Criticism over harmful content grows
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 chief executive 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 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.”
Others who have joined the boycott include 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., the No. 2 U.S. automaker said it would pause advertising on all social media platforms in the United States for 30 days, adding that it would evaluate such spending in other regions as well.
Zuckerberg announced changes Friday designed to appease critics, but the Anti-defamation League, one of the groups calling for the boycott, called the amendments “small.”
Some analysts have said the financial impact of recent exits will be limited, citing past advertiser revolts. Even so, this exodus is distinct in key ways, Bernstein Securities analyst Mark Shmulik wrote in a research note Saturday. There’s heightened pressure to publicly demonstrate that brands stand with civil-rights groups, he said.