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Big Tech navigates operating, social pressures amid Russia-Ukraine conflict


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Big Tech navigates operating, social pressures amid Russia-Ukraine conflict

Big Tech companies rallied in support of Ukraine following Russia's invasion of the country, resulting in disruptions to some popular services in the region.

Meta Platforms Inc., Twitter Inc., Alphabet Inc., Apple Inc. and Microsoft Corp. were among the companies that took steps to remove Russian state media from their platforms, including cutting off access to advertising networks, as European regulators moved to revoke media licenses for Russian outlets. The Russian government responded by throttling access to Facebook and Twitter within its borders.

Facebook parent Meta said it is working to keep its social platforms running in both Ukraine and Russia so that ordinary users could use them "to protest, to organize, and to share what's happening with their communities in the wider world."

While Russia represents a relatively small portion of usage and revenue for tech companies, Big Tech must navigate various social and regulatory pressures regarding the use of its services amid the ongoing conflict.

"From a financial impact standpoint, large tech companies would take a minimal hit if they were forced to withdraw their businesses from Russia," said Angelo Zino, senior industry analyst at CFRA Research. "It would be more financially damaging in the long run if they continued to conduct business normally, because the severe social and media backlash around the globe would lead to further regulatory scrutiny."

Meta, Apple and other big tech companies largely held on to stock gains as the conflict progressed, though trading has grown choppier in recent days. The tech-heavy NASDAQ was up 3.8% for the seven days ended March 3.

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Company actions

Some Big Tech companies temporarily disabled their own services in the conflict zone. Both Apple and Google stopped providing live traffic data from showing in their mapping services in Ukraine. An Apple spokesperson called the move "a safety and precautionary measure for Ukrainian citizens."

Apple also halted all sales of its products in Russia.

While Apple does not disclose what portion of its revenue comes from Russia, it reported that about 24% of its $123.90 billion in total revenue for the quarter ended in December 2021 came from European sales, including those in Russia.

Microsoft joined its Big Tech peers in limiting exposure to Russian state media on its internet platforms, and the company on March 4 announced it would suspend all new sales of Microsoft products and services in Russia. In a blog post, Microsoft President and Vice Chair Brad Smith said the company was coordinating closely with the governments of the U.S., EU and U.K. to comply with various sanctions.

"We believe we are most effective in aiding Ukraine when we take concrete steps in coordination with the decisions being made by these governments and we will take additional steps as this situation continues to evolve," Smith wrote.

Microsoft is also working to defend Ukraine from cyberattacks originating from Russia.

Netflix Inc. responded to the invasion by refusing to comply with new Russian rules that obliged the company to carry 20 state-backed channels on its streaming service.

"Given the current situation, we have no plans to add these channels to our service," a Netflix spokesperson said in an emailed statement to S&P Global Market Intelligence. The spokesperson declined to comment on whether Netflix would consider shutting down its operations in Russia.

Netflix had about 1.1 million subscribers in Russia at the end of 2021, according to estimates from Kagan, a media research group within S&P Global Market Intelligence.

"I don't think Netflix itself will take it an extra step and remove the service from Russia altogether," said Michail Chandakas, an analyst at Kagan.

Russian regulations

The Russian government is moving to enforce a new law established prior to the invasion that requires foreign internet companies to register legal entities or establish local offices in Russia to operate in the country. Russian internet regulator Roskomnadzor said Apple, TikTok Inc. and Spotify AB were in compliance with the law, while Google, Meta and Twitter had taken steps to comply as of mid-February, before the Ukrainian conflict.

The companies declined to answer questions from Market Intelligence about how they were complying with the Russian law and whether they planned to continue doing so in the wake of the invasion. A Spotify spokesperson later told The Wall Street Journal that it had closed its Russian office but its service was still available to users in Russia.

In an emailed statement to Market Intelligence, London-based human rights organization Article 19 said the Russian law is intended to facilitate government censorship of the internet in the country. Article 19's focus as an organization is to defend and promote freedom of expression and access to information.

"The implementation of this obligation will make affected Internet companies vulnerable to the potentially unlawful content moderation requests coming from the Russian government," the group said. Still, it cautioned that a lack of access to foreign internet companies could also be detrimental to people seeking information in Russia.

ESG implications

Big Tech has struggled with how to respond to social movements in the past.

Looking at environmental, social and governance scores tabulated by S&P Global, Big Tech firms score much higher on responding to environmental concerns than to social or governance and economic matters. Facebook-parent Meta, for instance, scored 12 out of 100 on its handling of social matters, while Apple scored a 10. Regarding its response to environment concerns, Meta scored 47 and Apple scored 52.

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Tech companies' efforts to limit Russian propaganda and shut down products such as real-time maps that put Ukrainians at risk shows that U.S. companies understand they have a role to play in world conflicts, but many of their efforts to date do not go far enough, said Natasha Lamb, a managing partner at activist investment firm Arjuna Capital who works with clients to integrate ESG factors into their investments.

"The trouble with social media is that it's a double edge sword; it can be used to help and it can be used to hurt, but it leans toward the latter," Lamb said. "True, there are more channels for regular citizens to report out on what's happening on the ground, but the record shows that platforms like Facebook have been leveraged extremely effectively by malevolent actors to aid in genocide and state-run propaganda campaigns."