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The Anti-Social Network

Social media companies face reckoning over hate speech

Facebook, Twitter and other platforms are drawing criticism for their failure to tackle hate content. But will the hit to their reputation do any lasting commercial damage?

In April 2021, English football announced a boycott of social media. Players, coaches and pundits from across the sport shunned Twitter, Facebook and Instagram for four days in protest against racism on these platforms. Corporate sponsors including Adidas and Barclays also took part in the boycott.

This was just the latest episode in a wider backlash against social media companies over their failure to tackle hate speech. In July 2020, more than 1,000 prominent advertisers launched a month-long boycott of Facebook as part of the #StopHateForProfit campaign, pressing the firm to do more to stamp out racist content in the wake of George Floyd’s murder and the Black Lives Matter protests.1

Despite these controversies, social media companies continue to enjoy the confidence of the market. Share prices have risen in line with the wider tech sector amid growing demand for online tools, even as the bricks-and-mortar economy suffers under COVID-19 restrictions. But as advertisers pull out, users log off and regulators circle, some investors are warning the persistence of hate speech on social media could yet pose a serious threat to the future of the tech giants.

Real-world effects

As defined by the United Nations, hate speech encompasses “any kind of communication in speech, writing or behaviour, that attacks or uses pejorative or discriminatory language with reference to a person or a group on the basis of who they are”. This might include their religion, ethnicity, nationality, race, gender, sexuality or any other identity factor.2

Internet hate speech has real-world effects, making it a fundamental human rights issue. In Germany, a correlation was found between anti-refugee posts on Facebook by the far-right Alternative für Deutschland party and physical attacks on refugees.3

Internet hate speech has real-world effects, making it a fundamental human rights issue

The perpetrators of racist mass shootings in the US and elsewhere have publicised their acts to supporters on the major social media sites and even used the platforms to broadcast videos of their crimes. The shooter who murdered 51 people at two mosques in Christchurch, New Zealand, in March 2019 streamed a video of the attacks using Facebook Live, and clips of the footage spread quickly across Facebook and YouTube.4

While this sort of activity tends to get taken down relatively swiftly, Facebook only blocked white nationalist content as a matter of policy in the immediate aftermath of the Christchurch attacks.5 YouTube and Twitter allowed Ku Klux Klan leader David Duke to post on their networks for years before finally banning him in 2020.6

Social media firms have global reach and hate speech is a global problem. In Myanmar, military personnel used Facebook to spread propaganda demonising Rohingya Muslims ahead of a campaign of ethnic cleansing, according to a UN investigation. In India, lynch mobs have used Facebook-owned messaging service WhatsApp to coordinate attacks.7

Echo chambers

Some experts blame social media business models. Social networks encourage like-minded individuals to gather, to target them more efficiently with advertisements. But as algorithms push users towards content that aligns with their pre-existing views, echo chambers can form. Without the corrective offered by opposing opinions or moderating voices, rhetoric can quickly spiral towards extremes.

Each social media platform has its own rules over what is permissible

Each social media platform has its own, more or less stringent, rules over what is permissible. Facebook’s guidelines are relatively detailed, while YouTube and Twitter also have clear guidelines over what should be removed – any incitement to violence is off-limits – and what should be allowed to remain with content warnings attached (this includes certain forms of hate speech).

Enforcement of these rules is patchy, however. To varying degrees, social media firms rely on three methods of policing content: artificial intelligence, human moderators and user reporting. The algorithms used to detect and delete content that violates the rules are opaque. Human moderators, meanwhile, can quickly become overwhelmed by the thankless task of sifting through reams of disturbing content, which takes its toll on their mental health. 

Tougher regulation

As global businesses whose operations span countries with very different laws on freedom of expression, social media companies must tread a fine line when deciding which content to ban or to flag as harmful.

President Donald Trump was banned from both Twitter and Facebook after he contested Joe Biden’s presidential election victory and incited a riot by his supporters at the US Capitol building in Washington DC in January 2021. Twitter said Trump’s tweets around this time “were highly likely to encourage and inspire people to replicate the criminal acts that took place at the US Capitol”.8

Social media firms drew criticism for their delay in banishing Trump and for censoring free speech

In some quarters, the social media firms drew criticism for their delay in banishing Trump; in others, they were criticised for censoring free speech. Facebook CEO Mark Zuckerberg has asked governments to devise a consistent set of rules for Internet companies, including guidelines on how to deal with harmful content. The company has also set up an independent oversight panel – dubbed Facebook’s Supreme Court – to review content management decisions and potentially overturn them.9 In May 2021 the panel upheld Trump’s suspension, but said the indefinite nature of the ban was unusual and called on Facebook to be more transparent in its decision-making process.10

From the tech companies’ perspective, a worst-case scenario would be an amendment to Section 230 of the US Communications Decency Act, according to which technology companies are currently immune from prosecution from harmful or defamatory content published by third parties on their platforms. For its part, the European Commission is drawing up legislation that will force tech giants to remove illegal content or face the threat of sanctions under a comprehensive Digital Services Act due to be unveiled at the end of 2021.

