Facebook’s ad boycott snowball keeps growing

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Facebook is losing advertisers due to the terms of policies on share and return on investments (ROI), thereby large companies like Unilever (UL), Verizon (VZ), Mozilla, Honda, Hershey’s, Magnolia pictures, to mention a few they are boycotting to place their ads on Facebook.

Regarding larger advertisers, some of them have been bailing on the back of #StopHateForProfits, although the boycott may prove to be short-lived. More importantly, these companies could very well be encouraged to shift marketing dollars away from Facebook and into channels that, while facing secular pressures, could present better ROI opportunities.

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For starters, there have been studies in the past suggesting that TV and print tend to provide a better return on ad dollars than online display and even video. Second, lower demand for TV and print ads could drive CPM lower on these platforms, which is good news for advertisers but not for online players that have to compete with it. And third, among digital platforms, Facebook campaigns have consistently trailed those of peers Alphabet (GOOG)(GOOGL) and Amazon (AMZN) in the race for ROI, at least through last year.

Another round of cancellations by heavyweights like Verizon (VZ) and Unilever (UL) sent the Facebook stock tumbling on Friday, June 26. While each boycotting client’s ad budget alone may not add up to much on the heels of Facebook’s massive $70 billion in revenues generated last year, many of them combined could create some drag to growth in an already challenged 2020.

Shares of Facebook plunged 8.3% on Friday, with selling accelerating after Unilever said it would stop advertising on social media sites through the rest of the year. Starbucks said Sunday it would stop advertising on social media, joining companies like Verizon and Coca-Cola.

Adidas (OTCQX: ADDYY) and Reebok are suspending their Facebook ads through July (following the terms of the “Stop Hate For Profit” boycott), CNBC says. Coca-Cola and Starbucks also said they would pause ads on all social media, but that they wouldn’t join the boycott. Clorox also mentioned it was halting ads but did not mention the boycott.

Apart from the terms and conditions of Facebook to these companies, there is the medium-term economic impact of COVID-19. As the global economy shows clearer signs that it will remain under stress for longer, advertisers should face challenges on two fronts: decreased budgets (an internal problem) and lack of demand for its products and services (an external problem). This will probably hurt small and mid-sized companies most, whose pockets might not be deep enough to endure a recession that is looking more severe by the day.

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