By now it has been well-documented that this election is hurting Donald Trump's luxury brand, with charities abandoning his properties and his new, flagship hotel in Washington D.C. reportedly desperate for paying customers. Now the damage seems to be spreading beyond just the Trump name. It's starting to stick to his backers as well.
Recently Peter Thiel, the Internet billionaire who made his fortune founding PayPal and investing in companies like Facebook, donated $1.25 million to the Trump campaign. His outspoken support for the deeply polarizing Republican candidate is rare among the generally young Silicon Valley set and news of Thiel's donation sparked a swift reaction online, including numerous calls for consumers to boycott PayPal, especially on social media.
Pulling all my money out of my paypal account rn. Why can't we ever have nice things :(— Zolee (@Zoleeofficial) October 17, 2016
Spreading across Twitter, in particular, the #boycottpaypal hashtag has quickly picked up steam. Messages range from meme-driven snarky posts...
...to screenshots of PayPal account cancelation confirmation:
To some as simple as a message saying "just closed my PayPal."
Just closed my PayPal ☺️ #BoycottPayPal— ���� (@_ohhkayB) October 16, 2016
The catch is, Thiel no longer owns PayPal.
While Thiel did cofound the online payment company in 1998, he sold the company to eBay in 2002 for $1.5 billion. Last year PayPal formally split from eBay to become its own company once again… but still with no involvement or investment by Thiel.
For many protestors, current ownership is immaterial. Thiel's history as founder of the company is enough to taint it with a brand that they consider toxic. The backlash has grown severe enough, in fact, that some posters for #boycottpaypal have begun to also target Venmo, an electronic payment service owned by PayPal.
Beyond the Twitterverse, Thiel's colleagues in Silicon Valley have also responded to his decision to support Trump publicly and financially. In a post on Medium, Ellen Pao, former CEO of Reddit, announced that her Project Include will be divorcing itself from Y Combinator, a business incubator that Thiel advises.
Pao wrote, in part:
"We struggle to rationalize Peter Thiel's power and influence as he moves further and further out there… But we are completely outraged to read about Thiel donating $1.25 million to Trump, apparently unfazed by the storm around the candidate in the last week following the broadcast of lewd conversations."
The backlash has grown intense enough to call for the resignation of Y Combinator President Sam Altman for not distancing the company from Thiel.
Others have pointed out that, while Thiel may no longer own PayPal, he does currently sit on the board of Facebook and holds approximately $40 million in stock.
"Ironically," writes The Huffington Post, "Peter Thiel does have an ownership interest in several companies, including Facebook, one of the social media outlets where calls for the boycott originated… Interestingly enough, there have been no calls to boycott Facebook."
This is not PayPal's first brush with political controversy or calls to boycott; however, in past news cycles, it has drawn ire primarily from the Right. Earlier this year, the company announced its plans to cancel a North Carolina expansion over the state's discriminatory treatment of LGBT citizens. In a public statement at the time, the company wrote that:
"[L]egislation has been abruptly been enacted by the State of North Carolina that invalidates protections of the rights of lesbian, gay, bisexual, and transgender citizens and denies these members of our community equal rights under the law. The new law perpetuates discrimination and it violates the values and principles that are at the core of PayPal's mission and culture."
In response, conservative outlets such as Breitbart ran articles with tips for starting boycotts, including advice on e-pay alternatives for those angered by PayPal's support of the LGBT community and its related decision to cancel a planned expansion.
Still, other conservatives have called for boycotts over a PayPal's refusal to handle transactions involving firearms of any kind.
While Thiel is likely to remain a deeply controversial figure, including not only his support of the Trump campaign but also his role in bankrupting Gawker through litigation, cutting ties with him is likely a difficult task for the average consumer. As a recent Fast Company article pointed out, the Silicon Valley investor has touched or owned pieces of an enormous number of now-commonplace technology products and services, including:
- And, in a way, the FBI
However, PayPal remains Thiel's flagship creation, despite the years since his involvement. For the time being, it is where the protestors have decided to take out their rage.
Do These Boycotts Even Work?
Boycotts have long been a favorite way for consumers to protest a company's social or political decisions. From divestment movements across college campuses to Chik-Fil-A's standoff with social liberals, fear of lost sales is a major reason why many businesses try hard to avoid controversy.