Commercial impact

Even if they manage to avoid costly regulatory sanctions, it is likely big technology companies will have to invest much more heavily in content-management initiatives in the future, from improved automated systems to new armies of human moderators.

Advertising boycotts could also have a growing impact over time, given ad sales make up the vast majority of social media companies’ revenues (see Figure 1), though the impact so far has been small. Facebook’s ad revenues actually increased during the boycott in July 2020, partly because its customers are mostly local, “mom-and-pop” businesses that did not participate in the walk-out.

Figure 1: Leading source of revenue for tech companies (per cent)
Source: Facebook, Twitter, Alphabet, Apple, Amazon, Microsoft, March 2020

That’s not to say the boycott will not work in forcing changes at Facebook’s handling of hate speech, however. YouTube responded to an ad boycott in 2017 by tweaking its algorithms to curb extreme content.

This example shows tech companies will respond when sufficient external pressure is applied, indicating investor engagement could bear fruit. And the fate of the tech companies is certainly an issue of increasing significance to investors, for financial as well as ethical reasons. The five biggest technology companies (Alphabet, Amazon, Apple, Facebook and Microsoft) accounted for about 22 per cent of the total market capitalisation of the S&P 500 as of May 1, 2021.11

More and more investors are beginning to question the social media firms over content

With both moral and financial risks at stake, more investors are beginning to question the social media firms over content. Louise Piffaut and Charles Devereux, ESG analysts at Aviva Investors, set out a framework for engaging with these companies in key areas. They recommend investors should ensure social media firms are properly assessing how their operations affect human rights, developing more robust content policies in light of these principles and demonstrating how these are enforced.

Investors should also engage with social media firms to improve internal accountability and provide more transparency as to their actions on hate speech. Investment in more sophisticated detection algorithms would lessen the burden on human moderators, the analysts say.

While social media companies in the West face criticism for being lax in shutting down abusive content on their platforms, technology firms in other countries, such as China or Russia, may be too quick to restrict debate at the behest of authoritarian governments. In those cases, the onus is on investors to pressure companies to defend individual freedoms and maintain their access to information where possible.

Domino effect

Striking the right balance when engaging globally with social media companies over content management may be tricky, but investors must be willing to do this if they are to invest according to their own moral framework and defend the value of those investments. After all, if hate speech is allowed to flourish, calls will grow to rein in the social media firms with stronger regulation, and perhaps even to break them up.

Biden criticised Facebook's content-management policies and ordered it to “move fast and fix it”

During the election campaign in 2020, President Biden signalled he would take a tough line on Facebook. In June, he wrote an open letter to the company in which he criticised its content-management policies and ordered it to “move fast and fix it”, referring to the problems of hate speech and misinformation; he and his supporters disseminated this slogan on the network.12

Whether or not regulators decide to break up the larger tech companies – and a recent court ruling in Washington presents a blow to this – there is a possibility users could become disaffected by the increasingly poisonous atmosphere on social media platforms. This could create a negative feedback loop, whereby a decline in user engagement removes the incentive for companies to pay for ads over the long run.

There are already signs users don’t value Facebook particularly highly in monetary terms. Consider a recent study led by Erik Brynjolfsson, director of the Initiative on the Digital Economy at the Massachusetts Institute of Technology. It asked people how much they would have to be paid to forgo search engines for a year; respondents offered an average figure of $17,500. The same respondents were willing to give up access to Facebook for less than $600.13

Hate speech threatens to trigger a domino effect among Facebook’s users, advertisers and investors

To grasp the risk of a user exodus, one only needs to consult Mark Zuckerberg himself, or at least his fictional alter ego in the 2010 biographical film, The Social Network. In a key scene, Zuckerberg frets about how quickly the fortunes of his company could turn: “Users are fickle,” he says. “Even a few people leaving would reverberate through the entire user base. The users are interconnected. That is the whole point. College kids are online because their friends are online. And if one domino goes, the other dominos go. Don't you get that?”

As hate speech threatens to trigger a domino effect among Facebook’s users, advertisers and investors, the real Zuckerberg would do well to heed the warning.

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