pear to be re­spond­ing to its cus­tomers, but these changes are likely to have been in the works for some time. And de­spite the com­pany’s re­liance on them, ad­ver­tis­ers prob­a­bly hold lit­tle sway.

Firstly, Zucker­berg has near-to­tal con­trol over Face­book. He is chair­man, chief ex­ec­u­tive and con­trol­ling share­holder, which means he is de facto not an­swer­able to in­vestors, even if he were to run the com­pany into the ground. Zucker­berg presents this as an ad­van­tage that al­lows him to think long-term. It also lim­its the in­flu­ence Face­book’s ad­ver­tis­ers can have.

The other rea­son is that while the com­pany is re­liant on one source of rev­enue, that source is re­mark­ably broad. At the last count, Face­book had more than 8m ad­ver­tis­ers, and even the big­gest of those ac­count for a frac­tion of a per cent of its to­tal sales.

The to­tal cost of the Face­book boy­cotts an­nounced so far is $76m, a round­ing er­ror to the com­pany. The com­pany’s ad­verts are bought by au­to­matic auc­tion, so any void is likely to be quickly filled by the ad­ver­tis­ers who do re­main on the so­cial net­work. The crit­i­cal mass of ad­ver­tis­ers that would be needed to truly squeeze the com­pany is im­pos­si­bly high.

Be­sides this, re­cent history sug­gests any ad­ver­tiser ex­o­dus will be short lived. A string of big brands de­serted YouTube in 2017 af­ter their mes­sages were found to ap­pear in front of ex­trem­ist and il­le­gal con­tent, but most re­turned shortly af­ter. The small number of ad­ver­tis­ers that quit Face­book af­ter 2018’s Cam­bridge An­a­lyt­ica con­tro­versy also largely made their way back.

The re­al­ity is that it is al­most im­pos­si­ble for ad­ver­tis­ers to ig­nore Face­book, which has built an as­ton­ish­ingly ef­fec­tive tar­get­ing ma­chine, and com­bined with Google, ac­counts for more than half of the dig­i­tal mar­ket.

Those who worry about com­pe­ti­tion will tell you that this is the prob­lem, rather than Face­book’s con­tent mod­er­a­tion poli­cies. This week, Bri­tain’s Com­pe­ti­tion and Mar­kets Author­ity is due to pub­lish its fi­nal re­port into the dig­i­tal ad­ver­tis­ing mar­ket. Po­ten­tial op­tions in­clude po­ten­tially forc­ing Google and Face­book to share data with others, a step that might im­prove com­pe­ti­tion but would worry pri­vacy ac­tivists.

It is pos­si­ble that so­cial net­works be­come so ill-tem­pered that com­pa­nies sim­ply feel they are not good places to ad­ver­tise. The fact that some brands also pulled their ad­verts from Twit­ter last week sug­gests that could well be the case. But plenty more will re­main. If Face­book is going to change, it won’t be the ad­ver­tis­ers that made it hap­pen.

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