Social platforms are facing increased scrutiny. How long will advertisers stick around?

It’s all fines and games for the social media platforms recently.

Last month, a New Mexico jury found Meta liable for violating state consumer protection laws and ordered the company to pay $375 million in damages in a case related to child safety on its apps. The next day, a California jury found both Meta and Google liable for negligence in fueling one woman’s depression and anxiety as a young user, awarding her $6 million in damages. These decisions marked the first time social platforms have been held accountable for possible harm to children and have been called landmark cases.

But will they cause marketers to flee Meta and Google platforms? If history is any indicator, the answer is likely no, Sean Wright, chief insights and analytics officer at ad intelligence platform Guideline, told us.

“You can, with reliability, look at a lot of the social media players and see some pretty big headline scandals…sometimes up to four or five headline scandals in a year,” he said. “Through that entire time, both from a total revenue perspective and from an advertising perspective, there’s really been no slowing of growth outside of a very weird quarter where it was really more about overexuberance post-Covid.”

No signs of stopping? As long as the reach of social media platforms remains high and the costs of advertising on them remain low, it’s unlikely that advertisers will begin to flee en masse, Wright said. Looking back at recent events, that seems to largely be the case:

• In September 2019, the FTC fined Google and YouTube $170 million for allegedly violating children’s privacy rules. That quarter, Google reported YoY revenue growth of 20% driven largely by YouTube, mobile search, and its cloud offering.
• In September 2021, the Wall Street Journal reported that Meta had internal knowledge of the harm Instagram had on teen girls’ self-image. That quarter, Meta reported a 33% YoY increase in advertising revenue.
• In November 2023, an unsealed legal complaint from 33 states accused Meta of failing to remove the accounts of millions of children under 13 and collecting data on those users. That quarter, the company reported a 16% increase in revenue YoY.

“Advertisers continue to spend on these platforms, quarter over quarter, year over year, with almost a shocking level of regularity,” Wright said.

But…If the recent decisions open the floodgates to other similar lawsuits, Wright said it could be “the beginning of something radically different for these platforms,” which he compared to the gradual downfall of the tobacco industry. In the case of child safety, Meta has been sued by 42 state attorneys general, and Wright said that just two or three more wins for plaintiffs could start making advertisers think again.

At the same time, the company’s low-cost, high-reach pitch may be losing some of its luster. According to Wright, some CPA costs are going up as platforms seek to offset their increasing investments in AI tools, which could make their platforms less attractive to advertisers.

There’s also the question of the increasing number of social media bans for kids around the world and the impact that has not only on platforms’ global usage numbers, but also their reputations. Both Australia and Indonesia have banned social media for children under 16, and both countries have claimed that some social platforms are failing to comply with the new laws. If audiences begin to turn on the platforms and leave, Wright expects that advertising costs will increase to make up for lost revenue on the platforms, which could also help send some marketers packing.

What’s next? The search for alternative advertising avenues may already be underway. Wright said he sees the recent influx of brands and users on Reddit as representative of a “first wave” of people seeking an alternative to big-player social platforms. He also said he’s seen a shift in social budget to retail media networks, even if they can be a bit more expensive.