Has Facebook become toxic for advertisers?

Discussion
Source: Facebook
Mar 26, 2018
Tom Ryan

In the aftermath of the Cambridge Analytica revelations, should the advertising community join the #DeleteFacebook movement?

The U.K-based data firm has been accused of obtaining the personal information of about 50 million users to build profiles of American voters that were later used to help elect Donald Trump.

With the hashtag #DeleteFacebook gaining traction online, Sonos said Friday it was pulling its advertising from Facebook and its sister-company, Instagram, as well as Google and Twitter for one week.

“The Cambridge Analytica scandal, like many recent headlines coming out of Silicon Valley, raises questions about whether Big Tech is doing enough to balance its own interests with one of its biggest responsibilities: safeguarding your privacy,” the smart-speaker maker wrote in a blog post.

Commerzbank, the German bank, and Mozilla made similar moves. In February, Unilever threatened to pull its ads from Facebook, YouTube and other social sites due to objectionable content and divisive, fabricated news stories. Procter & Gamble issued similar warnings last year.

On Sunday, a new online poll from Reuters/Ipsos showed that 41 percent of Americans trust Facebook to obey laws that protect their personal information. That compares to 66 percent for Amazon and 62 percent for Google.

Facebook on Sunday ran advertisements in British and U.S. newspapers apologizing to users for the “breach of trust” while downplaying last week’s actions by advertisers. Facebook said in a statement, “Most of the businesses we’ve spoken with this week are pleased with the steps we’ve outlined to better protect people’s data.”

An exodos of users would obviously sink Facebook’s advertising appeal, but that’s not expected to happen. Facebook was already held in low regard by many prior to the scandal, and people’s habits are ingrained in using the social media platform.

A larger concern for advertisers is whether stricter implementation of data safeguards will limit their ability to target users effectively. The Wall Street Journal and The New York Times said Google would also be affected as well if authorities impose more restrictions over the use of data. Calls are also rising to regulate Facebook like a utility in what would basically lead to a switch to a subscription model.

DISCUSSION QUESTIONS: Is the Facebook business model in danger of breaking down? Do you see the data challenges facing Facebook as a bigger issue facing the internet’s free-services for personal data model?

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"Facebook isn't going to rule the world, but it's not going away either."
"Increasingly, there is no real privacy unless you unplug all devices and apps from your life. "
"Yes, it long claimed it was not a media company, but instead was only a platform. I think that claim is now poppycock."

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21 Comments on "Has Facebook become toxic for advertisers?"


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Max Goldberg
Guest

Threatening to pull advertising and actually pulling it are two different things. Facebook, with its 2 billion users, will suffer a bit in the short run, but the company has an opportunity to win back advertiser trust by tweaking its policies.

Paula Rosenblum
BrainTrust

I do not see the model in danger of breaking down. The U.S. is not Europe. We seem to really not like regulating anything except seat belts and (grudgingly) the tobacco industry.

Young people go elsewhere. Older people are happy to reconnect with old friends they might never again have seen. Facebook isn’t going to rule the world, but it’s not going away either. If Twitter can survive, Facebook certainly can.

Mark Ryski
BrainTrust

I don’t believe Facebook’s business model is in danger of breaking down – but this is a bump in the road. Ultimately, advertisers will go where the eyeballs are, and notwithstanding the recent “delete Facebook” movement, I suspect this will pass. Anyone remember Equifax? With more than 2 billion users, I believe this Facebook controversy will blow over, hopefully with some new policies and procedures that make users’ data more secure.

Lyle Bunn (Ph.D. Hon)
BrainTrust

Excellent points Mark. Consumers have endured hundreds of data breaches from Target to Capital One cards. The costs seem to be accepted as a cost of operating and no firm has suffered too badly for too long. Has Volkswagen even lost significant market share or product resale value through their pre-meditated lying about emission performance? Even this is becoming a distant memory as other news items bury their fraud.

