Happy 4th of July.
This week’s letter explores the importance of slowing down, Facebook ads boycott, paradox of savings and Kanye West breaking Twitter.
Enjoy.
Quicker. Faster. Now.
In a world of speed racing; from microwavable foods to Amazon Prime delivery, there’s infinite value in slowing down.
Deep thinking happens when you slow down.
So, as you’re taking time off to decompress this weekend, identify ways you can create time and space for yourself to reflect. Detach yourself from scrolling on social media; pick up a book you’ve been wanting to read for a while. Turn off Netflix; go for a long walk instead. Journal to document your thoughts. Meditate to re-center yourself…
We all eventually realize that in order to get ahead we must slow down.
Large Companies Boycotting Facebook Ads. Opportunity for SMBs?
Last 8 weeks have been an uphill battle for Facebook. The most recent challenge is around hate speech. A campaign led by ADL and NAACP called #StopHateForProfit is asking major corporations to stop spending on the platform in the month of July.
The North Face immediately responded by pausing all ads in July; followed by Patagonia and quickly the list grew with the likes of Unilever, Starbucks and more.
An hour after The North Face tweet, Zuck shares his vision for creating a more inclusive community.
The list is long, but here’s a snippet of recognizable brands taking a break from running Facebook ads.
Adidas
Ben & Jerry’s
Birchbox
Chobani
Clorox
CVS
Dunkin’
Ford
Hershey’s
Honda
Lego
Levi Strauss
Microsoft
Patagonia
Pfizer
Puma
The North Face
Samuel Adams Beer
Starbucks
Target
Unilever
Verizon
There’s no question that Facebook’s platform has flaws; it’s not perfect. Facebook needs to work hard to create a safe space for everyone online.
But from a lens of advertising, what impact will pausing ad spend have on the platform? In short, minimal. Facebook (Instagram and their family of apps) is built for SMBs. It has leveled the playing field and created massive opportunities for small businesses. There are 8M monthly active advertisers on Facebook and vast majority are SMBs.
SMBs have helped create an economic moat for Facebook, and Facebook has given them a platform to reach a global audience with a click of a button. It’s a win-win relationship.
SMBs simply can’t afford to turn off Facebook ads. Their business is dependent on the platform. COVID has impacted businesses of all sizes, but no one has been more impacted than SMBs. Large advertisers are able to share shift ad dollars to other platforms to make a statement; SMBs can’t. Their infrastructure isn’t designed to share shift dollars quickly to channels like direct mail, TV, billboards, etc.
For large advertisers, Facebook is a small part of their media mix. For SMBs, Facebook is THE media mix.
The revenue impact for large advertisers will be minimal by turning off their Facebook ads. One can argue that The North Face is in their off-season, CVS and Unilever have been actively reducing media spend across the board anyway due top line impact by COVID; the pausing of Facebook ads is a gentle way to reduce expense while driving positive brand impact.
Given that July is the beginning of Q3, Facebook’s sales team will have two months to make up the delta of advertising revenue lost. July will also create interesting auction dynamics for advertisers; with large brands pausing and activation of CCPA, SMBs should look to reach their optimal audiences and engage them at the top of the funnel, not just the bottom.
Paradox of Savings
I wrote a short essay on paradox of savings and COVID. In the essay, we explore why saving money is viewed as the leftover of whatever we don’t consume. And how we won’t have a full recovery until labor markets recover.
Tweet Of The Week
Links Meant To Be Shared
The Coronavirus Shock. Short letter written by Kansas City Fed President, Esther George. She discusses labor market developments; how COVID has hit minorities and women employment the hardest. Unemployment levels in the retail and services sector won’t return to normal until there’s a vaccine.
Tech and the new normal. Ben Evans shares his updated macro deck on where we are and where we’re going.
Hertz situation. A good explanation of Hertz bankruptcy madness. Author also breaks down a simple way of understanding bankruptcies.
Consumer spending surged in May. There are obvious fears of a sharp decline in consumer spending in H2 2020. A lot will depend on extension of stimulus benefits.
The Fed suspends buybacks and capped dividends for banks. Banks are currently well capitalized to help with the rebound, but triggering this action is a strong signal that The Fed is actively planning for worst case scenarios. And that includes COVID likely being a part of our lives until beginning of 2021.
Partings Thoughts
Thanks for reading. If you’re enjoying these letters, then please share with friends and colleagues.
Have a great rest of your weekend. Until next time.