By: Creating Future Us
June 30, 2020
Last week we wrote about Mark Zuckerberg’s intransigence with respect to arbitration (i.e. policing ads and content) on Facebook and the lack of proper governance at Facebook. We hope we contributed to the resulting boycott that has been gathering impressive pace since Friday.
We appreciate how Unilever explained its weighty decision: “The complexities of the current cultural landscape have placed a renewed responsibility on brands to learn, respond and act to drive a trusted and safe digital ecosystem.” They exemplify the Digital Age ESG conscious company we wrote about in Governance Rebooted: focussed on a fine-tuned awareness of the multi-stakeholder age it swims in, and accordingly, the power it wields.
Let’s talk about the effects of this move on Facebook – a platform that makes c.98% of its $70bn in annual revenue from advertising – and its investors:
- ⇒By the end of last week, advertisers accounting for $245m of revenue for Facebook had pledged to boycott the firm – more, like Starbucks and Coca Cola are pausing ads even though they have not yet ‘officially’ joined the boycott
- ⇒Facebook’s stock tumbled 14+% between June 23rd-29th wiping c.$75Bn off its market cap
- ⇒Zuck had to row back (albeit tepidly) on his hereto strong stance against policing content – within an hour of Unilever making its announcement
- ⇒The incredible speed with which this coalesced: “Three weeks ago, this was a barely-hatched idea,” the pressure group [#stophateforprofit] said. “Now, 150 plus companies have decided to stop advertising spending on Facebook for at least a month and British royalty is helping make it happen ”
- ⇒This kind of content moderation is going to have a not insignificant cost impact on Facebook’s bottom line
This is also a perfect example of how markets are imposing penalties, long before regulators catch up. More importantly, it’s a clarion call for other tech companies – and all companies in reality – even ones that don’t necessarily depend on advertising-driven business models. The world is watching and when stakeholders unite – sometimes overnight – the board of a business had better already be on the right (or at least highly defensible) side of a given issue. That requires dynamic scenario analysis and ears to the ground, not ivory tower decision making.