Facebook has a PR problem, not a long-term revenue problem

Facebook is under siege. The movement to persuade advertisers to pause their ad spend for the month of July (#StopHateforProfit) is an organized one, backed by groups ranging from the NAACP to the Anti-Defamation League and Color of Change.

Its made for splashy headlines. To lose business from companies like Microsoft, Unilever and Verizon isn’t good. What may be worse is facing very public criticism from brands which themselves have very loyal followings; brands like Adidas, Birchbox, and Patagonia.

Ben & Jerry’s expressed its support for “all those calling for Facebook to take stronger action to stop its platforms from being used to divide our nation, suppress voters, foment and fan the flames of racism and violence, and undermine our democracy.” That level of outrage from an ice cream company flags a significant PR crisis.

An existential threat?

But is it any more than a PR crisis? “Could a boycott kill Facebook?” as a BBC headline dramatically asked. In theory it could, under Facebook’s current ad-based business model. Speaking on the BBC Today program, David Cumming from Aviva Investors said that “the loss of trust, and a perceived absence of a moral code, could ‘destroy the business’.”

It’s not that simple, of course. Boycotts by advertisers make for bad headlines, and losing your third largest advertiser (Microsoft) is bad business. But it has been pointed out that Facebook doesn’t depend on these kinds of advertisers for the bulk of its revenue. The top 100 spending brands account for around 6 percent of Facebook’s ad revenue, the overwhelming majority of which comes from SMBs. Is that business going anywhere?

Not according to Socialbakers CEO Yuval Ben-Itzhak. Socialbakers provides a platform to manage and measure social media. He said: “There is no credible alternative, at the scale of Facebook, for brands to reach engaged audiences.”

He also pointed out that Facebook faced tougher challenges in the recent past.

“With Cambridge Analytica they had a trust issue with their core value—their users. Back then some brands also put on hold their advertising budget and the headlines about Facebook’s uncertain future were splashed across the news. Eventually we saw that the Cambridge Analytica story had a relatively small impact on Facebook’s stock in the long-term and most of the brands returned their spend on the platform.”

Concern has been expressed that the pandemic’s depressive effect on the economy is forcing small businesses to cut their ad spend—if it’s not forcing them out of business altogether. But it would take very large numbers of those brands to desert Facebook indefinitely to create an existential threat to the business.

It isn’t easy being Zuckerberg

Whether Facebook decides that the PR crisis itself merits fundamental, rather than cosmetic, changes in policy it is ultimately in Zuckerberg’s hands (it took less than two minutes for us to find a white nationalist account on the platform today, using some obvious search terms).

“It’s not easy to be Mark Zuckerberg these days,” said Ben-Itzhak. “No matter what Facebook decides, there will be people who will disagree. As an organization that is constantly learning, I do expect we’ll see some adjustments to policies, and content will be labeled according to updated guidelines.”

About The Author

Kim Davis

Kim Davis is the Editorial Director of MarTech Today. Born in London, but a New Yorker for over two decades, Kim started covering enterprise software ten years ago. His experience encompasses SaaS for the enterprise, digital- ad data-driven urban planning, and applications of SaaS, digital technology, and data in the marketing space. He first wrote about marketing technology as editor of Haymarket’s The Hub, a dedicated marketing tech website, which subsequently became a channel on the established direct marketing brand DMN. Kim joined DMN proper in 2016, as a senior editor, becoming Executive Editor, then Editor-in-Chief a position he held until January 2020. Prior to working in tech journalism, Kim was Associate Editor at a New York Times hyper-local news site, The Local: East Village, and has previously worked as an editor of an academic publication, and as a music journalist. He has written hundreds of New York restaurant reviews for a personal blog, and has been an occasional guest contributor to Eater.