Direct-to-Consumer Realpolitik

You probably already know that big brands like Walgreens and Coca-Cola are boycotting Facebook advertising due to the company’s inaction on hate speech. But did you know that many direct to consumer (DTC) brands like Glossier and Casper aren’t joining the boycotts?

Before you decide to never buy a fluffy ghost mattress or use Boy Brow again, know that the Facebook boycotts might have less to do with moral considerations than business ones.

Facebook-opoly

“If a brand like Glossier stops spending money on Facebook, they will lose money, as they get customers and revenue directly from Facebook. The DTC business model, for the vast majority of DTC brands, relies on Facebook to drive revenue,” Kevin Simonson, VP of social for digital marketing agency Wpromote, told Marketing Brew.

On the flip side: Big brands like Coca-Cola could actually save money by cutting Facebook spend, since they use the platform for brand awareness rather than direct sales.

The method to the madness

The boycotts may have actually made it cheaper for DTCs to keep advertising on Facebook, further complicating the question of boycotting:

• As large brands stop buying ads on Facebook, the platform’s inventory could get even cheaper for DTCs, simply because there is less demand than usual.
• “We usually see a drop of 10-15% [in CPMs at the start of a month] and we're seeing a drop [of] 25%, so that leads me to believe that we are seeing lower rates in part due to the boycott,” Simonson said.

For DTC brands, many of which were in a tough place even before the pandemic, the potential to drive more ROI on Facebook may simply be too powerful to pass up.

Looking ahead: DTC brands' reliance on FB, and Zuck’s confidence that advertisers will be back “soon enough,” could provide fresh fodder for antitrust investigators at the big tech hearing later this month.

Bottom line: Joining the boycotts would cause already-struggling DTCs to sacrifice a major sales engine. Some DTC brands may be unhappy engaging in realpolitik, but Facebook is likely overjoyed. Small and medium-sized businesses (SMBs) account for nearly 75% of Facebook's yearly ad rev.