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Companies are boycotting Facebook. But who does it hurt more?

Billions of dollars of its market value has disappeared and its chief executive officer has been bumped down a notch in his place among the world’s wealthiest. But despite these big losses, Facebook is unlikely to suffer significant damage from the growing ad boycott over its policies to prohibit hate speech in its advertisements, say some marketing experts.

Indeed, some of the companies, depending on their size, could be hurting themselves more by limiting their exposure on the social media giant, suggest some industry experts. “A few brands pulling their Facebook ads for a month will have little to no bearing on Facebook’s bottom line,” Mari Smith, co-author of Facebook Marketing: An Hour A Day, said in an email to CBC News.

And if small and medium businesses cut their ads altogether, even for one month, this could cause a massive loss of revenue for those business owners, Smith said. “Joining the ad boycott would actually hurt their bottom line infinitely more than it would Facebook’s,” she said.

Coca-Cola, Starbucks are pulling ads

So far, a number of small- and medium-sized business, along with major corporations, including Verizon, Unilever, Starbucks, Best Buy, Coca-Cola, and The North Face, have said they will pull their ads from Facebook for the month of July. Canadian companies Lululemon, MEC and Arc’teryx have also joined the boycott.

Facebook CEO Mark Zuckerberg is estimated to have lost more than $7 billion US of his personal net worth following an advertisement boycott over his company’s policies on hate speech.

Their actions are a response to the StopHateForProfit boycott led by civil rights and advocacy groups, including the Anti-Defamation League and National Association for the Advancement of Coloured People. The groups claim Facebook has not done enough to keep racist, false and dangerous content  off its platform and allowed users to call for violence against protesters fighting for racial justice in the wake of the deaths of several Black Americans.

Facebook CEO Mark Zuckerberg has said the company will change its policies to prohibit hate speech in its advertisements. Under the company’s new policies, Facebook will ban ads that claim people from a specific race, ethnicity, nationality, caste, gender, sexual orientation or immigration origin are a threat to the physical safety or health of anyone else.

Still, the boycott doesn’t seem to be letting up. Facebook’s stock slid by more than eight per cent on Friday, erasing $56 billion US from its market value. Zuckerberg is estimated to have lost more than $7 billion of his personal net worth, and was also knocked down from third place to fourth on the Bloomberg Billionaires Index. But those that have joined the boycott represent just a small fraction of Facebook’s advertisers and revenue.

“To affect real, significant change with Facebook’s content moderating rules and all related issues, probably thousands of major brands would have to pull their ad budget for a month or more. Most likely, major brands are just not going to do that when it impacts their own bottom line,” Smith said. The top 100 advertisers on Facebook platform represent only six per cent of their total ad revenue, said Beth Ellen Egan, an associate professor of advertising at Syracuse University.

Biggest advertisers haven’t joined boycott

Roughly eight million companies of all sizes advertise on the social media platform, and some of the biggest advertisers, including Walmart, Disney and Procter & Gamble, have not joined the boycott.

“They’re not taking that big of a hit overall,” Egan said. Indeed, Dennis Yu, co-author of Facebook Nation and CTO of the digital marketing company BlitzMetrics, said in the last five to six years, despite all the controversies, Facebook has been on a steady upward trajectory — not just in its stock price but in its total revenue.

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“Every year, there’s something like this that happens. And people predict the gloom and doom and death of Facebook,” he said. “I think [this boycott] is no different.” Alan Middleton, an adjunct professor of marketing at York University, said it’s possible Facebook will suffer down the road. He agreed that Facebook will weather this storm in the short term, but the boycott is just another hit against the company, which has already suffered negative press over issues of privacy and data handling.

“There’s a concept called the inflection point, which is when you get a whole bunch of things happen, [they] don’t seem to have an effect straight away, but then they accumulate and they become big enough that it really takes off,” he said. Middleton views the boycott as another blow to how consumers view Facebook’s overall brand. And according to market research, that’s dropped dramatically over the last year, he said.

“So the risk is that bit by bit, the people will say, ‘Am I going to go on Facebook? No, I’m going to go on the next new one coming along.'”

Meanwhile, some of those companies boycotting the social media platform will likely also take a hit, particularly smaller companies.

CBC

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