| March 23
March 23 The decision by a handful of
high-profile consumer brands to pull advertising from Google’s
YouTube over offensive content could threaten the site’s
long-term strategy of stealing ad dollars from television,
analysts and ad industry professionals said Thursday.
The immediate financial impact of the controversy is likely
to be limited, in part because a big chunk of YouTube revenue
comes from smaller advertisers who lack the budget for TV
campaigns and do not have easy alternatives. Some analysts also
believe that departing advertisers, eager to reach YouTube's
millennial audience, will quickly return.
But with "brand safety" emerging as a major concern for
marketers amid a surge in hate speech and other types of
offensive content across the internet, the widespread assumption
that major advertisers are ready to shift large chunks of their
budgets from TV to digital now looks much more dubious.
The timing may also favor television networks as they
usually present their fall line-ups and woo big advertisers
starting in May, agency executives said.
YouTube, part of Alphabet Inc, has spent years
courting big brands that spend hundreds of millions annually on
air time. But over the past week, companies including Verizon
Communications Inc, AT&T Inc and Johnson & Johnson
have canceled their YouTube ad deals.
“Video is actually a lot more fragile of an ecosystem than
the Silicon Valley, software-eats-everything crowd may want to
think," said Joel Espelien, a senior analyst at the Diffusion
Group, which studies the future of television. "The point is all
content isn’t actually the same, all advertising isn’t actually
all the same. There is an element of taste. And when you ruin
that, the whole thing does kind of start to fall apart.”
Google offers little visibility into YouTube’s financial
performance, but analysts view it as a key driver for the
company’s growth as its traditional search advertising business
matures. Analyst Mark Mahaney of RBC Capital Markets estimates
YouTube will bring in about $14 billion in revenue this year.
Alphabet shares have fallen more than 3 percent since
Monday, closing at $839.65 on Thursday.
Whether the recent events are a mere blip on the radar for
Google or a harbinger of bigger problems to come may depend on
whether the company can quickly improve its technical tools to
give advertisers more control over where their ads appear.
YouTube has begun reviewing its advertising policies and
will take steps to give advertisers more control, Philipp
Schindler, Google's chief business officer, wrote in a blog post
on Tuesday. Google also plans to hire more people for its review
team and refine its artificial intelligence – a key step, since
much of the ad-serving is handled by automation.
Eric Schmidt, executive chairman of Alphabet, acknowledged
in a Fox News interview that ads appearing next to videos
promoting hate speech or advocating violence had slipped through
the digital cracks in Google's elaborate ad-serving systems.
"We match ads and the content, but because we source the ads
from everywhere, every once in a while somebody gets underneath
the algorithm and they put in something that doesn’t match,"
Schmidt said. "We’ve had to tighten our policies and actually
increase our manual review time and so I think we’re going to be
But Google's public statements have done little to assuage
advertisers’ fears, said David Cohen, president, North America,
for media buying firm Magna Global. Privately, Google has gone
into more detail about how it plans to combat the issue,
including ratcheting up its algorithms to better categorize
content and being more stringent about how content is labeled,
But such additional controls would reduce the percentage of
content that carries advertising and could disrupt the vibrant
community of independent creators on YouTube, who drive traffic
to the site and rely on revenue-sharing from advertising.
YouTube faces a special imperative to keep creators happy as
rivals such as Facebook Inc and Twitter Inc try
to court talent for their own platforms, said Hank Green, a
prominent YouTube creator who runs the VidCon conference.
“YouTube has a decade-long head start, but obviously
everyone wants a piece of the pie,” he said.
Even before the most recent revelations about YouTube,
control over online ad placement had become a hot button topic
for advertisers. Social networks and news aggregators came under
fire during and after the U.S. presidential election for
spreading fake news reports, and advertisers have also sought to
avoid having their brands appear beside content that they
categorize as hate speech.
“Between non-human traffic and fraud, fake news and hate
speech, brands are more concerned than ever,” said Marc
Goldberg, CEO of Trust Metrics, a New York-based company that
addresses ad fraud.
(Reporting by Julia Love in San Francisco and Jessica Toonkel
and Tim Baysinger in New York; Editing by Jonathan Weber and