This strategy can be highly effective when it comes to forcing a corporation to change its behavior, but the key word there is organized. As Professor Maurice Schweitzer with the Wharton School of Business explained, for a boycott to make a difference, it has to have the kind of sticking power that social media isn't often known for.
"For boycotts to be effective they need to be sustained," Schweitzer said. "They need coordinated leadership and they need to have significant economic consequences, and the vast majority of cases just never rise to that."
PayPal is hardly the first company over the past several years to face organized resistance over social or political issues (indeed, as noted earlier in this article, this isn't even the first time this year that PayPal itself has been the target of an attempted boycott). Other businesses have included BP in the wake of its 2010 oil spill, Kentucky Fried Chicken over treatment of animals, the 2003 rally to boycott French wines, and many, many more.
"The list goes on," Schweitzer said. "There are lots of boycotts and they tend not to be very effective. The few exceptions are cases where there was a substantial and coordinated sustained movement, and I'm quite sure that the move to boycott PayPal is not going to be one of them."
"Particularly," he added, "because Thiel's no longer at PayPal."
Part of the reason that boycotts struggle is that they ask a lot of rank-and-file protestors. A successful boycott requires large numbers of consumers to change their established habits, abandoning or suspending brand loyalty often built up over years and because a given product is the cheapest or most convenient option.
For a brief period shoppers might be willing to endure extra expense, but once the news has passed that initial burst of anger often fizzles out... and with it the incentive to carry on a boycott.
"The boycott of PayPal due to its connection to Thiel does not seem to be a textbook case of a successful boycott," said Gregory Egorov, a professor at the Kellogg School of Business at Northwestern. "As a rule of thumb, roughly half of the organized boycotts are successful. Organization means resources and perseverance; there needs to be a group -- say, activists -- that takes responsibility for raising awareness, [and] telling customers how to boycott."
"The reason they fail," he added, "is either failure to organize properly, or the company's resolve to rebuild reputation for being tough. This makes a lot of sense for high-profile companies that know that otherwise they would always be a target of every self-respecting activist."
While the sustainability of a Twitter-driven campaign is a serious question, there's a larger reason why a boycott of PayPal is unlikely to succeed: boycotts depend on their ability to bite into a company's bottom line, and that's very difficult in a market where PayPal is the dominant force.
Although modern companies are often highly protective of their image, history shows that few boycotts succeed purely through PR damage. See, for example, the annual plight of Starbucks, which faces enormous pressure from the American Right to adopt a more explicit celebration of Christmas. While the issue could hardly be more widely publicized each December, it has little impact on corporate policy.
"Companies rarely notice unless there is an impact on revenue or stock price, which is a signal about future revenue," Egorov said. "Rarely negative publicity per se causes a company to change behavior."
In this case, while the PayPal boycott has generated substantial media attention it also remains concentrated in a small handful of users. Other consumers, even if sympathetic to the symbolic cause, would likely hesitate to cancel their PayPal accounts due to concern for other options.
There just aren't that many.
According to one analysis, PayPal has an approximate 80% share of the digital payment market.
With 184 million users and 14 million participating merchants, there are few viable alternatives to PayPal in the current market.
It would be potentially impossible for consumers to find an alternative to PayPal without sacrificing some ease of use and convenience.
For a boycott with no articulable demands, and so no actual
end date, it would be difficult to convince many consumers to abandon one of the few widely accepted e-payment platforms.
"Paypal is a platform that has few good substitutes for such transactions" Egorov said, "if any at all. So the social media activity would likely come from a few dozen, perhaps hundreds, of outraged individuals who are not particularly profitable for PayPal either. Unless there is some activist group that picks up this case and tries to make demands clearer - then they may have some success."
However for the time being, absent organization, articulable goals or a meaningful alternative, the odds are that the PayPal boycott will amount to little more than a chance for consumers to vent some anger on social media.
After all, as Schweitzer noted, protestors gathered over 20,000
signatures on a boycott of BP gas stations after its Gulf oil spill. Today their gas stations remain open and are doing just fine.
"We have habits," he said. "In the main, most people are trying to get on with their lives. For people to affect long term change in the way they shop, in the way they fill their car up with gas, it turns out to be hard."
"Like dieting, we can do it for a little while but we have to be pretty motivated to keep up sustained change," he added.