A growing list of Facebook’s advertisers is set to halt spending on social media, undermining the company’s sales outlook and putting its stock price under further pressure.
Starbucks, Levi Strauss, PepsiCo and Diageo are among the most recent companies to say they are curtailing their ad spending, part of an exodus aimed at pushing Facebook and its peers to suppress posts that glorify violence, divide and disinform the public, and promote racism and discrimination.
No single company can significantly dent growth at Facebook, which generated US$17.7 billion (S$24.6 billion) in revenue last quarter alone. But a rising tally adds to pressure on other brands to follow suit and, when combined with an economic slowdown fuelled by the coronavirus pandemic, the threat to Facebook deepens.
“Given the amount of noise this is drawing, this will have significant impact on Facebook’s business,” Wedbush Securities analyst Bradley Gastwirth wrote in a research note. “Facebook needs to address this issue quickly and effectively in order to stop advertising exits from potentially spiralling out of control.”
As more brands publicise plans to join boycotts or otherwise rein in ad spending, Facebook shares remain under pressure. The stock tumbled 8.3 per cent last Friday after Unilever, one of the world’s largest advertisers, said it would halt spending on Facebook properties this year, eliminating US$56 billion in market value and shaving more than US$7 billion off the net worth of chief executive officer Mark Zuckerberg.
Facebook closed at US$216.08 last Friday.
The number of coronavirus cases in the US has surged in the intervening months, prompting many parts of the country to slow or roll-back reopening efforts and giving advertisers added justification to rein in marketing spending.
While some companies are targeting social media generally, including Twitter, many are singling out Facebook specifically.
Mr Zuckerberg has been more reticent to put limits on online discourse, notably controversial posts by President Donald Trump, saying that he does not want Facebook to be an arbiter of what is true.
That has prompted a consortium of civil rights and other advocacy groups, including Colour of Change and the Anti-Defamation League, to urge advertisers to stop spending on Facebook-owned platforms for July to protest against the company’s policies.
Mr Zuckerberg responded last Friday to the growing criticism, saying that Facebook would label all posts related to the November presidential elections with a link encouraging users to look at its new voter information hub. The social network also expanded its definition of prohibited hate speech for advertising.