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News Analysis 6 Oct 2021 - 5 min read

Australia’s 20 biggest advertisers risk ESG compliance to keep spending $200m with Facebook as whistleblower crisis deepens

By Brendan Coyne, Paul McIntyre & Sam Buckingham-Jones
Facebook whistleblower Frances Haugen in US Senate Subcommittee

Facebook whistleblower Frances Haugen: “It is about Facebook choosing to grow at all costs, becoming an almost trillion-dollar company by buying its profits with our safety."

Australia’s biggest spending marketers risk cutting directly across their corporate responsibility compliance by spending hundreds of millions of dollars on Facebook alone, potentially funding misinformation, social division – and worse. Amid Facebook’s latest crisis, they’ve all gone quiet. But ignoring financial and reputational risks in pursuit of cheap reach may yet come back to bite them.

What you need to know:

  • Australia’s biggest brands risk cutting directly across environmental, social and corporate governance (ESG) compliance by funding misinformation on social media.
  • Facebook’s latest crisis puts the spotlight back on marketers, with Australia’s 20 biggest spenders collectively handing the platform upwards of $200m per annum.
  • World’s biggest investment company warns it will vote against boards that shirk ESG compliance and cost of capital will rise.
  • Yet brands and regulators slow to act.
  • Research finds consumers will boycott brands that fund misinformation.
  • One of Facebook’s biggest local advertisers indirectly funding its own problems.

Fringe conspiracy theories that spread to social media directly contributed to a lot of the Covid panic buying that we saw, including supermarkets such as Woolworths in Australia and other major retailers in the region.

Harrison Boys, Director of Standards & Investment, EMEA, Magna Global

Furious purpose

The latest firestorm engulfing Facebook poses legitimate questions for Australia’s biggest advertisers around environmental, social and corporate governance (ESG).

After releasing a slew of internal reports to the Wall Street Journal, former Facebook product manager Frances Haugen yesterday testified before the US Senate.

Haugen, a data scientist who previously worked at Google and Pinterest, has alleged Facebook is making “disastrous” choices in tackling the harms its algorithms can cause – such as its own research showing Instagram causes anxiety and depression in teenage girls, and stating that misinformation spread on the platform has directly contributed to genocide and displacement in Myanmar – and that Facebook has deliberately misled regulators.

The company, she claimed, is “choosing to grow at all costs, becoming an almost trillion-dollar company by buying its profits with our safety”.

Facebook has issued detailed rebuttals and ‘prebuttals’ of Haugen’s claims and testimony – and for now, Australia’s big advertisers are watching to see how the current crisis unfolds.

But there are risks with that approach.

Social: The ‘S’ in ESG

Most of the top 20 Facebook advertisers – such as Coles, Commbank, Disney, Federal Government, IAG, NSW Government, Optus, Queensland Government, Westpac and Woolworths – have publicly stated ESG commitments, which now form part of their financial reporting and corporate governance.

Some of those brands, such as Telstra, have stated they ultimately plan to withhold ad dollars from media owners that fail to align with those commitments – and have significant financial incentives to do so.

BlackRock, the world’s largest investment management firm with $9tn in assets, has warned global CEOs it will vote against boards that fail to deliver demonstrable ESG improvements, and that their cost of capital will increase. BlackRock’s emphasis is on environmental sustainability, but CEO Larry Fink has made clear that social aspects are deeply connected.

Despite a lot of investment and resources going into topics around privacy, hate speech and extremism to snuff that out of the social media platforms, the advertising and marketing industry has not really taken a similar stand on misinformation.

Harrison Boys, Director of Standards & Investment, EMEA, Magna Global

Brands funding misinformation

Whether or not Facebook is proven to be wilfully pursuing profit over purpose, there is risk of further fallout for advertisers. A recent paper from Magna Global, IPG Mediabrands’ centralised intelligence and investment unit, cites research that found consumers will walk away from brands that fund misinformation – even if unwittingly – through digital ad placements.

“Directly ad-funding misinformation and disinformation through ad adjacency is a common way that brands are impacting disinformation and therefore unintentionally incentivising it,” said report author Harrison Boys, Magna’s Director of Standards & Investment Product, EMEA.

He cited a study by the Trustworthy Accountability Group and Brand Safety Institute that found 85 per cent of consumers would boycott brands that advertise next to Covid misinformation and detailed how fringe conspiracy theories originating on message boards have been amplified on social media – i.e. not just Facebook – to cause significant social harms and brand damage.

