Here’s how big Facebook’s ad business really is
“Facebook has an enormous number of advertiser clients,” said Nicole Perrin, an analyst at eMarketer. “They’re definitely pretty reliant on the long tail of small business advertisers.”
Even as Facebook confronts by far the largest advertiser boycott in its history, the sheer number of advertisers on its platform may insulate the company from too much financial fallout. At the same time, it remains an open question whether many big and small advertisers can afford to stay away from the powerful platform it built for very long.
Facebook’s relationship with advertisers: It’s complicated
For all of Facebook’s splashy investments in artificial intelligence and virtual reality products, the company — like many of its peers in Silicon Valley — remains an advertising business at heart. Its most lucrative innovation isn’t helping friends and family connect to one another, but rather positioning itself as an essential tool for businesses of all sizes to connect with an unrivaled audience at the click of a button. It can offer marketers both scale and a ridiculous degree of targeting.
And the revenue it brings in from those ads has grown along with Facebook’s user base and reach. In 2009, the company’s ad revenue for the entire year was around $761 million, according to data compiled by research firm eMarketer.
It’s been a game changer, particularly for smaller businesses without the same deep pockets as bigger companies for splashy TV commercials. And it’s effectively turned Facebook into one half of a digital advertising duopoly with rival Google. The two companies together accounted for more than half of all digital ad spending and nearly 30% of total media ad spending in the United States last year, according to eMarketer data. (TV ad spending shrunk from 37% of the total to 29% between 2009 and 2019.)
But Facebook has had a tense relationship with the advertising industry over the years, which has sometimes spilled out into the open.
But speaking out appeared to be easier than quitting the platform entirely. Despite the repeated pushback, Facebook’s powerful ad machine kept rolling along.
Businesses can check out anytime they like but they can never leave
But the millions of small businesses with smaller budgets may be less willing to cut the cord.
“I think it’s relatively unlikely that small businesses [and] small brands will join the boycott, because they’re the ones most reliant on Facebook for access to their customers,” Perrin said.
Even those brands who have joined the boycott may not abandon the platform for long. Many of the brands taking a stand have said they will only pause advertising on Facebook through the month of July. Not all of them have specified that they will stop ads on both Facebook and Facebook-owned Instagram, and most of them have accounts on both platforms with millions of followers where they can continue to share unpaid posts. Some of them have also said their advertising hiatus only applies to the US audience.
Finally, as Perrin points out, many companies have likely been forced to dial back their advertising already this year because of coronavirus.
“One thing to keep in mind is that this is happening in the middle of the pandemic, and brands have already really cut their ad spending across all kinds of channels, including Facebook,” she said. “It’s going to be impossible to ever parse out how much did this boycott cost versus how much did the pandemic cost, how much would these same advertisers have pulled back just because of the broader economy.”