The companies that help Facebook to earn billions of dollars a year are in open revolt against the social media giant. Whatever way the row goes, it is likely to have significant repercussions for the firm's Irish operations, writes Adam Maguire.

Facebook is arguably in the midst of the biggest challenge in its 16-year history.

Already under increasing scrutiny from governments and regulators around the world, the firm is now being hit in the bank balance by discontented brands.

Their complaint - that Facebook turns a blind eye to hate speech and misinformation - is hardly new.

The company has long accepted it had a problem to address, particularly in light of its role in the 2016 US Presidential election and the Brexit referendum.

The changes it has made, and the promises for more, have fallen short of many critics’ demands, but it had generally been enough to keep it a fringe issue.

That was until six weeks ago.

Black Lives Matter

The death of George Floyd in late May prompted a wave of protests in the US - and around the world - which in turn prompted an angry response from US President Donald Trump.

That culminated in a social media post where he repeated a phrase first uttered by a Florida police chief during the 1967 race riots, seemingly suggesting that protesters' actions could lead to them being shot.

In response, Twitter marked the post as "glorifying violence" with the platform, for the first time, obscuring one Mr Trump's tweets from view.

The warning Twitter placed over Donald Trump's controversial tweet
The warning Twitter placed over Donald Trump's controversial tweet

Facebook, however, opted to leave the same message untouched on its service - making it visible to all with no warning or qualification.

"I disagree strongly with how the President spoke about this, but I believe people should be able to see this for themselves, because ultimately accountability for those in positions of power can only happen when their speech is scrutinised out in the open," wrote Facebook CEO Mark Zuckerberg the following day in a post where he attempted to explain the rationale for their hands-off approach.

That decision sparked both internal and external criticism of Facebook but it also appears to have lit the fuse that ultimately exploded into a multi-million dollar boycott by advertisers.

Stop Hate for Profit campaign

Set up by a number of US civil rights groups, the Stop Hate for Profit campaign has called on companies to stop buying ad space from Facebook until it made significant changes in the way it handles hate speech and misinformation.

Among other things it wants Facebook to find and delete groups focused on white supremacy and anti-semitism, and to stop amplifying the content of those associated with hate and conspiracy theories.

It also wants the company to raise civil rights to the boardroom, while also opening itself up to regular external audits on its handling of controversial content.

At first the campaign gained some modest support, with outdoor clothing brands such as Patagonia and North Face among the first to sign up.

In the final days of June, however, the trickle of backers became a deluge - with big names (and big spenders) like Coca-Cola, Starbucks and Unilever joining in.

Many firms have pledged to boycott Facebook for July only for now. That has prompted the suggestions that companies are simply taking the opportunity to jump on the bandwagon, with normal service resuming later in the year no matter what the campaign achieves.

Others argue that firms would have been reigning in ad spend due to the Covid-19-related downturn, and the campaign gives them PR-friendly cover to do so.

However, Professor Theo Lynn from DCU Business School feels the stance firms are taking is sincere.

"You have 900 or 1,000 companies, they're not doing it for publicity - because you don't know all the companies," he said. "You also have to think about the America that they’re operating in where political retaliation by senior government officials is a real threat."

He cites Pfizer as an example, a company that may not gain much revenue from consumers thanks to its stance - but could miss out on opportunities if it finds on the wrong side of the current US administration.

And while there has been a suggestion that joining the boycott is a handy way for firms to build their progressive reputation, Prof Lynn points out that that may not be much of a revenue-getter for "true blue American" brands like Levi’s and Ford.

The sincerity of boycotting brands is echoed by Suzanne McElligott, CEO of digital advert body IAB Ireland, which represents brands and ad agencies - and platforms like Facebook too.

She feels that brands are increasingly showing genuine concern about the context of the ads they buy.

"I think it's becoming very important to all of us, even as consumers, in terms of looking at brands and looking at their priorities and environmental ethics and labour ethics," she said. "Similarly for brands it is becoming increasingly important and they’re playing a more active role in understanding where their advertising spend is going."

An ad boycott involving hundreds of big companies could be a significant threat to Facebook's bottom line.

Last year, the social media group got 98.4% of its global revenue from advertising - representing $20.7 billion.

Almost $95m of that came from Starbucks US alone, according to data analytics platform Pathmatics, while Unilever accounted for an estimated $42.3m in 2019.

The Irish element

So far the boycott has remained a very US-centric issue, with the impact in Ad Land Ireland relatively small.

Some Irish brands, like Guinness and Jameson, have halted ads on the network - though that is largely as a result of the stance taken by their respective multinational parent companies.

