Facebook losing millions of dollars as companies cut off advertising

More than 400 global companies are withholding millions of dollars in advertising on Facebook for a month or possibly longer to pressure the social media giant to take a stronger stance against misinformation and hate speech on the platform.

Coca-Cola, Pfizer, Microsoft, Adidas, Lego, Procter & Gamble, Starbucks, Hershey’s, Ford Motor Co. and Verizon are among the biggest names to join the #StopHateforProfit campaign being led by a coalition of civil rights groups including the NAACP and the Anti-Defamation League.

In response, Facebook CEO Mark Zuckerberg now says he will meet with civil rights leaders in the coming weeks after defying recent public pressure to take action on inflammatory posts by President Donald Trump that spread misinformation about mail voting and suggested violence against George Floyd protesters nationwide.

The impact

Facebook’s digital ad business is its bread and butter, getting most of its profits from small business vs. large corporations. Experts say that the company is more concerned about current antitrust investigations and that the boycott is doing more damage to Facebook’s reputation rather than to its bottom line.

Although that’s the case, Facebook still lost about $60 billion in market value this week, reports said.

To get an idea of the amount of money on the line,  the top 100 advertisers on Facebook spent $4.2 billion on ads last year, which was only roughly 6% of the company’s total ad revenue, but advertiser spending accounted for more than 98% of Facebook’s annual $70.7 billion in total revenue, The New York Times reported.

Starbucks alone spent $95 million in advertising on Facebook in 2019.

While the social network has struggled with issues such as election interference and privacy in recent years, it has never faced a public backlash of this magnitude from its advertisers.

How boycott started

The boycott, which is supposed to last throughout July, sprang up about two weeks ago over the company’s “repeated failure to meaningfully address the vast proliferation of hate on its platforms.”

Facebook employees staged a virtual walkout over the issue of Trump’s social posts in early June, but Zuckerberg came away from that only suggesting that the company would consider changes to existing policies.

“I know many people are upset that we’ve left the president’s posts up, but our position is that we should enable as much expression as possible unless it will cause imminent risk of specific harms or dangers spelled out in clear policies,” Zuckerberg wrote at the time.

On June 19, the North Face and REI were among the first brands to announce a boycott, quickly followed by multiple other companies.

Pressure on top advertisers was ramped up by politicians, supermodels, actors and even Prince Harry and his wife, Meghan, The Times reported.

Snowball effect

A turning point came last Tuesday, when Zuckerberg came face-to-face in a virtual meeting with some of his biggest advertisers who complained about the potential of their brands being featured alongside questionable content. But when the CEO doubled down again on his stance to leave Trump’s posts alone, the floodgates opened.

During a town hall with employees last week, Zuckerberg reportedly told employees "We're not going to change our policies or approach on anything because of a threat to a small percent of our revenue" adding that the advertisers would "be back on the platform soon enough," according to technology news outlet The Information, which put the number of boycotting companies at more than 500.

Others involved in the holdout are CVS Pharmacy, Unilever, Eddie Bauer, Eileen Fisher, Honda America, JanSport, Patagonia, Levi Strauss, REI, The North Face and White Castle.

Ad agency executives said more of their clients were weighing whether to join the boycott.

“Other companies are seeing this moment and are stepping up proactively,” said Jonathan Greenblatt, chief executive of the Anti-Defamation League, citing recent efforts from Reddit, YouTube and Twitch taking down posts and content that promote hate speech across their sites. “If they can do it, and all of Facebook’s advertisers are asking them to do it, it doesn’t seem that hard to do.”

Damage control

Behind the scenes, Facebook has been on full damage control in the days since Zuckerberg’s initial sit-down with advertisers.

On Friday, the company announced it will flag all “newsworthy” posts from politicians that break its rules, including those from Trump.

The social network will begin adding new labels to all posts about voting that will direct users to authoritative information from state and local election officials.

Facebook is also banning false claims intended to discourage voting, such as stories about federal agents checking legal status at polling places. The company also said it is increasing its enforcement capacity to remove false claims about local polling conditions in the 72 hours before the U.S. election.

Facebook also said in a statement that it had invested billions of dollars in technology and employees to sort through content. It also said it had banned 250 white supremacist organizations from its core Facebook site and its photo-sharing site, Instagram.

On Tuesday, Facebook banned an extremist anti-government network loosely associated with the broader “boogaloo” movement, a slang term supporters use to refer to a second Civil War.

The company is also holding daily calls with executives along with regular email communications, and has agreed to an audit by the Media Rating Council over its approach to hate speech.

Facebook communications chief Nick Clegg has also been very visible in a series of media interviews to stress the company had its priorities straight on the issue of hate.

“We may never be able to prevent hate from appearing on Facebook entirely,” he said, “but we are getting better at stopping it all the time.”

Facebook’s executive team also held another meeting with advertisers Tuesday morning  in which they acknowledged the concerns about hate speech and misinformation, according to The Times.

— Information provided by The Associated Press and The New York Times was used to supplement this report.