The advertiser boycott is not going to change Facebook

It benefits Facebook to appear to be responding to its customers, but in truth, these changes are likely to have been in the works for some time. The reality is that despite the company’s reliance on them, advertisers probably hold little sway over the company.

First, Zuckerberg has near-total control over Facebook. He is chairman, chief executive and controlling shareholder, which means he is de facto not answerable to investors, even if he were to run the company into the ground. Zuckerberg presents this as an advantage that allows him to think long-term. It also limits the influence Facebook’s advertisers can have.

The other reason is that while the company is reliant on one source of revenue, that source is remarkably broad. At the last count, Facebook had more than 8m advertisers, and even the biggest of those account for a fraction of a percent of its total sales. 

As my colleague Laurence Dodds reported this weekend, the total cost of the Facebook boycotts announced so far is $76m – a rounding error to the company. The company’s adverts are bought by automatic auction, so any void is likely to be quickly filled by the advertisers who do remain on the social network. The critical mass of advertisers that would be needed to truly squeeze the company is impossibly high.

Besides this, recent history suggests any advertiser exodus will be short lived. YouTube saw a string of big brands desert the video website in 2017 after their messages were found to appear in front of extremist and illegal content, but most returned shortly after (Facebook’s problem is less acute than YouTube’s, since adverts on Facebook appear as standalone items in the news feed rather than front of specific videos). The small number of advertisers that quit Facebook after 2018’s Cambridge Analytica controversy also largely made their way back.

The reality is that it is almost impossible for advertisers to ignore Facebook, which has built an astonishingly effective targeting machine, and combined with Google, accounts for more than half of the digital market.

Those who worry about competition will tell you that this is the problem, rather than Facebook’s content moderation policies. This week, Britain’s Competition and Markets Authority is due to publish its final report into the digital advertising market. Potential options include potentially forcing Google and Facebook to share data with others – a step that might improve competition but would worry privacy activists.

It is possible that social networks become so ill-tempered that companies simply feel they are not good places to advertise. The fact that some brands also pulled their adverts from Twitter last week suggests that could well be the case. But plenty more will remain. If Facebook is going to change, it won’t be the advertisers that made it happen.

Source Article