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

The Daily Telegraph - Business - - Front Page - Robin Pag­na­menta

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

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