Over 240 companies have paused ad spending on Facebook Inc., citing concerns about the proliferation of hate speech and misinformation on the social network. Many are part of a boycott backed by civil-rights groups that officially went into effect Wednesday.
But Facebook, which earns nearly $70 billion in annual revenue from more than 8 million advertisers, is unlikely to take a substantial financial hit unless the boycott becomes far more expansive and companies carry it out for a very long time.
Who is “pausing?”
Some very big names have suspended ad-buying—some for July, some for longer—including Unilever PLC, Verizon Communications Inc., Microsoft Corp. and Starbucks Corp. “There is no place for racism in the world and there is no place for racism on social media,” said James Quincey, chief executive of Coca-Cola Co., which paused all social-media advertising for at least 30 days but didn’t officially join the boycott. Still, only eight of Facebook’s 100 largest U.S. advertisers had joined the effort as of July 1.
The boycotters’ share
Those brands spent a combined $57.4 million on Facebook and Instagram in the U.S. in May. Many other brands that boycotted are smaller spenders.
What would it take to hurt Facebook financially?
Advertiser pullouts are big news , but it would take much more to throw Facebook’s business off course. If all the company’s top 100 U.S. advertisers in May boycotted Facebook and Instagram for a whole year—an extreme scenario—that would mean a hit of 18.6% to U.S. and Canada revenue and a roughly 9% hit to global revenue. A Facebook spokeswoman had no immediate comment on the boycott’s financial impact.
How does the boycott affect Facebook globally?
Facebook’s U.S. and Canada business makes up around half of its overall ad revenue. Many companies are only pausing their spending in the U.S.—where controversies over objectionable content have been most pronounced— but some are pausing all spending globally.
Mom-and-pop businesses
Facebook’s lifeblood is the millions of small and medium-sized businesses who use the company’s sophisticated ad buying system to target potential customers. These businesses account for 76% of all spending on Facebook, according to Deutsche Bank, and may not be in a position to pause a highly effective form of marketing, especially in a pandemic.
Even though Facebook's financial position is strong, the boycott does pose some risks. The attention big brands get from pausing spending could discourage Facebook and Instagram users from spending as much time on the platforms, and spur some mom-and-pop businesses to join the effort. The bad publicity could potentially invite more regulatory scrutiny for the company, which has already faced concerns on Capitol Hill, particularly from Democrats, that it doesn't do enough to police its platform.
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