"One or two advertisers have contacted us saying that they were looking into this with their advisors and their agencies," said Suzanne McElligott, CEO of digital advertising body IAB Ireland. "Some advertisers have come out and said they're taking that stance, but we haven't had actually a lot of contact about it at the moment.

"That's not to say it's not happening in the background."

Some brands here that have joined the campaign may be doing so for selfish - rather than high-minded - reasons.

One digital advertising professional told RTÉ News that many of their clients had asked for ads to be paused as they were worried about the backlash they might receive if they continued to use the platform.

However, they also stressed that the move was likely to be temporary.

Meanwhile, others may feel they do not have the luxury of joining big names like Adidas and Honda on the virtual picket line.

Another person working in digital marketing said that, while they supported the call for change, they had decided to continue to use Facebook, as it represented too significant a source of revenue for its small business.

While there are alternatives out there, they said switching would involve more investment and upskilling than they could afford at present.

But the impact the boycott may have on Facebook Ireland is about more than what Irish advertisers are doing.

Ireland is where Facebook books most of its non-US earnings, so the loss of ad dollars from hundreds of multinationals may prove significant to its Irish accounts.

"The impact on the Irish scene isn’t just the domestic market, it’s the induced and indirect market that they get from across Europe," said Prof Lynn.

Ireland is also a major hub for the moderation of Facebook content, largely through a contract with Dublin-listed recruitment firm CPL Resources.

That means that any measures Facebook takes to meet the campaigners’ demands will have a ripple effect on its business here too.

Those factors also raises questions about what role Ireland has in forcing change at Facebook.

"What’s weird here is that the big brand companies are filling a gap that really policy makers should be addressing," said Prof Lynn. "In the Irish context their international HQ is in Ireland, their moderation is in Ireland, so what is the role that Ireland has in influencing this?"

Facebook responds

For its part, Facebook had accepted that it has work to do and says it will continue to work with civil rights groups to improve its response.

It said it had already banned 250 white supremacy groups from Facebook and Instagram, while its Artificial Intelligence was succeeding in intercepting the vast majority of the hate speech that would otherwise make it to its platform.

In response to the Stop Hate for Profit campaign the company also promised to tighten rules around the content it allows - banning outright, for example, hate speech directed against a specific group of people.

However, Mark Zuckerberg has also characterised its stance on the matter as an ideological one - reflecting his desire to see Facebook as a kind of digital town square.

He wants to give space to as wide a range of views as possible which, he says, will inevitably lead to controversial opinions and arguments appearing on the service.

And even as it tightens some rules he also says content deemed "newsworthy" will be given more latitude, even if it's in breach of its content policy. The kind of caveat that might allow a post implying violence against political opponents to stay visible, perhaps.

Face-to-face with Facebook

But while the Stop Hate for Profit campaign has extracted some changes out of Facebook those involved feel the company is still falling far short of where it should be.

Earlier this week, its representatives held a video meeting with Mark Zuckerberg and Facebook COO Sheryl Sandberg.

It did not go particularly well.

"#StopHateForProfit didn't hear anything today to convince us that Zuckerberg and his colleagues are taking action," said Jessica Gonzalez, Co-CEO of Free Press, which is one of the partners involved in the campaign.

"Instead of committing to a timeline to root out hate and disinformation on Facebook, the company's leaders delivered the same old talking points to try to placate us without meeting our demands.This isn't over. We will continue to expand the boycott until Facebook takes our demands seriously."

Another involved in the discussion said it was "abundantly clear that [Facebook is] not yet ready to address the vitriolic hate on their platform."

Central to the campaign’s complaint was a lack of specifics from Facebook - including a timeline for the introduction of the changes they want to see.

Business as usual?

But while the boycott has the potential to cut Facebook’s revenues, or at least increase the money it needs to spend to better police users, you wouldn’t necessarily know about it if you were only watching its stock price.

Following a brief dip as the Stop Hate for Profit campaign began to gather steam in June, Facebook shares are now at an all-time high. At the time of publishing, their value was 8% higher than it was when Donald Trump made his controversial post six weeks ago.

The reasons for this are hard to know - but it does suggest that investors aren’t too worried about the company’s future prospects; or future dividends.

Perhaps that is due to the fact that Facebook is, for many smaller advertisers, too big to fail.

It is also possible shareholders are confident that Facebook will ultimately find a way to bridge the gap between its current policies and the demands of campaigners.

Or maybe the temporary nature of the boycott has put investors at ease - with many probably pricing in a recovery in ad spend once the current scrutiny begins to fade.