Advertising hatred of Facebook is spreading as fast as social media-generated fake news.
Facebook is taking a nose-dive precisely because advertisers are fleeing what has become a toxic environment. It’s been enough of a culling to shave $60 billion off of the social media giant’s market value in only two days.
It started on Friday, with a civil rights coalition’s launch of the #StopHateforProfit campaign, which called on advertisers to withdraw from Facebook over “repeated failure to meaningfully address the vast proliferation of hate on its platforms”.
The response was almost immediate--and thus too fast-moving for hedge funds to get out in front of before losing. The North Face and Patagonia jumped on board right away, but when Starbucks joined on Sunday, it was clear that the culling was going to be big.
Some $60-billion later--considering that Starbucks alone was the sixth-largest advertiser on the social media platform--Facebook has some real thinking to do.
A line-up of huge names then followed suit, including but not limited to PepsiCo, Coca-Cola, Verizon and others over the social media giant’s failure to get a handle on the spread of hate speech, fake news and overall misinformation.
By Monday, the list included 184 companies, according to the Wall Street Journal, which cited AB Bernstein analyst Mark Shmulik as saying that he expects the peer pressure on brands to increase the momentum of the advertiser boycott of both Facebook and Instagram.
Coca-cola said it was pausing for 30 days starting in July, noting in a statement: "We will take this time to reassess our advertising standards and policies to determine whether revisions are needed internally, and what more we should expect of our social media partners to rid the platforms of hate, violence and inappropriate content. We will let them know we expect greater accountability, action and transparency from them."
Facebook CEO Mark Zuckerberg responded, too, with a blog post in which he promised to take a tougher stance on hateful content in ads.
Facebook stock closed at $241.31 on June 23rd. Last Friday, when the #StopHateforProfit campaign, the stock closed down at $216.08, shaving $56 billion from FB’s market value. By Monday at 12:36pm EST, Facebook stock was at $218.36.
And that’s without feeling the hit on the bottom line--yet.
Still, plenty of analysts seem to think Facebook is indestructible.
Despite the lost revenue, “we do not expect significant risk to numbers” wrote Doug Anmuth, an analyst at JPMorgan, as reported by Bloomberg.
The reasoning is that the ~$60 billion FB lost in market value likely represents a lot bigger loss than the actual advertising revenue will end up being. In other words, it’s sentiment rather than fundamentals at this point, says JPMorgan.
While Bloomberg Intelligence estimates the advertising withdrawals could cost FB over $250 million in sales, Wall Street is still expecting full-year revenue of over $77 billion.
But this could also be one of those scenarios in which Wall Street is--again--behind the times.
Indeed, banks such as JPMorgan and Goldman Sachs have been overtaken by the likes of BlackRock, which hungrily targets ESG investments, or “environmental, social and governance” investments.
At this point, it’s a bet on Facebook’s resilience. It’s been amazingly resilient in the past, even amid the Cambridge Analytica scandals.
But there may be a breaking point. And if there is, the timeframe between now and November 2020 provides the most intense setup for it.
By Michael Kern for Safehaven.com
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