Examples included a fake Starbucks coupon that offered free coffee “only to people of colour” to say “we’re sorry” and US furniture retailer Wayfare being linked to the QAnon conspiracy movement.

“That actually resulted in services that provide genuine support to victims of child abuse and child trafficking to be inundated with nuisance – so much so that a hotline had to be launched and a press release issued to debunk the claims,” said Boys.

Locally, “fringe conspiracy theories that spread to social media directly contributed to a lot of the Covid panic buying that we saw, including supermarkets such as Woolworths in Australia and other major retailers in the region… and it obviously had a significant impact on supply issues and business for many native retailers,” Boys added.

Ironically, Woolworths is one of Facebook's largest Australian advertisers. Boys said brands had been slow to act.

“Despite a lot of investment and resources going into topics around privacy, hate speech and extremism to snuff that out of the social media platforms, the advertising and marketing industry has not really taken a similar stand on misinformation”.

Advertisers worried... but still spending

Locally, big spending brands remain reluctant to pull budgets from the world’s biggest ad platform despite the latest allegations. Mi3 contacted most of the top 10 Facebook advertisers (according to data provided by Pathmatics). Only Telstra and IAG replied, with similar statements: they will await Facebook’s response before considering taking action, if any.

Joshua Lowcock, Chief Digital and Innovation Officer at UM in the US and UM's Global Brand Safety Officer, said brands “are ready to make the hard decisions, but need more transparency… because the problem with any allegation is [the risk] that what we're being told is not the reality.”

However, while Facebook has sought to discredit Frances Haugen’s testimony, Lowcock told Mi3 “Haugen was credible and compelling” and that “advertisers are concerned about the allegations in the hearings”.

Rather than take countermeasures, he suggested, “Facebook needs to hit reset, be transparent, and demonstrate that it should be trusted by the public and advertisers”.

It’s important to acknowledge that these problems are real, it’s unlikely any platform is going to drive the change needed, and we need regulators to act not just talk. Inaction by platforms and regulators is causing real world harm.

Joshua Lowcock, Chief Digital Officer and Global Brand Safety Officer, UM

Regulators: do your job

Lowcock said he considers social media harms to fall under brand ESG commitments – which is why IPG Mediabrands developed its social media responsibility principles and ranks social platforms on their improvements, ultimately planning to withhold ad dollars from the worst performers.

But he said advertisers face a hard choice – in pulling back from Facebook they stop reaching billions of people, which is ultimately a market dominance issue: “Is the marketplace competitive and is there choice?”

That implies competition authorities may ultimately be those that solve the social problems posed by algorithmically-controlled platforms. 

Either way, Lowcock said regulators must stop sitting on their hands.

“It’s important to acknowledge that these problems are real, it’s unlikely any platform is going to drive the change needed, and we need regulators to act not just talk,” said Lowcock. “Inaction by platforms and regulators is causing real world harm.”

Amid 1,846 words of rebuttal to Haugen’s claims and the Wall Street Journal's reporting – “[Haugen] worked for the company for less than two years, had no direct reports, never attended a decision-point meeting with C-level executives, and testified more than six times to not working on the subject matter in question,” per spokesperson Lena Pietsch – Facebook told Mi3 it agrees with the need for regulation.

It appears Australia’s biggest spending Facebook advertisers are also waiting to be told what to do.


Australia’s biggest Facebook advertisers

According to data compiled by Pathmatics, Australia’s top 20 Facebook advertisers between 01/01/2020 and 01/10/2021, in descending order of spend, are as follows:

  • Disney
  • Telstra
  • P&G
  • Singtel
  • NSW Government
  • Woolworths
  • IAG
  • Whitehat Jr.
  • REA Group
  • Coles
  • Wix.com
  • TPG Telecom
  • Westpac
  • Transport for NSW
  • Awesome SDC
  • Microsoft
  • Commbank
  • Federal Government
  • Queensland Government
  • Paypal

Pathmatics analysis estimates that between January 2020 to October 2021 those advertisers individually spent between $9m and $29m on Facebook’s platforms, suggesting collective annual spend of approximately $200m. One of the few brands that responded to request for comment and confirmation stated those figures were “wildly inflated”. Others suggested they were broadly accurate.

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Brendan Coyne, Paul McIntyre & Sam Buckingham-Jones

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