Here’s the revenue hit Facebook will take as Diageo and Starbucks join the list of companies pulling ads from platform

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Facebook shares fell in premarket trading on Monday, after Diageo and Starbucks became the latest companies to halt advertising on social-media platforms over ineffective policing of hate speech.

Shares of the social-media company FB, -8.31%, which operates Instagram and WhatsApp in addition to its namesake platform, fell more than 2% ahead of the open of regular trading, with Twitter TWTR, -7.39% down by a similar amount.

“Diageo DGE, -0.44% strives to promote inclusion and diversity, including through our marketing campaigns. From 1 July we will pause all paid advertising globally on major social-media platforms. We will continue to discuss with media partners how they will deal with unacceptable content,” the U.K.-based spirits and beers maker said in statement.

On Sunday, coffee giant Starbucks SBUX, -3.08% said it was “pausing” advertisements on all social-media platforms, and would “continue discussions internally, with our media partners and with civil-rights organizations in the effort to stop the spread of hate speech.” On Friday, Unilever UN, -0.58% ULVR, -2.19% said it would halt U.S. advertising on Facebook and Twitter through year-end. Its Ben & Jerry’s ice-cream unit had previously announced a Facebook ad pullout.

Coca-Cola KO, -3.02% said on Friday that it would “pause paid advertising on all social-media platforms globally for at least 30 days.” On Saturday, another iconic American brand, Levi Strauss & Co. LEVI, -5.25%, announced on Twitter that it, too, it would pause ads on Instagram and Facebook:

Late Friday, Facebook Chief Executive Mark Zuckerberg announced policy changes, during a “virtual town hall,” to hide or block content considered hateful or that could harm voting, with no exception for politicians, an approach Twitter has previously applied to the high-profile account of President Donald Trump and others. Twitter hasn’t been as consistently a target of the boycott call but has come under a new wave of scrutiny, and shares have fallen alongside those of Facebook.

Neither Facebook nor Twitter could immediately be reached for comment.

Read:Facebook’s Zuckerberg was reportedly talked out of making moves against Trump as far back as 2015

The boycotts stem from a #StopHateforProfits campaign announced by a coalition of civil-rights and other groups, including the Anti-Defamation League and the National Association for the Advancement of Colored People, which has asked Facebook advertisers to show that they won’t support companies that prioritize profits over safety.

Since the launch of the campaign, the list of companies opting to pause advertising is growing, but Facebook is still looking at less than a 5% hit to revenue, said Rohit Kulkarni, executive director at MKM Partners, in a note to clients.

Firstly, he said Facebook makes the bulk of its revenues from mobile direct ads and small-business marketing. “FB has more than 160 million registered businesses globally and 8 million paying advertisers,” said Kulkarni, who noted that Ad Age’s 100 biggest advertisers spend less on a proportionate basis with Facebook.

“Procter & Gamble PG, -2.25% is the largest advertiser in the world, but we think it accounts for less than 0.50% of FB’s revenues,” Kulkarni said. Due to COVID-19, he said MKM had already expected leading advertisers to scale back on spending in the second half of this year, “implying a lower marginal headwind” for Facebook. Wall Street is estimating 1% year-over-year growth in the second quarter and 7% in the third. “We believe near-term Street estimates are reasonable and that there is upside potential given ad market recovery.”

He said Snapchat parent Snap inc. SNAP, -5.76% could benefit from “near-term uncertainty with advertiser policies related to [Alphabet-owned GOOGL, -5.45% GOOG, -5.65% YouTube] and Instagram.”

Tim Rostan contributed to this report.

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