Like many startup entrepreneurs on a tight budget, Mike Seper turned to Facebook to help his fledgling New Florence, Missouri-based Eco Adventures Ziplines get off the ground. These days--in the wake of the Cambridge Analytica scandal, in which the political data firm harvested the information of more than 87 million Facebook users--he's hitting the brakes.
"Last year, the majority of our advertising dollars--a few thousand--went to Facebook," says Seper, who launched his adventure tourism business last summer. "Now we're scaling back the amount of ads we're doing on Facebook, cutting that spending in half and casting a wider net," he adds, nodding to Google Ad Words as an alternative.
Seper is not in the minority for hedging. Indeed, according to the dozen or so entrepreneurs that Inc. has spoken with in recent days, small businesses are increasingly turning to different networks--Google, Pinterest, and Twitter, to name three--to diversify their ad spending and mitigate their association with the tarnished company. And there could be more revelations to come. On Thursday, Facebook said it expects to discover and announce more "instances of misuse of user data or other undesirable activities by third parties" as a result of an audit into popular apps that may have collected private information, according to a filing with the U.S. Securities and Exchange Commission.
The company denies, however, that the events have had a meaningful impact on the bottom line. Facebook insists that advertisers have not left the platform en masse. In fact, it says the number of business users rose by 10 million since November 2017, when it reported 70 million on the platform. "First, in the immediate days of the concern, we heard from a handful of advertisers who paused spend, one of whom has already come back," said Facebook COO Sheryl Sandberg on the company's most recent earnings call last week. "We haven't seen a meaningful trend or anything much since then," she added.
Indeed, its numbers bear that out. The social network last week reported higher-than-expected earnings--$1.69 per share on $11.97 billion in revenue--and said it now has 2.2 billion monthly active users, up from 2.1 billion in the previous quarter. It's worth noting that news of the Cambridge Analytica breach first broke on March 17, while the company's first quarter ended March 31. One could argue the company hasn't yet seen the true affects of the scandal.
"Clients have asked us [if they should] take a step back and evaluate all of their marketing channels," says Jill Mailander, an account executive at Room 214, a social media-marketing agency based in Boulder, Colorado. "The results have been mixed. If Facebook has been an uphill battle for your brand as a small business, and you feel like it has been pulling teeth to get fans, it's only going to get harder from here," she adds, referring to the #DeleteFacebook movement.
Many businesses fear the cost of advertising on Facebook will surge in weeks to come, particularly as more users delete their accounts, and gravitate toward other networks. "We do not want our products to be associated in any way [sic] with Facebook's scandal," noted a spokesperson for Cuckoo Forest, an online Black Forest clock retailer based in Chicago. "After the scandal, we believe Facebook will lose a significant amount of users and people will be spending less and less time there," he added. Although Facebook declined to comment on whether it would raise advertising rates, a spokesperson tells Inc. the onus is on the businesses to create content that attracts users on the News Feed.
Still others, like Rod Ford, chairman and CEO at the North Little Rock, Arkansas-based retailer Bourbon & Boots, characterize the security scandal as a sort of reality check, leading them to re-evaluate just how effective Facebook has been as a marketing tool. "In some ways, the incident was a needed wake-up call as to how powerless we could be, and thus how much business risk we were unknowingly assuming with a heavy dependence on Facebook," says Ford.
Of course, plenty of entrepreneurs are sticking with the social network. Nadia Martinez, founder of the online shoe retailer Kallie & Co., is one. "I've grown my business because of Facebook, and I have faith things will turn around [for the company,]" Martinez tells Inc., noting she started the firm with just $100 in savings from her laundry room in San Diego. "Nine out of ten of our customers come from Facebook traffic," she adds. "How would we connect with our customers if we were to delete the platform?"
Some go so far as to call the aftermath of the data breach, and Mark Zuckerberg's response before Congress earlier this month, a boon for small-business owners. "We see it as a positive thing," notes Keri O'Brien, the marketing and sales director with Darn Good Yarn, based in Scotia, New York. "We think it's great that there's going to be more transparency, and hopefully now that gives some more legitimacy to Facebook advertising," she adds. "Customers will have more confidence that these marketers [like us] are not a scam."
Even Seper, the Ziplines founder who is minimizing his Facebook activity, nods to the value of social media as a tool for young companies on a shoestring budget. "Ultimately, Facebook is the most effective--and most cost-effective--channel to reach potential customers," he concedes. If the scandal had happened earlier in 2017, he adds, before his startup had generated any sales, he wouldn't be pulling away from the platform. "[In that case,] we would have to do what would be best to reach our customers," he says.