(AP) — More than 500 companies kicked off an advertising boycott of Facebook on Wednesday, intended to pressure it into taking a stronger stand against hate speech. CEO Mark Zuckerberg has agreed to meet with its organizers early next week.
But whether Zuckerberg agrees to tighten the social network's carefully crafted rules probably boils down to a more fundamental question: Does Facebook need big brand advertisers more than the brands need Facebook?
In a broad sense, the current boycott, which will last at least a month, is like nothing Facebook has experienced before. After weeks of protests against police violence and racial injustice, major brands for the first time have joined together to protest still-prevalent hate speech on Facebook platforms by taking aim at the social network's $70 billion in annual ad revenue.
After years of piecemeal measures to address hate, abuse and misinformation on its service, Facebook's critics hope that pinching the company where it hurts will push it toward more meaningful change. As of Wednesday, 530 companies have signed on — and that's not counting businesses like Target and Starbucks, which have paused advertising but did not formally join the "Stop Hate for Profit" campaign, which calls its action a "pause" rather than a boycott.
"Many businesses told us how they had been ignored when asking Facebook for changes," campaign organizers wrote in a letter to advertisers this week. "Together, we finally got Facebook's attention."
But Facebook's already-tarnished public image may suffer more damage than its business. If the ad pause lasts one month, Citi Investment Research analyst Jason Bazinet estimates, the likely impact on Facebook's stock will be $1 per share. Based on Wednesday's closing price of $237.92, that's a decline of less than 0.5%.
If the businesses extend their boycott indefinitely, Bazinet suggests the likely impact would be $17 a share, about a 7% decline. That's less than the 8% drop Facebook shares sustained last Friday after global consumer-products maker Unilever said it would pause advertising on Facebook and Instagram for the rest of the year.
Facebook shares have already bounced back from that dip.
On Wednesday, Nick Clegg, Facebook's vice president of global affairs and communications, tried to reassure businesses that Facebook "does not benefit from hate" and said the company has every incentive to remove hate speech from its service.
He acknowledged that "many of our critics are angry about the inflammatory rhetoric President Trump has posted on our platform and others, and want us to be more aggressive in removing his speech."
Clegg, however, offered few concessions, but merely repeated Zuckerberg's talking point that "the only way to hold the powerful to account is ultimately through the ballot box." He cited Facebook's get-out-the-vote efforts as evidence of the company's commitment, along with the billions of dollars, tens of thousands of content moderators and other investments it has made in trying to improve its platform.
While Facebook is making efforts to hear its critics, it remains clear that decisions will rest with its founder and CEO, who holds the majority of the company's voting shares and could run the company for life, should he desire to.
It's not clear that Zuckerberg will see any reason to meet protesters' demands.
"Data of past boycotts suggests the observable impact is relatively mild," said Brian Wieser, global president of business intelligence at GroupM, advertising holding company WPP's media agency arm.
Still, he said, given these "extraordinary times," it's possible that a long-term, pervasive boycott could shift advertising dollars away from Facebook to other companies.
Beyond bad PR, though, experts say the protest is not likely to make a lasting dent in Facebook's ad revenue, because plenty of other advertisers can step in. Stifel analysts said in a note to investors this week that "well over" 70% of Facebook's advertising dollars come from small and medium-sized businesses and "these advertisers may be less concerned with the optics of where their ads are placed than large brands." Citing data from Pathmatics, Stifel said the top 100 brands spent roughly $4.2 billion on Facebook ads last year, representing around 6% of the company's nearly $70 billion of ad revenue in 2019.
Facebook hosts more than 8 million advertisers, according to JPMorgan. "We do not expect significant risk to numbers for Facebook as many other marketers ... will take advantage of potentially lower-priced inventory," JPMorgan analyst Doug Anmuth wrote in an investor note.
By BARBARA ORTUTAY
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.
