Over the past week, a growing numbers of advertisers (major brands) have been pulling their advertisements from Facebook (FB) in order to pressure the company to take a more serious stance on the misinformation and hate speech that occurs on their social media platform. As a result of this near term pressure, Facebook announced they would begin placing warning labeling on postings which are deemed as being in violation of its rules and terms of service. This is a reversal of Zuckerberg’s original position that it should be left up to the user determine whether something is truthful or not and also an about face when earlier in the week, a company spokesperson defiantly said Facebook will not change policies simply due to revenue pressure.
The boycott has resulted in a loss of market capitalization over the past week; shares were trading near all time highs on June 23rd at $244/share but as of the market close on June 26th, over 10% in valuation has been lost with shares closing at $216/share. From my point of view, a 10% loss is minimal damage given the potential revenue loss from the boycott. Other companies would’ve gotten whacked for 20-30% (it could still happen but Facebook management is trying to contain the fallout).
It should be noted that most advertisers that have pulled out, have a limited timeframe associated with them (such as until the end of July) and is not a wholesale complete abandoning of the platform. Additionally, while there are major names pulling out, there is still mixed signals because their parent company often times has other brands/labels that have not pulled their advertising dollars (basically, it’s just a slight of hand to fool the average person that these brands that did pull out, are fully standing behind a good cause which could not be further from the truth when their parent company continues to advertise with their lesser known/more niche brands).
If these companies really wanted results, they would wholesale remove ALL of their advertising from the platform for a much longer period of time, and only return once Facebook has shown to have made the proper changes. Zuckerberg maintains a controlling interest in the company (due to the structure of Facebook shares where publicly traded ones are non-voting stock). Thus the only way to put pressure on Zuckerberg himself to make real meaningful change, is to place an immense amount of pressure on their revenue generating capabilities (and that means a sustained advertisement pullout). Unfortunately, without major corporate reforms (where valuation is not just a measure of ever increasing revenues and profits, but also includes actual corporate responsibility), all of the companies will end up going back to the status quo (with priority on growing YoY revenues and profits).
