How Meta’s Free-Speech Turn Is Shaking Up the Ad Business

Summary

WSJ Tech News Briefing: How Meta’s Free-Speech Turn Is Shaking Up the Ad Business

Release Date: February 4, 2025
Host: Pierre Bienname
Reporter: Suzanne Vernica

Introduction

In this episode of the WSJ Tech News Briefing, host Pierre Bienname delves into the significant shifts occurring at Meta Platforms Inc. (formerly Facebook) concerning its free speech policies and the ensuing impact on the advertising industry. Reporter Suzanne Vernica provides an in-depth analysis of how Meta's strategic pivot is creating tension between social media giants and advertisers, especially within the heart of the U.S. advertising sector, Madison Avenue.

Meta’s Policy Shift on Free Speech

Meta has recently undertaken a notable change in its content moderation strategy. Historically, the company emphasized combating hate speech and misinformation on its platforms, including Facebook and Instagram. However, under the leadership of Mark Zuckerberg, Meta is now advocating for a more relaxed approach to content regulation.

Suzanne Vernica [01:08]: "They have decided to eliminate US-based fact checkers and they're going to replace them with community notes... Zuckerberg basically wants this to be to loosen up all the restrictions that he sees on free speech on Facebook and Instagram."

This shift mirrors the community-driven content flagging system employed by Twitter/X, aiming to allow more user autonomy in moderating content.

Impact on Advertisers and Brand Safety

The relaxation of content restrictions has raised significant concerns among advertisers regarding brand safety—the assurance that their advertisements do not appear alongside offensive or controversial content.

Pierre Bienname [01:57]: "Not having your ads appear next to some material that could be considered offensive... that's something they want to avoid."

As Meta moves towards a freer speech model, advertisers fear an increase in the prevalence of undesirable content, which could tarnish their brand image if their ads are inadvertently associated with such material.

Political Issues and Antitrust Concerns

The episode highlights the intersection of Meta's policy changes with broader political and legal challenges. Notably, Meta has been scrutinized for its relationships with advertisers and conservative outlets.

Suzanne Vernica [02:10]: "Jim Jordan... issued a detailed report... said that this trade group and a bunch of its members may have violated antitrust laws by withholding Ad spending from social media platforms and conservative media outlets."

Moreover, Elon Musk's lawsuit against several major advertisers and an advertising trade group has exacerbated fears within the advertising community, further destabilizing trust between advertisers and social media platforms.

Advertising Agencies’ Responses

Advertising agencies are grappling with the uncertainty brought about by Meta's policy changes and the ongoing legal battles. Many are contemplating adjustments to their strategies to safeguard their brands.

Suzanne Vernica [03:22]: "They're all trying to decide what they do... Meta has been hosting meetings... trying to calm advertisers down... there’s a broader worry because if a platform goes really south..."

Agencies are particularly concerned about the effectiveness of existing ad-tech tools designed to prevent ads from appearing alongside problematic content. The reliance on such technologies underscores the delicate balance between free speech and brand protection.

Importance of Meta for Advertisers and Vice Versa

Meta remains a pivotal platform for both large and small advertisers due to its sophisticated targeting capabilities and vast user base.

Suzanne Vernica [07:27]: "Most advertisers have become so dependent on Meta and their platforms... they know everything about their consumers... they are the second-largest digital ad company in the US behind Google."

However, Meta's revenue is heavily reliant on advertising, particularly from millions of small businesses. This dependency creates a complex dynamic where Meta's policies significantly influence the advertising landscape, while advertisers' needs shape platform strategies.

Suzanne Vernica [08:28]: "The bulk of its revenue... they don't really need the big brand advertisers... they make the majority of their ad revenue from the tens of millions of little advertisers and small businesses."

Shifting Relationship between Brands and Social Media

The relationship between brands and social media platforms is evolving, moving from a position of control to one of dependence. Brands are recognizing that their leverage over platforms like Meta is diminishing.

Suzanne Vernica [09:10]: "They had a love-hate relationship from the get-go with social media... they're realizing that the game is over now and they don't have the leverage that they once did."

Brands are now contending with the reality that they must align their advertising strategies with the platforms' policies to maintain brand integrity and consumer trust.