Zel Bianco
BrainTrust

The challenge is how to balance the use of data so that it makes sense for advertisers while protecting our privacy. Facebook is now way too big to pull out of from the advertiser point of view, but will turn off many of their audience if Facebook does not step up to the plate and start taking responsibility for their actions or lack thereof. Zuckerberg is hiding behind PR statements and does not seem to accept his position as one of the most powerful men on the planet.

Neil Saunders
BrainTrust

Pulling advertising for one week, as Sonos is doing, is a making a statement rather than taking a principled stand.

I very much doubt that most brands will shun a channel that exposes them to countless millions of individuals. The only point at which that will happen is if Facebook loses users in droves.

Cynthia Holcomb
BrainTrust

If Mark Zuckerberg’s interview on CNN is any indication of Facebook’s “sincere” intent to advocate and to protect its users personal data, then yes, the Facebook business model is in danger of breaking down. Commoditizing people and the most intimate aspects of their lives is the Facebook business model! It’s impossible for Facebook to change course. Investors and Wall Street responded quickly last week dropping Facebook’s stock 14 percent. So Mark Zuckerberg and Facebook will become politicians, giving lip service to its users while continuing on with business as usual. After all, it only took three years for Facebook to admit 50 million Facebook users’ most personal data was breached.

David Katz
BrainTrust

The Cambridge Analytica issue dates back to 2014, when Facebook considered themselves a “platform” rather than an “advertising” company. As a platform, Facebook openly shared customer data with developers in exchange for collecting even more data. Under their advertising model, they no longer share their trove of data. This was not a “breach” or “hack,” it was a business decision and a leak.

Today’s advertisers have reason for concern, however they have few scalable, viable, effective alternatives.

Facebook will apply greater security, and this security is a double-edged sword — it will protect user information and build barriers to competition.

Lyle Bunn (Ph.D. Hon)
BrainTrust

It was inevitable that the curtain of social media for advertising would be pulled back. Consumers are increasingly aware that credit card records, browser history, mobile geo-awareness, store surveillance and a dozen other monitoring approaches are tracking their behaviours and attitudes, and only the most naive would think they have privacy and are not being marketed to based on these inputs. When consumption is a primary basis for society, the instruments that support it will advance.

Ralph Jacobson
BrainTrust

I’m not certain if this company has achieved “Too-big-to-fail” status, however it is so ubiquitous across the globe that the vast majority of its users have no idea or don’t care about what has happened with their data. They will just keep using it, and most advertisers will face no long-term issues because of this. This is only a blip.

Kim Garretson
BrainTrust
6 months 22 days ago

I don’t see the business model breaking down, but Facebook needs to take some bold moves in the content area. Yes, it long claimed it was not a media company, but instead was only a platform. I think that claim is now poppycock. I would like to see Facebook invest in the university journalism education industry, which is in decline, as a way to signal that it is serious about the future gatekeepers of the truth in media.

Lee Kent
BrainTrust

As long as the people keep coming to Facebook to connect with friends and family, the advertisers will too. This too will pass for my 2 cents.

Cathy Hotka
BrainTrust

Let’s hope that this episode helps make Facebook users a little more savvy about taking quizzes and oversharing. This will continue to be a valuable advertising platform, but with a shrewder audience.

Ricardo Belmar
BrainTrust

You are so right about this point that is being largely overlooked — the breach is only worth talking about because the majority of Facebook users don’t even make use of the existing privacy controls to protect themselves. There is a difference between this kind of breach and an Equifax where users have no control at all and are completely a the mercy of the company. For me, the Equifax breach still retains its status as the worst breach ever. Facebook users need to learn how to control their own personal data and Facebook needs to provide more controls to safeguard them.

