Advertisers Are Boycotting Facebook

Written by Jennifer Clark
Posted July 1, 2020

Facebook investors are getting a little worried about the growing Facebook (NASDAQ: FB) advertiser boycott. On Monday, Facebook shares fell close to 3% in early trading but eventually rebounded. The list of advertisers abandoning the platform continues to grow. Some big companies, like Starbucks (NASDAQ: SBUX), Coca-Cola (NYSE: CCEP), and Hershey’s (NYSE: HSY) announced they would be pausing their spending on the massive social media platform because of the growing concerns over the company’s mishandling of hate speech and misinformation.

Coca-Cola’s CEO James Quincey wrote on the brand’s site on Friday:

There is no place for racism in the world and there is no place for racism on social media.

On Friday, the huge household goods company Unilever (NYSE: UL) announced it would stop advertising on Facebook and Twitter for the rest of the year. On the news, Facebook shares closed out the market down 8%. As the list of companies joining this boycott grows, Facebook's ad sales could suffer. Most of the social media platform's ad revenue comes from small and medium-sized businesses, so while a few big brands boycotting might not have worried the company, the growing list poses a threat to it and its investors. 

There are only a few solutions to this problem and one is for the company to address the issues that have emerged and explain what it plans to do in regards to misinformation and hate speech. Facebook is a huge platform, and for some users, it is the place where they get most of their information. It’s extremely careless for a company with such a huge responsibility to the public to ignore this problem. Facebook needs to figure out how it will filter out fake information and hate speech. 

Bradly Gastwirth, a chief strategist at Wedbush Securities, said:

Facebook needs to address this issue quickly and effectively in order to stop advertising exits from potentially spiraling out of control.

Maybe Facebook isn’t worried right now, but as more companies follow suit, management will start to get a little more flustered. The company acts like it cares about its users and the information they see every day, but when it allows hate speech and false information to plague its platform, it tells a different story. Other companies don’t want to be associated with that type of mentality. 

2020 has been the year of “cancelling” an individual or company that don't take responsibility for past and present mistakes. It appears, at the moment, Facebook doesn’t recognize that. It has been privileged to have an enormous amount of power over how its users see the world. It needs to do better before it’s too late. 

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Earlier this month, a civil rights coalition that included the Anti-Defamation League (ADL) and the NAACP launched a campaign called #StopHateforProfit. This campaign calls on companies to stop advertising on Facebook for the month of July because of Facebook’s “repeated failure to meaningfully address the vast proliferation of hate on its platforms.” Some of the first brands that jumped on board were The North Face, REI, Honda (NYSE: HMC), Levi Strauss (NYSE: LEVI), and Verizon (NYSE: VZ) as well as the other companies mentioned earlier in this article. This campaign is heating up and July just started. 

As of Saturday, this advertising boycott had already wiped out an estimated $7 billion from Zuckerberg’s fortune. #StopHateforProfit is being used to put pressure on major advertisers to reexamine how they spend their money on Facebook because of how the company moderates its social media platform. Let’s remember that advertising accounts for almost 100% of Facebook’s revenue — it earned $17.4 billion in ad sales in the first three months of this year. The company needs its advertising revenue, so it needs to find a better, more realistic solution. 

These major brands and Facebook users want to see results and don’t want to hear the same excuses they’ve heard from massive companies like Facebook over and over again. 2020 is the year of action. Everyone is tired of excuses. If Facebook doesn’t make any changes, then its investors could also get tired of the company.

Until next time, 

Jennifer Clark
Pro Trader Today
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