Procter and Gamble (NYSE:PG)
Historical Stock Chart
2 Months : From Nov 2019 to Jan 2020
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 email@example.com
(END) Dow Jones Newswires
December 06, 2019 10:25 ET (15:25 GMT)
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