• Varun Sharma

Why Facebook boycott will not work in the long-term?

Updated: Oct 18, 2020

Facebook has always pushed boundaries of ethics in a world that’s transforming. It has been the subject of love and loathe but at the same time is the most significant social network with billions of users worldwide. A few weeks back, quite a few companies such as Coca Cola, Starbucks, Honda, Unilever, and North Face boycotted Facebook Ads. The reasons are the company’s inaction against hate speech and the failure in handling hate speech in moderation. The issue was raised by a coalition of Civil Rights Groups who want to stop hate for profit. The group wants big advertisers to stop running ads on Facebook and Facebook run social media channels (Instagram) until they get their act together. On June 17th they asked companies around the world to act against it, as the disruption will be bad for Facebook and lead to actions. A few days after that, Facebook removed around 80 ads placed by the Trump Campaign for the user of imagery related to Nazism. The company also stated that it would ban all ads that present racists and religions as threats, but this will only affect paid ads but not individual non monetized content. Fast forward to today and a lot of companies still continue to boycott the platform, but there has not been sufficient movement by Facebook.

The problem here is that Facebook is used by different kinds of advertisers differently. In 2018, Facebook had a ~ $70 Bn revenue from ads, which is their primary source of revenue. The highest-spending 100 brands accounted for $4.2 billion in Facebook advertising last year or about 6% of the platform’s ad revenue. Where does the rest 84% come from? Small and medium-sized businesses (SMBs) who are primarily direct to consumer (DTC) based. Facebook takes a hit when thousands of them, act up against Facebook over a significant period. But the SMBs will not be able to do that because of business reasons and not moral considerations.

Now the difference is that an SMB uses Facebook primarily for customer acquisition, which directly generates revenue. Like most other DTC business model relies on Facebook Ads and Google Ads to drive revenue. This has to do with the fact that traditional marketing such as radio, television, and billboards are too expensive. With tools like Facebook Pixel, these platforms make it easy to zero in on customers looking for specific products. Passing off on the ROI on Facebook may simply be too powerful to pass up. Boycotting Facebook will cause DTCs to sacrifice their major sales engine. Most of the firms may be unhappy engaging in this but Facebook is likely to be overjoyed.

On the other hand, big brands like Coca Cola do it primarily for brand awareness rather than direct sales. Hence, a brand like Coca Cola saves money by cutting Facebook Ad Spend. If you look at the equation in another way, the boycott makes it cheaper for DTCs to advertise on Facebook which, in a way, defeats the purpose of the boycott. If the large brands pull their advertisements out, the Cost per Thousand (CPM) will decrease for advertisers. This could translate to more advertising dollars spent on Facebook which possibly means even higher revenue for Facebook this year.

Where I see this creating an impact is that this boycott could add fodder to the antitrust hearing later today, which is a culmination of a more than year-long investigation into the market dominance of Big Tech. Facebook has violated the privacy rights of multiple individuals. They have collected and continue to collect, unconscionable amounts of data about individuals without consent. They collect information about people who are not Facebook users and people who believe they have opted out of tracking. Further, they have been shown to be utterly unreliable and irresponsible with the data they collect. As a company, Facebook should do more about eliminating hate speech and misinformation. I am hoping the hearing today takes it in that direction. As a platform, they should invest in adequate moderation personnel to review the nature of what is being published on the platforms. Even with all this said, unless there is an alternative advertising platform that offers the same level of advertising opportunities, which seems highly unlikely at this stage, the boycott will not harm Facebook in the long term.


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