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’
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.