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Facebook sees 250 companies participate in ad boycott

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Yahoo Finance’s Brian Sozzi and Jared Blikre speak with Futurum Research Principal Analyst Daniel Newman about what the Facebook ad boycott means for the company’s revenue.

Video Transcript

BRIAN SOZZI: Many household names are joining in the hashtag stop hate for profit campaign and promising to stop spending money on Facebook ads this month. Starbucks, Coca-Cola, Ford, and our parent company Verizon are among the most recent companies to join the growing movement. Joining us now to discuss how this will financially impact Facebook is Futurum Research principal analyst Daniel Newman.

Daniel, always good to see you here. And I would say this, for the first time, Facebook shareholders-- I wouldn't say all of them but a good majority of them finally understand that this company might make less money because of this backlash. This has been a Teflon stock for so many negative things against Facebook. But that is not the case here.

DANIEL NEWMAN: And you said that exactly correct, Brian. 8% last Friday we saw this thing drop off. And people are reacting. I mean, right now we've had a turbulent quarter, from coronavirus to the ongoing Black Lives Matter protests. And we're facing-- you know, more and more people are expecting to see real meaningful change.

And Facebook, like you said really well, Brian, has been through a number, the Cambridge Analytica scandal. The company has been through a number of different advertising, data tracking scandals. And people have just kind of let it all bounce off them. This time people are saying no. And that was why we saw that big 8% selloff.

Having said that though, it's definitely going to be a challenge, as these big companies-- Brian, the top 100 companies that advertise on Facebook only represent about 6% of the ad revenue for the company. So while it's great to see it because these big companies have a lot of influence, it's going to be interesting to see how long these companies can hold out. And can more companies join into this boycott to really make a bigger impact at Facebook?

BRIAN SOZZI: Daniel, can you give us a number? This list, I've seen the list out there on social media approaching 250 companies that will not be advertising on Facebook. Can you give us a number? What is the revenue hit? Is it in excess of a billion dollars this year?

DANIEL NEWMAN: You know, like I said, as I was reading it, the number does appear that it could be. But again, you have a lot of noncommittal companies, Brian. You have companies saying they're going to do it for a month. You have some companies saying they're doing it, but they're not necessarily part of this movement. They want to see better from Facebook. They want to see a conscience from the company. They want to see meaningful change.

You know, I don't know if you remember this. But in 2017, YouTube had a boycott as advertisements were showing up next to hate content. And advertiser after advertiser started pulling out. And there was a big reaction. And oh, my gosh, what's going to happen to YouTube. And then YouTube made a small modification to its ad policy. And I think most people have forgotten it. I think honestly, three years later, most people have forgotten that YouTube went through this. And Google is back to normal.

So I think what we're really hoping for here is that Mark Zuckerberg, who has a lot of control over the direction of the company, takes some real action, shows some real prerogative to mark hate content to give advertisers more choice over where their advertisements show up and to, you know, really push for a platform that isn't used to create abuse and to spread hate. And I think advertisers will come back, though because Facebook has been such a critical channel for these companies.

And that was actually what I said about that next wave of companies, Brian, beyond those big, big companies. I'm reading a lot about it. And they're saying, like, look, we want to be part of this movement. But we simply cannot afford-- our businesses will not survive because advertising on Facebook has become so critical.

So what I'm really hoping to see is a significant commitment from Facebook to do better. But it has to be more than words because Facebook does every time. Every time they run into this hurdle, they say something. And everyone goes, oh, OK, back to it. Stock goes back up. This time, I'm hoping those words become real meaningful actions that sustain beyond this election.

JARED BLIKRE: Hey, Jared Blikre here. Yeah, we've seen this stock plummet. And every time it seems to recover to new highs. But in the longer term, I mean, looking forward, is this going-- what are the potential for this to be the defining moment? You know, we've seen changes in leadership that Instagram. Is it possible there's going to be some kind of internal revolt that kind of propels us forward?

DANIEL NEWMAN: Yeah, you know, I don't think Mark Zuckerberg is going anywhere. I think that he obviously has set himself up in a very good position with a lot of control. I think we are seeing, though, a pivotal moment where this protest and these defining moments within tech companies saying we're not just going to talk anymore. We're going to do things. We're going to take actions. We're going to make investments. We're going to stop partnering in advertising.

I think if these companies can sustain beyond this month, I think when it really starts to hit shareholders, that's when companies make changes. They make changes, companies make changes when it starts to hit the bottom line. And investors and shareholders say, you know what, I'm going to put my money on Netflix, or I'm going to put my money over at Amazon or somewhere else than Facebook.

So to your point, is this the moment? I think only time is going to tell. But we are going to see some of the most interesting, you know, responses between now and November. And between now and November is going to be a defining period of time of whether we're going to rectify all this toxicity that exists within social media. And it has to start with the companies.

And I hope, Jared, that this is a chance because this is a great opportunity. Right now is that inflection point. And we can make the internet better.

BRIAN SOZZI: Daniel, I have 20 seconds left here. So just based off of Facebook's struggles, from an investor standpoint, do you take money, put cash to work in a Google or a Snapchat?

DANIEL NEWMAN: Oh, well, I am an industry not an equities analyst. I really do think Snapchat's doing interesting things. Google's great. But Snapchat's been interesting. And they've been passionate. And they've stood by their ground. We've seen that from their CEO.

BRIAN SOZZI: All right, we'll leave it there for right now. Daniel Newman of Futurum Research, always good to see you. Talk to you soon.

DANIEL NEWMAN: Thanks, Brian.