Summary
- Some analysts also believe that departing advertisers, eager to reach YouTube's millennial audience, will quickly return.
- YouTube, part of Alphabet Inc, has spent years courting big brands that spend hundreds of millions annually on air time.
- Analyst Mark Mahaney of RBC Capital Markets estimates YouTube will bring in about $14 billion in revenue this year.
- YouTube has begun reviewing its advertising policies and will take steps to give advertisers more control.
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 favour television
networks as they usually present their fall line-ups and woo big
advertisers starting in May, agency executives said.
Big brands
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
cancelled 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 per cent since Monday, closing at $839.65 on Thursday.
Mere blip?
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 OK.”
But
Google's public statements have done little to assuage advertisers’
fears, said David Cohen, president, North America, for media buying firm
Magna Global.
Categorise content
Privately,
Google has gone into more detail about how it plans to combat the
issue, including ratcheting up its algorithms to better categorise
content and being more stringent about how content is labelled, Cohen
said.
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 US
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.
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