Companies are boycotting Facebook. But who is hurt more by the tactic?

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 people.

But despite these big losses, Facebook is unlikely to suffer significant damage from the growing ad boycott over its initial reluctance 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's platform, 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.

On Tuesday, Scotiabank confirmed it too will pull its ads from Facebook during July, and on Wednesday, three more of Canada's big banks followed suite: RBC, CIBC and BMO.

WATCH | Canadian companies join Facebook ad boycott:

Canadian companies join Facebook ad boycott

4 years ago

Duration 5:10

Several Canadian companies, including Vancouver-based Lululemon Athletica Inc. and Mountain Equipment Co-op, are joining a chorus of businesses calling on Facebook to do more to combat hate speech on its platform.

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.

"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.

Smaller companies benefit from ROI

The reason so much revenue comes to Facebook through smaller advertisers is that those advertisers see a swift return on investment, Egan said.

"They start advertising, and there's an immediate impact on their sales," she said. 

Facebook — as well as Instagram, which Facebook bought in 2012 — are essential for millions of small and medium-sized businesses that advertise on the platforms, said Smith. And with the inordinate amount of data Facebook collects on users, advertising on its family of apps is the most targeted traffic ad dollars can buy.

According to Statista, a statistics portal for market data, there were 2.6 billion monthly active users on Facebook as of the first quarter of 2020, making it the biggest social network worldwide.

"That's where the consumers are. You have to be where consumers are," said Yu. He said he believes Facebook can have a "tremendous" impact on sales for some companies, but that can be difficult to measure, when consumers are being exposed to other forms of messaging for a product.

But the impact on the more well-known brands who withdraw their ads from Facebook will likely be minor as they rely upon word of mouth, he said.

Smith said major companies like Coca-Cola are unlikely to see a revenue hit, since their ads on Facebook are focused more on brand awareness.

"It's not like people click on an ad and immediately buy a Coca-Cola," she said.