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Wednesday, 1 July 2020
The Facebook ad boycott is starting to rattle investors
After several days of largely shrugging off news about a growing Facebook advertiser boycott, investors now appear to be taking notice. Shares of Facebook fell nearly 3% in early trading Monday, before rebounding, after big brands such as Starbucks , Coca-Cola and Hershey's said they would pause spending on the social media platform over concerns about its handling of misinformation and hate speech.
The dip comes after Facebook's stock ended Friday down 8% on news that Unilever, the massive household goods company, would halt advertising on Facebook and Twitter for the rest of the year. (Twitter stock saw a similar decline on Friday.)
The stock moves highlight a new uncertainty about just how much the boycott could dent Facebook's ad sales machine. Much of Facebook's ad revenue comes from small and medium-sized businesses, potentially insulating it from too much of a revenue shortfall from the boycott. But some brands like Starbucks do rank high on the list of biggest ad spenders on Facebook, according to estimates by Pathmatics, a market intelligence firm.
"Facebook needs to address this issue quickly and effectively in order to stop advertising exits from potentially spiraling out of control," said Bradley Gastwirth, chief technology strategist at Wedbush Securities. A civil rights coalition that includes the Anti-Defamation League (ADL) and the NAACP launched the #StopHateforProfit campaign earlier this month, calling on major corporations to halt advertising on Facebook for the month of July, due to the platform's "repeated failure to meaningfully address the vast proliferation of hate on its platforms."
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