Facebook ad boycott is a tactical retreat for companies, not a cause

A range of major companies have have been quick to join an advertising boycott against Facebook amid concerns about hate speech and misinformation on the world’s most popular social media site. Yet the move reflects more of a tactical retreat from the platform, experts say, with brands under enormous public pressure to take a stand against racism.

Indeed, many of the 200 brands that committed to pause their marketing on Facebook were already likely to do that given that July, the month marked for the boycott, typically sees low spending on ads. On top of that, the coronavirus-induced economic freeze has many advertisers looking for a reason to cut back.

“My opinion is those people were going to cut advertising anyway because of COVID,” said Laura Martin, an equity analyst who covers Facebook at investment bank Needham. The pandemic has not only reduced how much consumers spend, but it has changed behavior to make other forms of advertising, such as Google or connected TV ads, more attractive, she added.

“Facebook’s competitive advantage is reaching people on their mobile devices, and everyone’s sitting at home right now,” she said. “You can reach people at home, so you don’t need Facebook so much. It’s an easy way for companies to boycott [the platform] without hurting their bottom line.”

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Gogi Gupta, founder of digital marketing agency Gupta Media, noted that Facebook is less strategically important for many of the companies distancing themselves from the company.

“If you take Coca-Cola, their brand is so strong, their distribution network is so strong, that if you take them out of Facebook it doesn’t change much,” he said. Smaller companies, especially direct-to-consumer brands like Harry’s or Casper, are much less likely to yank their ads because their social-media advertising is crucial to their sales. 

“They spend a dollar to make six dollars, and the minute you turn that off, the impact to them is six times worse than it is for Facebook,” he said. 

Pennies on the dollar

Despite the attention the boycott has garnered, meanwhile, Wall Street appears unconcerned. Facebook’s stock has risen 12% since Monday, indicating investor confidence that it will weather the scandal, like many others, with barely a dent to its bottom line.

The boycott has so far cost Facebook about $150 million, Oppenheimer estimated. While that’s a sizable figure for many businesses, it represents less than 1% of the $17 billion in ad revenue Facebook pulled in during the first quarter alone. 

If Facebook’s top 100 advertisers all dropped off the platform, that would shave just 1% off its annual revenue, according to Morgan Stanley analyst Brian Nowak. Yet as of Wednesday, many of the top 100 continue to advertise on Facebook Those companies include AT&T, ViacomCBS (the corporate parent of CBSNews.com), Disney, Home Depot, The New York Times, Walmart and Wix. 

Procter & Gamble, the world’s top buyer of advertising, has so far stopped short of pulling its ads off the platform,despite a recent promise to avoid “hateful, discriminatory, denigrating or derogatory” content. 

With about 8 million advertisers, Facebook is well-insulated from most customer complaints. Moreover, its auction model for selling ads means that any advertiser that departs is easily replaced with another. 

“We really think that it is important that advertisers exercise their brand virtues through advertising and where they choose to spend those dollars,” Gupta said. But when it comes to boycotting Facebook, he said, “It’s hard for me to imagine this will have much impact.”

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While the Anti-Defamation League, one of the campaign’s sponsors, has called the boycott “a tremendous success so far,” data indicate that new advertisers are coming in to replace those leaving. Gupta Media’s analysis shows that the cost of Facebook ads has steadily risen since a low point in late March — and is now at the same level it was last year.

For many brands, in other words, Facebook is just too good to give up. “[M]ost advertisers cannot afford to pause [Facebook and Instagram] campaigns for more than a month given how effective FB is compared to other platforms,” Oppenheimer analysts wrote in a research note.

So while brands may want to boycott Facebook for longer to show they’re in sync with their customer’s values, Needham’s Martin believes they will only do so for as long as COVID lockdowns continue.

“Right now  it doesn’t cost [advertisers] anything to take a political stance here, but the minute consumers leave their homes they’re going to need Facebook,” she said “So economic realities will overshadow their political goals.”