• by Joe Mandese  @mp_joemandese, July 27, 2020

Don't be shocked to see Facebook's advertising results expand, not contract, when it releases its second-quarter earnings on Wednesday. In the middle of a pandemic. Amid an advertising boycott by the world's biggest brands. With rampant social unrest, much of which is pointing its finger at the social network.

That's what BMO Capital Markets seems to be suggesting in a earnings preview sent to investors this morning, in which analyst Daniel Salmon opines: "We expect near-term trends to be among the strongest in our ad-supported coverage universe and we continue to believe boycotts are relatively immaterial to near-term revenue."

And whatever big brands have stated publicly about it, Salmon adds that the equities research team's "checks" with ad industry sources indicates the boycott is much ado about nothing, and is already "baked into" its current stock market valuation.

Part of Facebook's sustained growth is coming from the rapid expansion of Instagram, as well as relatively newer commerce-driven advertising products such as "Shops" and "Marketplace."

Beyond that, Salmon doesn't even reference the Facebook ad boycott, although it takes Facebook's second-quarter revenue estimates down a smidgen and cautions about ongoing "safety and security" concerns, citing impact from regulators, not advertisers.

The reason that Facebook is somewhat immune from an ad boycott is, that unlike the power big brands wield in centralized Big Media sectors like, say, network TV, they are a relatively small part of Facebook's total revenues.

Most of Facebook's advertising comes from small- and medium-sized businesses that use it for its efficiency and effectiveness, not to take a socially conscious stand.

And while some have suggested that an ad boycott by Fortune 100+ brands would likely take enough pressure off of Facebook's auction-based ad monetization to hurt its yields, the truth is that Facebook's average cost-per-ad has been trending down anyway from the proliferation of ad impressions, as well as new kinds of advertising products.

According to BMO's analysis, that disparity will become most exaggerated during the pandemic, but it's not clear that it is being driven by the ad boycott or simply the economic pressures of a pandemic-driven economic recession, not just in the U.S., but worldwide.

Tune in Wednesday to see how Facebook chief Mark Zuckerberg spins the impact of the boycott. My guess is he won't even mention it, though I fully expect some analysts to ask.