Over the past week or so, major companies of all kinds began announcing that they are suspending advertising spending on social media. The stated reason for these halts in advertising is inadequate handling of hate speech and misleading content.
What started with outdoor brands North Face and REI now includes more than 160 companies from across the economy as part of the “Stop Hate for Profit” campaign.
Facebook (FB) and CEO and co-founder Mark Zuckerburg have emerged the primary targets of the movement. Stop Hate for Profit’s website lays out recommended next steps for Facebook and has a breakdown of some of the recent events that they feel were mishandled by the company.
Despite not joining the Stop Hate for Profit movement, Starbucks (SBUX) announced Monday it will join the growing number of companies in halting their ad spending on Facebook, including Facebook-owned Instagram, Twitter (TWTR) and other social media platforms.
Zuckerberg and Facebook have taken a hit over the past week as a growing number of companies announced suspensions of social media advertising. According to Bloomberg’s Billionaire Index, Zuckerberg lost a whopping $7 billion off his net-worth as Facebook shares plunged over 8% last week.
As the Stop Hate for Profit movement continues to add large and small companies, it makes sense to wonder what the impact this will have on these companies.
Market Cap: While the number of companies that are a part of the movement is a testament to the growth and strength of the movement, the market cap of the companies may prove to be a better indicator of much investors can expect this movement to affect Facebook’s earnings and stock price. Nearly 99% of Facebook’s revenue comes from online advertising, which places Facebook in a vulnerable position here as the source of virtually all of the company’s future cash flows are now in question.
Consistency: Despite the pause on social media advertising spreading like wildfire, there are a lot of inconsistencies within the movement that may make it difficult for the movement to have a noteworthy impact on Facebook’s earnings and force change. Even though many of these companies have pledged to not advertise on Facebook, it appears that the extent to which companies withdraw advertising varies greatly. Some companies are continuing to advertise on Instagram, while others, such as Ben and Jerry’s, are halting their ads in the U.S. while continuing them internationally.
Elasticity: Another important variable to watch is how a company's stock reacts after announcing it is going to halt ad spending on Facebook. This is important because the effect the announcement will have on the company’s stock may be a deciding factor that either prevents or pushes other companies into similar decisions. This means that if companies get notable boosts during the days and weeks following a similar announcement, more companies may hop on board. Meanwhile, if it has a neutral or negative effect on stock prices, companies (particularly smaller ones) may decide to not participate or to participate in a manner that adds further inconsistency to the movement.
As Facebook’s revenue and Zuckerberg’s net worth continue to take a hit as companies of all sizes boycotting advertisements on the site, the Stop Hate for Profit movement will continue to create interesting opportunities for investors that, if played right, could result in profitable trades throughout the movement.
This movement is growing fast so a complete list of companies is hard to come by, but here are some of the publicly traded companies that had announced plans to suspending ad purchases on Facebook as of June 29:
Coca-cola (KO)
Colgate Palmolive (CL)
Denny's (DENN)
Diageo (DEO)
Ford (F)
The Hershey Company (HSY)
Honda Motor Company (HMC)
Levi's (LEVI)
Lululemon (LULU)
Starbucks (SBUX)
Unilever (UL)
Verizon (VZ)
