On June 17, 2020, a coalition of civil rights organizations, including the NAACP, the Anti-Defamation League and Color of Change, launched the #StopHateForProfit campaign. More than 1200 businesses and nonprofits stopped advertising on Facebook during July in a Facebook Ads boycott. They demanded the platform take responsibility for and action against hate speech prevalent on the site.
Three months on, we take a look at what eCommerce brands can learn from the recent boycott and how it impacted the industry.
The Boycott was Big With Brand Advertisers But Not Others
The boycott was picked up and led by some of the biggest brands in the country. Outdoor retailers REI, The North Face and Patagonia, were the first to join the campaign. Companies like Unilever, Adidas, Starbucks and Coca-Cola quickly followed.
It’s brand advertisers that are heading up the boycott, writes The Verge’s Casey Newton. This is important to note because these aren’t the only advertisers on Facebook. The bulk are direct-response advertisers. These are the ads that ask you to install an app or buy a product.
There’s a reason for this: It’s much easier for these brands to join in a boycott. Bloomberg tech reporter Kurt Wagner points out that Facebook ads make up only a fraction of their total marketing budget, and we don’t even know how much each brand actually spends. Smaller companies, on the other hand, can’t shut off ads without doing serious damage to their business.
Not only is it easier for these brands to boycott Facebook, says Patricio Robles at Econsultancy, but many of these brands also had an incentive to do so. “With the global economy under pressure and future uncertain, companies are necessarily adopting more financially conservative stances and that entails reducing ad spend,” he writes. “In a few cases, brands hardest hit by the pandemic have even stopped advertising altogether.”
That has caused skeptics to question the intentions of these brands as a result. Is the boycott a convenient excuse to cut budgets while looking good? Are these brands having their cake and eating it, too?
Perhaps. Several brands like Unilever, Coca-Cola, HP and Verizon have committed to pausing their ads past July, reports CNBC’s Megan Graham. Others, like The North Face, Eileen Fisher and Puma, were quick to return to the platform in August.
eCommerce Brands Weren’t Keen on the Facebook Ads boycott
It won’t have passed your notice that the brands returning to Facebook are retailers. This isn’t a surprise. One industry less affected by the boycott than any other: eCommerce.
Spending by eCommerce actually increased according to data collected by Socialbakers.
While eCommerce ad spend fell by 13% during the first week of July, it then increased by 19.3% to reach a 2020 high by the end of the month. It was the only industry Socialbakers examined that increased its ad spend.
While major retailers like The North Face, REI and Patagonia joined the boycott immediately, many smaller eCommerce firms didn’t. Notably absent were DTC eCommerce brands, says Taylor Avery at the Los Angeles Times. She highlights Birchbox as one of the few DTC brands that did take part, despite the bulk of its marketing budget being allocated to Facebook and Instagram.
Puma, The North Face and Eileen Fisher are not unique. Other online retailers who took part have been quick to return to the platform. Of the 29 eCommerce advertisers that told ad agency Tinuiti to stop buying Facebook ads in July, only one considered extending the ban, reports Digiday’s Seb Joseph. “All others planned to resume their pre-boycott campaigns; some with additional spend to make up for lost media dollars in July.”
It’s Particularly Hard for DTC Brands to Go Cold Turkey
There’s a reason Birchbox struck a lonely DTC-figure in the boycott; it’s hard for digitally native brands to quit Facebook. Part of the problem lies in the DTC model, says blockchain security specialist Reuben Jackson. By cutting out middlemen like marketplaces and third-party retailers, DTC brands depend on targeted advertising to attract consumers.
This puts DTC brands in a bit of a bind, he writes. “With DTC, the focus is on building brand affinity by appealing to consumers’ emotions and values, so championing social justice can bolster sales. But at the same time, generating inbound traffic from social media channels is a major source of sales.”
Many DTC brands depend on Facebook to fill their sales funnel, says Brendan Gahan, Partner and Chief Social Officer at Mekanism. FMCG brands use Facebook for brand awareness and can, therefore, spend those marketing dollars elsewhere. “For DTC brands, it would be the equivalent of pulling your product off the shelves of Walmart,” he says.
DTC marketing strategist and investor Nik Sharma says many brands couldn’t boycott Facebook even if they wanted to. He estimates that between 60%-80% of DTC marketing budgets are spent on Facebook and that brands depend on the platform to grow revenue. Many of these brands have a duty to shareholders and investors to grow as fast as possible. Turning off the tap simply isn’t an option.
Make no mistake, quitting Facebook can seriously hurt. JibJab, an eCard creation studio that spends between $4 million and $6 million on Facebook ads each year, joined the boycott even though CEO Paul Hanges knew it would financially impact the company.
On average, 35%-40% of new subscribers come from Facebook. By the end of July, new subscribers were down 25% compared to the end of June. It wasn’t as big an impact as Hanges expected, but the company is being forced to return to the platform.
It probably won’t be the same levels as before, however. “One of our priorities is diversifying our acquisition set and finding other channels to reduce the reliance of our brand on Facebook advertising,” says Hanges.
The Boycott Isn’t Likely to Hurt Facebook in the Long Run
It’s not clear whether the boycott will significantly impact Facebook in the long run, says CNN’s technology reporter Brian Fung. “That’s partly due to the number of participating brands, the timing of the campaign, and ambient factors such as the pandemic that may make it challenging to link any potential dip in Facebook revenue directly to the boycott,” he writes. There’s no other platform that can offer advertisers the reach and targeting of Facebook, either.
Facebook stock fell by roughly 10% in the wake of the boycott announcement, but by July had recovered, writes journalist Tim Dams at IBC. He puts the rebound down to the fact that so much of Facebook’s ad revenue is from smaller businesses rather than the big brands that were boycotting. Facebook also pledged to label posts with harmful content, although it hasn’t agreed to remove content going forward.
A diverse customer base certainly helped Facebook weather the storm. In an earnings call, Facebook CFO David Wehner noted that the top 100 advertisers only contributed 16% of total quarterly revenue, reports Axios’ Sara Fischer. This was lower than last year, meaning Facebook had diversified away from big brands. What’s more, total ad revenue actually grew by 10% during the boycott.
A similar boycott of YouTube in 2017 didn’t hurt that platform much either. If anything, the video hosting site came back even stronger, writes Will Oremus at OneZero. Brands that boycotted returned swiftly, but the platform did become “more restrictive and carefully moderated” as a result. Despite that, the underlying business model remains unchanged.
It’s too early to state definitively whether Facebook, like YouTube, will emerge from the boycott unscathed, but DTC brands needn’t wait to find out. If the Facebook Ads boycott has done anything for the eCommerce sector, it’s shown the danger of relying on one traffic source to deliver the bulk of your customers.
Diversifying traffic sources and marketing budgets may be hard work, but it does make it easier to take the kind of progressive, consumer-focused stances DTC brands have become famous for. Diversification will make your business more financially stable, too.