As scandals mount, advertisers begin to question Facebook's value

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NBC News

Facebook has suffered a near nonstop drip of bad news in 2018, and with each event advertisers have barely uttered a peep while continuing to spend.

But this week, with yet another revelation about the company's past data practices, one agency chief finally said enough is enough, while other ad agency senior executives say they are questioning how much consumers continue to trust Facebook and whether advertisements on the social network continue to be effective.

On Wednesday, Mat Baxter, the global CEO of ad agency Initiative, said in a post on LinkedIn that he was advising clients not to advertise on Facebook.

"It’s about time we take a collective stand against the egregious behavior of Facebook," Baxter wrote.

Baxter, who has head of Initiative oversees media buying and planning for Amazon, wrote that Facebook would need to feel pressure from advertisers to act.

“Hopefully, when they feel the pain of lost advertising dollars things might just change," he wrote.

Baxter followed up with a second posting reflecting a more widely held belief among agencies.

“Effective at what cost? Ultimately brands want positive associations and Facebook looks anything but … " Baxter wrote.

Jim Helberg, chief media officer at RPA Advertising, an agency which represents Honda, said he is watching closely to see how consumers respond to further disclosures about Facebook and whether the company has broken any laws — including a consent decree from the Federal Trade Commission.

Helberg added that for any other company, the recent scandals would have led to far greater advertiser backlash.

“If this was not Facebook but a standard bearer like a network, there would have been a much more rapid route to conclusion,” he said. “At a certain point, you get to a critical mass of smoke. I certainly hope there’s no fire. Credibility and trust are paramount.”

Helberg says there are many ad opportunities out there, and that Facebook could reach a tipping point where the value of its ad targeting can't overcome its brand issues.

“We will never compromise our most valuable chip that is consumer trust," he said.

While advertisers have typically been hesitant to publicly criticize Facebook, the company's struggles in recent months have pushed some in the industry to go public with their concerns.

In November, Rishad Tobaccowala, the chief growth officer at ad giant Publicis Groupe, told The New York Times that he questioned the company's culture following the newspaper's report about Facebook’s strategy to deflect criticism, which included hiring a conservative lobbying firm.

“Now we know Facebook will do whatever it takes to make money," he said. "They have absolutely no morals.

One ad agency chief, who did not want to be named for fear of compromising its relationship with Facebook, said he is questioning whether Facebook works effectively for companies trying to create positive reputations through brand building campaigns. This person said on a personal basis they have removed Facebook from their phones and only access it via desktop computers.

Another media executive, who asked not to be named due to competitive interests, said that Facebook's power with advertisers has at times seemed impervious to the scandals.

“They’ve broken trust with the consumer numerous times," they said. "They’ve also broken trust with advertisers, but no one seems to care.”

Some of Facebook's loudest critics say that the days of Facebook's run as an untouchable advertising destination are numbered.

Jason Kint, the CEO of Digital Content Next, a trade group, said he expected Facebook's trouble to continue.

"I'm certain there’s more negative news coming," Kint said. “It is well documented there is a significant drop in trust in the Facebook News Feed. It's certain that’s having an effect on brands. Advertisers are still judging Facebook on clicks and performance while their brands are being impacted long term."

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