Jon Fletcher 2020-07-08

The companies walking out on Facebook


When the news came that outerwear retailer Patagonia was pulling its advertising spend from Facebook over their content moderation policy, it didn't come as a major body blow.

This is, after all, the company that leads the way when it comes to environmental and social responsibility. Patagonia received the second-highest rating in the 2019 Ethical Fashion Report, it belongs to both the Sustainable Apparel Coalition and 1% For The Planet. They even stopped selling their unofficial uniform of the Palo Alto fintech scene, the Nano Puff Vest, to companies that don't match their ethical or environmental standards. 

Facebook, on the other hand, has been dogged by questions over privacy, data security, hate speech, violent content, and even accusations of being used for election tampering.

Citing concerns about how the platform responds to - and profits from— the proliferation of hate speech, Patagonia defriending Facebook was a natural progression of their brand ethos.

Yet by June, this stance had grown from an individual statement to a movement other companies were keen to join. This was no longer a select few 'woke' companies choosing alternative advertising platforms - a boycott had begun.

Led by a coalition of civil rights groups that includes the Anti-Defamation League and NAACP; the official boycott, Stop Hate for Profit has a list of recommendations for Facebook along the themes of Accountability, Decency, and Support. Now, more than 900 companies have publicly stated they are halting their advertising on Facebook. 

And the companies joining are firms that are not primarily known for their vocal ethical positions. Unilever, Verizon, Starbucks, Coca-Cola, and Clorox have all pulled their ads, citing the same desire to prevent Facebook from profiting from hate.

While this could be the start of a sea-change in business ethics, looking closer at the boycott shows a more conflicted story. Firstly, there are two issues at hand. Advertisers are taking a stand against a platform that gives means and publicity to misinformation, incitement or hate speech. 

But, another concern is that brands are paying to advertise alongside this content. Advertisers have no control over the content that surrounds them in users' feeds. Political or social responsibility aside, Coca-cola doesn't want people to associate sipping a cold coke with an argument over racial equality. tellingly, one of the core points of the boycott has to demand that Facebook provide an: 

'audit of and refund to advertisers whose ads were shown next to content that was later removed for violations of terms of service.'
Secondly, the timing of the boycott has raised some questions regarding how much this boycott is motivated by morality Wide A-Woke Ostensibly, the advertisers boycotting Facebook advertising are doing so to help address the negative impact of hate speech being given a platform. But, there are skeptical commentators who believe the ad boycott is being used as a 'woke cloak' to disguise budgets that were being trimmed anyway. 

With COVID-19 still causing lean times for advertisers, marketing departments can score brand points by leaning on a cause without really altering their budgets or spending. Disguising this budget cut around a cause, and maybe earning back some bargaining power from Facebook One of the biggest spending brands to join the boycott, Unilever, had already slashed its spending due to COVID-19 belt-tightening. So when they joined the boycott, it raised questions over how well their motivation really was.

Facebook isn't worried

And despite the momentum of the campaign, the big brands taking a public stance, deep inside the Zuckerberg compound, the collective mood is still calm. The reality is, It's just not enough advertisers, nor a long enough time period to make Facebook enact significant changes.

The highest-spending 100 brands accounted for $ 4.2 billion in advertising revenue in 2019. This totals about 6% of the platform's ad revenue. Looking at the advertisers that have joined the boycott,  Baird Equity Research has stated that “Even if all the advertisers boycotted Facebook for a full year, it would be less than 1% of revenues by our math,". 

Outside of the major brands jumping ship, Facebook has 7 million advertisers and 90 million business pages. These smaller businesses will continue to keep Facebook's revenues buoyant.

Despite the boycott, despite reduced advertising from the impact of COVID-19, Facebook is still forecasted to grow. Advisors are even predicting this moderate slump is a good time to pick up some Facebook stock. At the height of the boycott, the stock dropped 11% and has already begun to bounce back. 

At this point, Facebook may simply be too big to fail. Zuckerberg knows this and has dug in. Despite this dent in ad revenue, he has publicly informed employees that Facebook will not "change our policies or our approach on anything because of a threat to a small percent of our revenue, or to any percent of our revenue,".

So while the revenue concerns are being downplayed, the boycott does raise an issue over Facebook's long-term brand image. In a public filing back in April, Facebook was already noting how questions over ethics and scandal could harm them in the future. 

"Negative publicity could have an adverse effect on the size, engagement, and loyalty of our user base and result in decreased revenue, which could adversely affect our business and financial results."
So, for now, the game plan for Facebook is to be seen to be "listening" without taking any tangible actions. So far the only concrete action is the planned release of a yearslong audit of its civil rights policies and practices. Crucially, this audit is only a summary of recommended actions. It doesn't tie Facebook into any firm commitments. The plan is to be seen to address the concerns that could affect their future perception as a progressive thought leader in ethical technology, but without capitulating to advertisers' demands.

Derrick Johnson, chief executive of the NAACP, summarized the feeling towards Facebook's trademark noncommittal response: 

"Over the two years that the NAACP has been in conversation with Facebook, we've watched the dialogue blossom into nothingness," 
What remains to be seen is how long advertisers can live without Facebook and Instagram's audience of around 3 billion people. Zuckerberg is reported by The Information to have told employees yesterday that advertisers would return "soon enough.".

Facebook's loss should be publishers' gain, right? 

While this boycott is unlikely to upset Facebook's position as one of the cornerstone tech companies, it does highlight some of the advantages of more contextual advertising.

The audience profile tools, simple platform, and sheer volume gave advertisers an irresistible way to connect to specific profiles. But, the issues of where and when ads appear have got advertisers questioning if the benefits are outweighed by potential brand damage. 

In an open letter from Nick Clegg, the VP of Global Affairs and Communications at Facebook, he admitted that Facebook is unable to moderate its content entirely. 

Unfortunately, zero tolerance doesn't mean zero incidences. With so much content posted every day, rooting out the hate is like looking for a needle in a haystack. '' 
This admittal does give publishers more brand power.

Rather than being next to some unspell-checked, hate-filled diatribes, publishers can offer space in the sanctuary of a news organization that has a reputation to uphold. Context makes a comeback for advertisers as publishers and content providers have defined standards for content and opinion, advertisers can choose affiliations in tune with their own political and ethical positions. 

They don't have to spin the roulette wheel of content that comes with user-generated platforms. As well as giving advertisers more control over their positioning. with the desire of younger audiences to know and agree with the motivations and affiliations of the brands they interact with. Can publishers afford to boycott Facebook?

Any media companies hoping to join or profit from this exodus are in a difficult position. Not only do publishers rely on Facebook for traffic to their posts, but media groups are also some of the biggest advertisers on the platform. Cost-per-customer acquisition for subscription publishers currently runs between 50% and 100% of the cost of the year-one subscription price. 

With the vacuum in demand created by the big brand boycott, some publishers have been able to cut their acquisition cost on Facebook by as much as half. Profiting from the boycott can come in the form of higher ad spend on publisher websites, but also the chance to reach their own target audience at a lower cost.

So while the ongoing boycott of Facebook advertising is more of a symbolic gesture than a real force for change, it does give publishers two questions to address. 

Firstly, how can they prove the value of context over audiences to advertisers that have grown used to hyper-targeting specific profiles? Secondly, publishers need to question if they too should sever their relationship with platforms that don't meet their own standards for verified, honest, and ethical publishing.

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