#StopFundingHate: High profile brand walkouts challenge Facebook’s bottom-line

July 15, 2020

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2 min read

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What's going on here?

Major brands, such as CocaCola, Unilever, Starbucks and Verizon have joined together to boycott advertising on Facebook, in a campaign labelled “Stop Hate for Profit”.

What does this mean?

The decision for over 900 brands to suspend advertising on Facebook has spiralled as the US battles issues of social discontent, electoral divisions and racial tensions. The key driver for participating companies is brand safety, as they do not want their adverts being shown beside hateful content. The advertising industry is demanding fundamental changes, proposing cross-platform tools to allow marketers to better control where their adverts are placed and consistent classifications of harmful content.

Unilever is one of the world’s largest marketing spenders, spending an estimated $42m on Facebook advertising in 2019. It has recently pledged to stop all advertising on Facebook, Twitter and Instagram through to the end of the year. CocaCola, Daimler, Levi Strauss & Co, have followed suit, suspending payments for the month of July.

What's the big picture effect?

This story raises numerous issues but importantly highlights the competition (or lack thereof) within the digital sector.

Digital advertising fuels Facebook’s business model. In 2019 Facebook brought in $69.7bn in advertising revenue globally through its 8m advertisers. This means that Facebook would need large numbers to withhold spending if it was going to be impacted financially. Although these high profile walkouts have the potential to influence other brands to join in, Facebook is simply too big to be hurt by the boycott.

Facebook’s advertising base is incredibly broad and mostly made up of small-medium sized companies – the top 100 brands only make up 20% of total advertising revenue. The majority of smaller advertisers on Facebook are unlikely to join the campaign because they are reliant on the platform for cheaper, more focussed advertising to boost sales. With Facebook and Google accounting for 80% of all digital advertising in the UK, they have few options of where to take their business.

This shows the sharp power imbalance between Facebook and its customers. Tech giants enjoy market dominance and their rivals cannot compete on equal terms. With little competition online, this boycott is bound to be short lived. Even Zuckerberg has guessed “that all these advertisers will be back on the platform soon enough.” 

The Competition and Markets Authority (CMA) in the UK have recently released a report reflecting these issues, recommending that tech giants be reined in. It has proposed the government creates a “Digital Markets Unit” with the power to force competition where none exists. Some suggestions include sharing data about user behaviour and ordering Facebook to increase compatibility with competing social media platforms.

The boycotts may have little long-term financial impact, but importantly they may have started a much needed conversation about digital dominance and the need for regulation. Legislative developments could limit Facebook’s power, which may ultimately provide advertisers with more choice over where they place their ads.

Report written by Rebecca Lax

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