Welcome to "#SocialStocks," The Fly's weekly recap of Wall Street's reactions to social media stock news.
COMPANIES PULL SOCIAL MEDIA AD SPEND: For the last couple of weeks, many companies have announced they are suspending their advertisements on social media platforms. The movement is a calling for Facebook (FB) and Twitter (TWTR) to do more to curb hate speech. In a New York Times article, ice cream maker Ben & Jerry’s called on Facebook to stop the platform "from being used to spread and amplify racism and hate." The Times article named Patagonia, VF Corp's (VFC) The North Face, and REI as companies engaged in the advertising boycott.
Additionally, On June 26, Verizon (VZ) Chief Media Officer John Nitti said in a statement to media outlets: "We have strict content policies in place and have zero tolerance when they are breached, we take action. We're pausing our advertising until Facebook can create an acceptable solution that makes us comfortable and is consistent with what we've done with YouTube and other partners."
Other companies boycotting advertising on Facebook include Unilever (UN, UL), Procter & Gamble (PG), American Honda (HMC), Coca-Cola (KO) -- which announced it will pause all social media advertising, including Facebook, Twitter, and Snapchat (SNAP) -- Starbucks (SBUX), Denny's (DENN), Clorox (CLX), Best Buy (BBY), Ford Motor (F), Microsoft (MSFT), which previously suspended its advertising on Facebook and Instagram in the U.S. in May, expanded to a global pause, Adidas (ADDYY), PepsiCo (PEP), HP Inc. (HPQ), Madewell, Pfizer (PFE), Target (TGT), SAP (SAP), Six Flags (SIX), Conagra Brands (CAG), and Dunkin' (DNKN).
On July 1, Reuters' Siddharth Cavale reported Procter & Gamble (PG) said it will not make any statements about its activities on advertising platforms, in response to a question about whether it will opt to boycott advertising on Facebook. "Our approach has been to not make public declarations of where we stand with individual partners," a P&G spokesman said. "We are not changing that approach, so you shouldn't expect to hear more from us on Facebook, or any other advertising platform." On June 26, the Cincinnati Business Courier reported on a statement by Marc Pritchard, Chief Brand Officer for Procter & Gamble, in which P&G will pull ads from platforms with "hateful" or "discriminatory" content.
A search of the Facebook Ad Library by The Fly on July 1 showed no active advertisements on the platform by P&G.
On June 29, HP Inc. announced it was also going to review its social media strategy. The company issued the following statement: "HP is a purpose-driven brand and we expect all platforms on which we advertise to uphold responsible policies that prevent our ads from appearing alongside objectionable content, regardless of the source. We have expressed deep concerns to Facebook and are stopping U.S. advertising on the platform until we see more robust safeguards in place. We are also reviewing our social media strategy across all markets and platforms, and we will take additional actions as needed to protect our brand and combat hateful content."
TRUMP CAMPAIGN SPENDS $325K ON FACEBOOK ADS PROMOTING CAMPAIGN MANAGER: As companies are pulling their advertising dollars from social media companies like Facebook, the New York Times’ Shane Goldmacher reported that the Trump campaign is spending $325,000 on Facebook ads promoting the social media pages of Brad Parscale, President Trump's campaign manager. Parscale is one of just three people whose Facebook and Instagram accounts the campaign has used to display ads, with the other two being Donald J. Trump and Mike Pence, Goldmacher said.
On June 29, Facebook acknowledged more work needed to be done to keep its platform safe Facebook said in a statement, "We recognize our responsibility to facilitate a safe environment for everyone using our platforms. To do this, we have to provide our partners with transparency of how well we are doing at keeping the platform safe by removing violating content. We have work underway to address the major concerns expressed but acknowledge there is much more work to do." Shares got a 2% pop following Facebook’s statement, which came after a June 26 statement to the Wall Street Journal in which Carolyn Everson, vice president of Global Business Group at Facebook, said, "We do not make policy changes tied to revenue pressure. We set our policies based on principles rather than business interests."
On Monday, Business Insider’s Theron Mohamed reported that Facebook lost roughly $60B in market value since these companies announced their intentions to boycott advertising on the social network.
On July 1, Reuters' Sheila Dang and Katie Paul reported CEO Mark Zuckerberg agreed to meet with boycott organizers, citing a company spokeswoman.
ANALYST REACTIONS: Also on July 1, Monness Crespi analyst Brian White has cut his Facebook revenue and EPS estimates for 2020 and 2021 given the combination of the expanding COVID-19 crisis and ad boycott initiatives that are not only expected to hurt ad revenue in the near term but also present the risk of damaging the company's long-term brand equity. While he anticipates Facebook will struggle with weak digital ad spending trends and "remain vulnerable to a deluge of negative media headlines" in the near-term, White thinks that in the longer-term Facebook has an opportunity to emerge stronger from this crisis, pointing to the company's history of making necessary adjustments, improving the user experience and focusing on building new innovations.
Morgan Stanley analyst Brian Nowak said he estimates that about 250 advertisers, but only 13 of the largest 100 advertisers in the U.S., have joined an advertising boycott of select social media platforms, including Facebook and Twitter, to date. Nowak, who notes that Facebook's advertising dollar base is highly diversified and that it has "an incredibly strong" direct-response, transaction-driven ad product, thinks these key points could minimize any material impact from the boycott. He would be a buyer of Facebook shares amid the weakness, Nowak tells investors, adding that he thinks the potential impact on Twitter is likely to be larger given it has a materially lower total advertiser account base and it does not have the same scaled direct response offering. Nowak keeps an Overweight rating and $230 price target on Facebook shares.
Ticker changed to META
+9.49 (+4.18%)
+0.96 (+3.22%)
Snap
+0.39 (+1.66%)
VF Corp.
-0.07 (-0.11%)
Verizon
-0.31 (-0.56%)
Use symbol UL
+0.36 (+0.68%)
Unilever
+0.36 (+0.66%)
Procter & Gamble
+0.5 (+0.42%)
Honda
-0.295 (-1.15%)
Coca-Cola
+0.43 (+0.96%)
Starbucks
+0.56 (+0.76%)
Denny's
-1.04 (-10.30%)
Clorox
+0.38 (+0.17%)
Best Buy
-0.08 (-0.09%)
Ford
-0.12 (-1.97%)
Microsoft
+1.72 (+0.85%)
Adidas
+ (+0.00%)
PepsiCo
+0.57 (+0.43%)
HP Inc.
-0.44 (-2.52%)
Pfizer
+1.46 (+4.47%)
Target
-0.04 (-0.03%)
SAP
-0.4 (-0.29%)
Six Flags
+0.58 (+3.01%)
Conagra Brands
+0.49 (+1.39%)
Acquired by Inspire Brands
+1.27 (+1.94%)