Ben Ball
BrainTrust

The business model is only in danger from overzealous regulation — not a defection by users or advertisers. What Cambridge Analytica is accused of is unscrupulous at best, but hardly unique in the world of campaign tactics and strategy. And the social protests from both users and advertisers are certainly justified, but they will not be long-lived nor result in significant damage to the Facebook digital model. Elected officials, on the other hand, have two motivations to regulate digital data access. The first is to grandstand for their constituents — typical for social issues of most every ilk. The second is to reduce their own vulnerability and costs in pursuing perpetual reelection. If legislators can effectively cut off access to digital data for campaign purposes they will have effectively shut the door on the most cost-efficient method of campaigning for challengers who are typically not as well-funded as incumbents. That’s what concerns me about this.

Laura Davis-Taylor
BrainTrust

History has always shown us that where there is money to be procured, big business will push boundaries to maximize it. Increasingly, there is no real privacy unless you unplug all devices and apps from your life. We are now in a world of value exchange — we use Facebook to secure a “free” method to connect with friends and family. We use Waze as a “free” method to get there quicker. We use home delivery services as a “free” way to avoid the drive. We use smart home devices as a “free” way to get information quicker, protect our homes and manage them from afar. On it goes. However, nothing is free — and data is the gold they gather in exchange for the promise. It’s up to us to read the usage ts and cs and, as scandals like this emerge, decide what platforms and tools we engage with. Facebook will not suffer long, as they have become a cultural norm and, as one panelist pointed out, they bought out their competition.

Matt Sebek
BrainTrust

Facebook is still way too big for advertisers to abandon.

Rather than letting newsfeed algorithms exploit users to achieve opaque goals (such as swaying political opinions), I am eager to see companies that begin to put the user in control of the goals that their algorithms optimize for.

Facebook could do this tomorrow.

And it would be valuable for all involved — advertisers, Facebook itself — and most importantly, users.

Kai Clarke
BrainTrust

No, the Facebook model is not in danger of breaking down. Facebook will be implementing the necessary changes to ensure that their controls exceed government scrutiny in order to avoid this, and this is already in play. The dramatic shift from Cambridge Analytica’s theft of information only uncovers a poorly designed system that needs better protection. This, like so many other issues, will decline as bigger issues rise to take their place and profits continue to grow in the market as a whole. This is only a quick reaction to a political issue that will be fish paper by next month.

Craig Sundstrom
Guest

If by “the Facebook business model” you mean provide a site free to users in exchange for allowing targeted advertising (one could even argue the latter part is really all that matters) then no, I think it’s here to stay because it works for both the users and the advertisers. Most of the time, anyway.

OTOH if you mean can someone(s) continue to collect data on people — sometimes surreptitiously — and do whatever they want with it while some manchild prattles on that every concern is silly, then yes, I think there may be limits placed upon that. In fact I believe Europe is already doing so.

Ricardo Belmar
BrainTrust
I don’t think their model is in danger. Issuing threats to pull advertising isn’t the same as actually pulling it. And let’s be honest — there is also a difference between Sonos pulling ads and Unilever or P&G pulling ads. At the same time, all of these advertisers need to be in front of where their audience’s eyes are and that’s still a two horse race between Facebook and Google. I’m with Prof Scott Galloway’s comments on this one — no large advertiser can bear being away from the top two platforms that rule over 60% of the audience eyeballs. I also don’t see the current administration being too enthusiastic about creating new regulations to control a resource that they clearly believe helps them not hurts them. Let’s also not forget that Facebook users need to become more aware of how they are exposing personal data on the platform. Most do not even use the existing privacy safeguards in place and just make breaches like this even easier. This is more of an educational matter… Read more »
Mike Osorio
BrainTrust

The reality is that we have become a society largely immune to data breaches. The 2 billion FB users will continue to use the platform along with others and advertisers will continue to put their dollars where the audience is. The hit to the share price will provide a buying opportunity. What could sink FB? A new generation platform that attracts FB’s users. Until then, this too shall pass.

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Braintrust
"Facebook isn't going to rule the world, but it's not going away either."
"Increasingly, there is no real privacy unless you unplug all devices and apps from your life. "
"Yes, it long claimed it was not a media company, but instead was only a platform. I think that claim is now poppycock."

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