Conclusion

Meta's strategic pivot towards a more permissive free speech stance is significantly impacting the advertising industry. Advertisers face heightened risks regarding brand safety, while the intertwining of political and legal challenges compounds the uncertainty. As Meta and advertisers navigate this complex landscape, the future of digital advertising on social media platforms hinges on finding a balance between free expression and the commercial imperatives of brand protection.

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Notable Quotes with Timestamps:

• Suzanne Vernica [01:08]: "They have decided to eliminate US-based fact checkers and they're going to replace them with community notes."
• Pierre Bienname [01:57]: "Not having your ads appear next to some material that could be considered offensive... that's something they want to avoid."
• Suzanne Vernica [02:10]: "Jim Jordan... issued a detailed report... may have violated antitrust laws by withholding Ad spending."
• Suzanne Vernica [03:22]: "They're all trying to decide what they do... there’s a broader worry because if a platform goes really south."
• Suzanne Vernica [07:27]: "Most advertisers have become so dependent on Meta and their platforms... they are the second-largest digital ad company in the US behind Google."
• Suzanne Vernica [09:10]: "They're realizing that the game is over now and they don't have the leverage that they once did."

This comprehensive summary encapsulates the critical discussions and insights from the episode, providing a clear understanding of the current dynamics between Meta and the advertising industry for those who haven't tuned in.

Transcript

[ADP Representative]

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[Pierre Bienname]

Welcome to Tech News briefing. It's Tuesday, February 4th. I'm Pierre Bienname for the Wall Street Journal. For the better part of a decade, Meta's relationship with possible advertisers was based on its efforts to combat hate speec information on its social media platforms Facebook and Instagram. But a new cultural moment has arrived, punctuated by President Trump's return to the White House. And Meta's executives have a different message. Some things we used to remove will now be allowed. And that has some advertisers concerned. Advertising and marketing industries reporter Suzanne Vernica tells us there's a big shakeup in the relationship between social media giants and Madison Avenue, the center of the US Advertising industry. So Suzanne, what's changed over at Meta both concretely and in its messaging?

[Suzanne Vernica]

What Meta announced recently was they basically made this big pivot. They have decided to eliminate US based fact checkers and they're going to replace them with community notes. Think of what happens on X. That's a crowdsourcing system that basically allows users to flag posts that they think needs more context. And you see them all over X right now. So they're moving away from this. And Zuckerberg basically wants this to be to loosen up all the restrictions that he sees on free speech on Facebook and Instagram. And that's got advertisers really worried right now because that means if more and more sort of ugly or controversial or things that they find unsuitable appear, then there's more of a chance that their ads may appear next to those types of things, which is something they want to avoid.

[Pierre Bienname]

And that's something that they refer to as brand safety. Not having your ads appear next to some material that could be considered offensive, according to some advertising insiders, that's become a political issue. How so?

[Suzanne Vernica]

It's become a real lightning rod. This really all came to a head last year in a really big moment where a bunch of advertisers, specifically an ad trade group, was called on the carpet by the House Judiciary Committee, which was chaired by Ohio Republican Jim Jordan. He basically ran an investigation and he issued a detailed report in July that basically said that this trade group and a bunch of its members may have violated antitrust laws by withholding Ad spending from social media platforms and conservative media outlets that had significant ripples in the ad business. And subsequently, Elon Musk has filed a lawsuit against a bunch of advertisers as well, and an advertising trade group. Big brands like Mars, CBS Health, and a bunch of others basically have been added to this lawsuit, and it's basically spreading fear across Madison Avenue now.

[Pierre Bienname]

Yeah. And over the weekend, we reported that X has added more major brands to its lawsuit, including Nestle and Colgate. How have advertising agencies responded to this charge that this is a political concern? They have.

[Suzanne Vernica]

So they're really worried quietly. They're all trying to decide what they do. Some are returning to X platform a little bit, but what they really are concerned is there's tools that they have enrolled and basically longed onto for the last, I would say, five years, and they've gotten better. And these are tools that are technology ad tech products that allows them to keep their ads away from content that they don't want. They include things like they can enter a list of words that they think are unsafe, like it's terrorism or violence or fire or death, and those words are entered into a system, and then anything that has those words or terms an advertiser can stay away from. Meta has been hosting meetings in person, virtual meetings, calming advertisers down and saying, we're not going to take away these tools. Now, some advertisers are finding a little comfort in that. But there's this broader worry because if a platform goes really south, like, it's not just about keeping my ads from being adjacent to something that consumers might find offensive. The bigger worries, if, if the platform becomes predominantly negative or controversial, then there's an overall rub, because they feel like consumers will then see it as you're endorsing that platform and what it stands for. So that's what this is lathering up to. The fear that this might disintegrate all of the content on whether it's Facebook or Instagram, and then they're left with making a hard choice about do they place their ads if there's a negative connotation in people's minds about those platforms and does that affect their brand?

