Social media giant, Facebook, has recently lost several major advertising clients because of its content management policies. Brands like Starbucks, Coca-Cola, and Microsoft have discontinued their spending on the platform because of the way it handles hate speech, misinformation, and ad placement. As a result, the company’s market value has taken a multibillion-dollar hit.
However, market analysts do not believe the current marketer exodus will hurt the Big Tech firm in the long-term.
Why Brands are Leaving Facebook
The Menlo Park, California-based corporation is losing support from large companies because of its perceived poor handling of harmful content.
On June 17, a group of civil rights organizations launched a campaign called #StopHateforProfit with the intent of pressuring Facebook to enhance its hate speech policies. The effort appealed to brands to pull their advertising from the platform in July. The coalition’s message resonated as Levi’s, Ben & Jerry’s, Pepsi, Honda, Unilever, and Verizon pulled their ads from the service.
To date, the #StopHateforProfit campaign has cost Facebook an estimated $80 billion in market capitalization and $250 million in revenue.
As a result, Facebook’s stock price fell by 8 percent at the close of business last Friday. In response, the technology company held a conference call with over 200 marketers acknowledging the problem and promising reforms. Also, Nick Clegg, Facebook’s vice president for public affairs, stressed the service has “no incentive to tolerate hate speech.”
Despite its mitigation efforts, the firm’s ad partnership losses have not decreased. Microsoft announced it would discontinue marketing its products on Facebook and Instagram because it did not want its promotional material to appear next to inappropriate content. Having spent $115 million on the platform last year, the Windows maker ranks as Facebook’s third-biggest sponsor.
Why Facebook’s Advertiser Problems Might Be Temporary
Although the Silicon Valley giant’s near-term losses are concerning, a few leading marketing firms believe they may prove temporary.
Doug Anmuth, an analyst with JP Morgan, said Facebook’s recent headwinds do not represent a “significant risk” to its value. The market expert pointed out advertisers left the platform in droves following the Cambridge Analytica scandal but ultimately returned. Anmuth also speculated marketers might load up on social network ad purchases to take advantage of temporarily lower prices.
MKM Marketers agreed with JP Morgan’s assessment, noting Facebook has millions of ad partners scattered throughout the world. In addition, the service drives most of its advertising revenue from small and midsize businesses, not highly visible billion-dollar firms.
Aaron Kessler, an analyst with Raymond James, also holds the opinion that the social network’s sponsor headaches will be “short-lived.” He explained his near-term optimism is based on Facebook’s ability to assuage its brand partner’s concerns.
Bloomberg reported Wall Street’s consensus forecast is the corporation will post $17.1 billion in sales in Q2 and $77.1 billion for the full year. A week ago, market watchers expected its revenue intake would be 0.2 percent lower. Having endured a raft of controversies and a $5 billion government fine in recent years, Facebook has a proven ability to overcome existential challenges.