Advertising Exodus Threatens Facebook’s Revenue Growth

A growing list of advertisers on Facebook Inc. plans to suspend spending on social media, undermining the company’s sales prospects and putting further pressure on its stock price. Starbucks Corp., Levi Strauss & Co., PepsiCo Inc. and Diageo Plc are some of the companies that have recently announced a cut in advertising spending, part of an exodus aimed at putting pressure on Facebook and other companies in the sector to remove comments that glorify violence, divide and misinform the public, and promote racism and discrimination. No single company can significantly affect growth on Facebook, which generated $ 17.7 billion in revenue in the last quarter alone. But more companies are putting pressure on other brands to follow suit, and if this adds to a pandemic-fueled economic slowdown, the risks to Facebook are compounded. “Given the noise this creates, it will have a significant impact. in the Facebook business, ”Wedbush Securities analyst Bradley Gastwirth wrote in an analytical comment. “Facebook must address this problem quickly and effectively to prevent advertising cessations from spiraling out of control.” As more brands advertise, plan to join the boycott or curb advertising spending, Facebook’s actions remain under pressure. The stock fell 8.3% on Friday after Unilever, one of the world’s top advertisers, said it would suspend spending on Facebook properties this year, erasing $ 56 billion from the company’s market value and removed more than $ 7 billion from the net worth of chief executive officer Mark Zuckerberg. Shares closed at $ 216.08 on Friday after hitting a record $ 242.24 the previous Tuesday. Facebook was already gearing up for a weak performance in the second quarter, which ends this week. Chief Financial Officer Dave Wehner warned in April of a possible “even more severe contraction in the advertising industry.” The number of coronavirus cases increased in subsequent months, prompting many parts of the country to slow down or reverse. to the reopening measures and gave advertisers additional justification to curb marketing spending. Facebook will post 1% revenue growth in the June period, followed by a 7% increase in the third quarter, according to current analyst projections, by far the smallest quarterly growth increase since the company left. The Starbucks said on Sunday it would suspend spending on all social media platforms while holding internal talks with media partners and civil rights groups “in an effort to stop the spread of hate speech.” They are targeting social media in general, including Twitter Inc., many are targeting Facebook specifically. Zuckerberg has been more reluctant to limit the speech, particularly the controversial posts by United States President Donald Trump, saying he does not want Facebook to be an arbiter of what is true, leading to a consortium of rights groups. Civilians and other advocacy groups, including Color of Change and the Anti-Defamation League, urge advertisers to stop spending on Facebook-owned platforms in July to protest the company’s policies. Zuckerberg responded Friday to mounting criticism, Saying that Facebook would tag all posts related to voting with a link that will prompt users to check out their new election information center.