Social media reform Advertisers’ boycott is more likely to harm Twitter than Facebook
After doing more to curb hate speech, Dorsey may be forced to pay the price for Zuckerberg’s failures
Mark Zuckerberg is facing a growing revolt from advertisers. But the biggest loser from mounting public anger over Facebook’s failure to moderate hate speech could be one of his leading rivals, Twitter’s Jack Dorsey.
A one-month ban on social media advertising in the US kicked off yesterday. It was backed by a constellation of 400 blue chip global brands – from Lego to Unilever, Coca-Cola to Starbucks, insurer Aviva and InterContinental Hotels.
Superficially, at least, the ban appears to be having an impact on the world’s biggest social network.
After all, on Tuesday Zuckerberg agreed to meet with the boycott’s organisers, Stop Hate for Profit, which is supported by civil rights groups including the US Anti-Defamation League and the NAACP, to discuss their ten demands to end “hate, bigotry, racism, anti-Semitism and violence” on the platform.
But, while it is clearly an embarrassment for Zuckerberg and does no favours for Facebook’s already tattered reputation, the boycott is unlikely to make a serious dent in its finances.
That’s because Facebook remains an extremely robust global business while the ban, so far, is both temporary and chiefly focused on the US. With 2.6bn active monthly users and 8m active advertisers, Facebook is a commercial juggernaut with enormous momentum.
Big brands wield some influence but only contribute a small fraction of its total revenues.
Last year, the top 100 brands on Facebook generated only 6pc of its total $70bn in annual revenue, according to Morningstar research.
Instead, it is vast numbers of small and medium-sized companies who form the lifeblood of Facebook’s ad business.
So far, they show few signs of deserting a platform that remains a vital channel for them to reach potential target customers.
Put together, Google and Facebook enjoy a 70pc share of the online ad market – a chokehold that hands them enormous market dominance. In the UK the figure is even higher – about 80pc.
That enormous scale combined with a valuable trove of data collected by Facebook on users, and powerful AI and analytics tools which advertisers can use to drill into the right target audiences, make the platform irresistible for many businesses, often smaller firms with a local rather than global reach.
Certainly, the markets seem relatively unconcerned by the boycott’s impact on Facebook.
News of the ban initially wiped $56bn from Facebook’s market value last Friday after an 8pc drop in its stock. Shares have since recovered most of that ground and are now 8pc higher than their January level.
Perhaps unfairly then, it is Facebook’s smaller and less profitable rival Twitter that faces a bigger potential impact from the ban.
Twitter, which has its own problems with toxic content and bots, has been dragged into the debate too, with Unilever, Coca-Cola and others including it in their boycott.
That is despite the fact that Twitter is widely viewed as having taken a more proactive stance in its efforts to moderate hate speech.
It was Twitter’s decision in late May to start flagging tweets from Donald Trump as misleading that fuelled the latest frenzy of debate over the responsibilities social media firms have to police content on their platforms.
But the reality is that Twitter remains far less able to withstand a sustained boycott of this kind.
With 330m active monthly users, it is no minnow. But it is far less profitable than Facebook and more narrowly US-focused.
At $3.4bn last year, its revenues are less than 5pc of Facebook’s. Historically, the platform has also struggled to deliver consistent revenue growth.
Twitter only recorded its first profit three years ago while Facebook has been in the black for more than a decade and posting rising annual revenues ever since.
That leaves Jack Dorsey facing a quandary. Unless he can find a way to escape being lumped in with Facebook as part of the problem, his creation is at risk of serious commercial damage.
He does have one advantage however. As a much smaller company,
‘Twitter is far less able to withstand a sustained boycott.
It is far less profitable than Facebook and more narrowly US-focused’
Twitter is arguably more agile too. Reinventing Facebook’s ad-based business model would be like turning around a supertanker, but Dorsey could afford to take the risk by embracing a subscription-driven model.
Sure, Twitter would lose millions of users who were unwilling to pay – but it would retain enough to remain a viable business and in the process rid itself of the toxic content that is its biggest problem.
With users paying a small monthly fee, the quality of debate on the platform would improve and investors would prefer the recurring subscription revenue.
Dorsey has less to lose too. At $23bn, Twitter’s market value is already trailing well below the highs of $35bn it touched in September 2019.
It is worth only about half as much as Dorsey’s other business, Square, a payments company.
A radical change in direction might be just what Twitter needs to break free of the toxic ad-funded orbit of its bigger rival Facebook.
Social media is facing a backlash over hate speech on its platforms, but Facebook’s massive size insulates it from serious damage