[Pierre Bienname]

Coming up, does Meta need big advertisers more than big advertisers need Meta? That's after the break.

[ADP Representative]

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[Pierre Bienname]

Suzanne, can you give me an example of what brands mean by brand safety and how that might look on Facebook or Instagram?

[Suzanne Vernica]

Meadow, when they were talking to advertisers, gave examples. For example, a statement like women should not be allowed to serve in combat would have been prohibited before because basically they decided that excluding people from a job based on their gender is not permitted, but now is. And that means for an advertiser, they don't want to be associated with anything to do with that. If a post says that, so what now what happens is the onus is on the advertiser and they now need to make sure when they're doing their placements and using those ad technologies that I talked about, they basically have to make sure that in those technologies they are very specific about what type of content they don't want their ads to appear near. So they might have to put in words like women, combat, war, and hopefully that would then keep their ad from appearing near that particular post.

[Pierre Bienname]

And what did Meta say in response?

[Suzanne Vernica]

The Meta spokesman that we talked to pointed out that his company has been very aggressive with sharing information with their advertising partners and that basically they wanted to alert them that the advertisers that they were standing behind brand safety and that they were making sure that the tools that they offered them were still going to be in existence.

[Pierre Bienname]

Just how important is Meta for big brands, for small brands?

[Suzanne Vernica]

That is the bigger problem here. Advertisers, specifically the large advertisers and most advertisers have become so dependent on Meta and their platforms. They have the most amazing targeting capabilities. They know everything about their consumers. So it performs super well. They basically are the second largest digital ad company in the US behind Google for that very reason. They had over $130 billion in ad revenue in 2023. So advertisers, they can't come off of it. So there was a big boycott of Facebook a couple years ago, and advertisers came off for a month because of this very issue. There were plenty that actually went back immediately because they couldn't live without it. So this is a tough choice, and that's why we're not going to see a lot of them run for the hills. I will say you're going to probably see advertisers say maybe I don't rely as heavily on Meta if it goes south.

[Pierre Bienname]

What about on the flip side of that? How important is advertising funding for Meta?

[Suzanne Vernica]

It's huge. It's the bulk of its revenue. But what the secret is with Meta is as much as they have done to reassure these big brands, they don't really need the big brand advertisers. They have limited power because Meta is insulated to a great extent, because they make the majority, majority of their ad revenue from the the tens of millions of little advertisers and small businesses that use that platform.

[Pierre Bienname]

Suzanne, you covered a similar story last week and you mentioned it earlier. Amazon is ramping up ad spending on X specifically after pulling much of that advertising over a year ago. So how is the overall relationship between brands and social media shifting?

[Suzanne Vernica]

Brands have had a love hate relationship from the get go with social media and they had made a lot of ground with all of them. It was a tug of war for many years getting them to take control of the content that's on their platform and make sure that their ads were safe. They're realizing that the game is over now and they don't have the leverage that they once did and they're coming to terms with it. But they're faced with tough decisions here and they are very worried about the blowback. They don't want to be seen as they don't believe in free speech, but they would argue this has nothing to do with them free speech. Their argument is if a platform wants to be free speech, that's fine, but it has to also satisfy an advertiser because that's the product they sell ads they could easily switch if they didn't care about the advertisers and really wanted free speech, then charge subscriptions. But advertisers have a say because much of these platforms, the biggest revenue comes from advertising.

[Pierre Bienname]

That was a reporter, Suzanne Vernica. And that's it for Tech News Briefing. Today's show was produced by Julie Chang with supervising producer Kathryn Millsop. I'm Pierre Bienname for the Wall Street Journal. We'll be back this afternoon with TNB Tech Minute. Thanks for listening.

[ADP Representative]

ADP knows any big thing, any small thing, any trendy thing, even a trendy thing that everyone knows isn't a great idea, but management just wants us to give it a try for a bit. Can change the world of work. From HR to payroll, ADP designs forward thinking solutions to take on the next anything.