Backlash Over Controversial Ads Often Proves Short-Lived
December 06 2019 - 9:40AM
Dow Jones News
By Suzanne Vranica
It is rare for a company's stock to fall sharply after a poorly
received advertisement, but recent history shows fitness-equipment
maker Peloton Interactive Inc. shouldn't expect lasting damage from
social-media backlash over an ad.
Peloton shares have fallen 15% since Monday, erasing nearly
about $1.6 billion in market value, as late-night comedians and
social media mocked the company's holiday ad in which a man
presented his wife with a Peloton bike. Adding pressure to the
stock price this week was the company's decision to cut its monthly
subscription price to $12.99 a month from $19.49 in an effort to
expand its customer base.
Brands including Nike Inc., Procter & Gamble Co.'s Gillette
and PepsiCo Inc. have released ads that stirred controversy in
recent years. Some experienced calls for boycotts and a brief drop
in their stock prices, but all are trading at significantly higher
levels today than when their controversial ads originally
aired.
"We don't think it [the ad] will affect sales," said Justin
Patterson, an analyst at Raymond James, of the Peloton ad backlash.
"We live in the era of internet meme, and I think the ad will soon
be forgotten and people will move on." Mr. Patterson added that
Black Friday sales for Peloton seemed good.
Allen Adamson, co-founder of branding firm Metaforce LLC, said
Peloton may be an outlier. "Peloton's share price is fueled by
brand buzz and cult-like users," he said in an email.
Because of the subjective nature of advertising, companies have
long had to deal with harsh criticism of their pitches. The advent
of the web and the explosion of social media platforms such as
Twitter have helped fuel criticisms and supercharged
controversies.
Peloton's TV ad has been lambasted on social media with many
claiming the ad was sexist, because it could be seen as a husband
encouraging his already thin wife to exercise, and confusing
because the wife was already fit looking. About 73% of social-media
mentions about the Peloton ad during the past two weeks have had
negative sentiment, according to research firm Sprinklr.
The company has stood by its ad and defended its marketing by
providing some media outlets with positive emails it has received
about the ad.
"Our holiday spot was created to celebrate that fitness and
wellness journey," the company said in a statement. "While we're
disappointed in how some have misinterpreted this commercial, we
are encouraged by -- and grateful for -- the outpouring of support
we've received from those who understand what we were trying to
communicate."
The spot began airing on TV on Nov. 4 and has run more than
7,600 times, appearing on high-profile programs such as NFL
football games and during Macy's Thanksgiving Day Parade broadcast,
according to iSpot.TV. The ad-tracking firm estimates Peloton has
spent $84.2 million on TV ads this year, as of Wednesday.
While nasty consumer eruptions over ads have become commonplace
on Madison Avenue, few companies have seen their stock prices drop
as a result.
Nike's stock slid 3.2% last year after it released its
now-famous ad featuring former NFL quarterback-turned-activist
Colin Kaepernick. The ad drew plenty of backlash and calls for
boycotts. The stock quickly rebounded and the Oregon-based sneaker
giant posted higher sales following the ad campaign's release. The
ad also went on to win an Emmy for outstanding commercial.
Shares of Procter & Gamble fell 0.7% on Jan. 14, the day
Gillette razor maker unveiled its "toxic masculinity" commercial
that tackled sexual harassment and bullying. Procter shares rose by
0.9% the next day.
A PepsiCo ad in 2017 featuring celebrity Kendall Jenner was met
with such harsh criticism that the beverage giant pulled the
commercial. The company's stock barely moved in the days following
the eruption of the controversy.
"It's rare to see a big decrease or even a significant increase
in stock value because of a commercial. People don't typically make
a connection between a company's marketing and its value on Wall
Street," said Jeff Goodby, co-chairman of Goodby, Silverstein &
Partners, a unit of Omnicom Group Inc. "I wish they would -- it
would make our work more valuable."
In 1984, Apple Inc.'s stock rose 0.9% a day after its widely
acclaimed "1984" Super Bowl ad aired. A year later, the company's
shares rose 2.7% in the first day of trading after its much-derided
"Lemmings" Super Bowl commercial.
In 2008, Under Armour Inc.'s stock fumbled after the company
announced it was going to run a commercial during the Super Bowl.
Investors were spooked by the fact that the Baltimore-based company
sportswear maker was spending a big portion of its annual ad budget
on the ad.
Write to Suzanne Vranica at suzanne.vranica@wsj.com
(END) Dow Jones Newswires
December 06, 2019 10:25 ET (15:25 GMT)
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