TOPLINE
With over 500 companies having now joined the advertising boycott of Facebook called for by top civil rights groups, some investors are concerned about the company’s lost revenue—but most Wall Street firms estimate that Facebook is still looking at less than a 5% hit to overall revenue.
Analysts forecast that Facebook could lose between 1% and 5% of its revenue.
KEY FACTS
Facebook shares initially plunged by 8% last Friday amid an increasing number of big brands—most recently joined by Pfizer, Lego and Dunkin Donuts—announcing that they will stop working with the tech giant as part of the #StopHateforProfits campaign, which has now grown to include more than 500 advertisers.
But Wall Street firms generally remain quite bullish on the stock, with the large majority reiterating buy ratings: Facebook is looking at a less than 5% hit to its overall revenue, said Rohit Kulkarni, an analyst for MKM Partners, in a recent note.
In a scenario where the company loses business from its top 100 advertisers, that would only be around a $1 billion hit to revenue per month, Morgan Stanley analyst Brian Nowak estimates.
If the ad boycott only lasts one month, according to Citi analysts, the likely impact on Facebook’s stock is just $1 per share, and if Facebook is unable to convince the companies who are boycotting to resume business, the impact on its stock would be $17 per share, they estimate.
Advertisers were already winding down spending amid the coronavirus pandemic, Kulkarni notes, but Facebook has a diverse revenue base, with millions of paying advertisers; Procter & Gamble, for example, is the largest advertiser in the world but is estimated to account for less than 0.50% of Facebook’s revenues, he said.
Raymond James analysts similarly believe the financial impact on Facebook during the third quarter will be “minimal” and they remain “optimistic” that the company’s recently announced changes will “help alleviate advertiser concerns.”
Crucial quote
“As important as these advertisers are to Facebook, it would likely take a far broader advertising boycott over a longer period of time to materially impact Facebook’s ad revenue,” Stifel analysts said in a recent note.
Tangent
According to advertising database Pathmatics, the top 100 highest ad spenders on Facebook only accounted for around 6% of its entire revenue. What’s more, “social platforms are typically able to replace lost advertisers with other advertisers given the auction dynamics of the platforms,” Bank of America analysts said in a recent note.
News peg
Facebook responded to the ad boycotts on Wednesday. The company’s vice president of global affairs, Nick Clegg, said in a statement that “Facebook does not profit from hate.” He argued that the social media platform actually removes hate speech faster than rivals like Twitter and YouTube.
Big number: $69.7 billion
That’s how much Facebook generated in advertising revenue last year, trailing only Google as the second-largest digital marketer.
Key background
The Facebook ad boycotts stem from the #StopHateforProfits campaign announced by a coalition of civil-rights and other groups, including the Anti-Defamation League and the National Association for the Advancement of Colored People. A growing list of major brands—including Starbucks, Pfizer, Target, Best Buy, Verizon and Coca-Cola—have all agreed to not work with the tech giant until “meaningful action” is taken to address misinformation and hate speech.
Further reading
LEGO, Dunkin Donuts Join Over 500 Companies In Growing Facebook Boycott (Forbes)
Facebook’s Woes Could Get Worse: Survey Suggests More Advertisers May Bail From Social Media (Forbes)
The Stock Market Just Had Its Best Quarter Since 1998 (Forbes)
These Are The 10 Worst Performing S&P 500 Stocks So Far This Year (Forbes)
