Google’s Ad Saga: What’s Looming For Competitors, Partners

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Google’s Ad Saga:  What’s Looming For Competitors, Partners
Mizter_x94 / Pixabay

From SMITH BRAIN TRUST at the University of Maryland’s Robert H. Smith School of Business: With Google gripped by a spiraling ad boycott as companies protest having their content posted alongside extremist YouTube videos, the search giant’s competitors might be spotting an opportunity. Already a fresh focus has turned to the “upfronts,” the annual New York City ritual in which TV networks make pitches for long-term contracts with major brands and advertising agencies based on expected audiences.

But the biggest beneficiary is likely to be Facebook, says Wendy W. Moe, marketing professor and academic director of the Master of Science in Marketing Analytics at the University of Maryland’s Robert H. Smith School of Business. Like YouTube, Facebook has a feature that allows users to report objectionable content, but unlike YouTube, Facebook’s advertising is not linked to specific content, says Moe, the author of the book “Social Media Intelligence.” Ads float on the page, but don’t link specifically to content, as they do on YouTube.

Troubles for Google, which owns YouTube, surfaced two weeks ago, when an investigation from the Times of London revealed that advertisements from major companies and from the U.K. government itself were posted with videos that promoted terrorism, racism, anti-Semitism and violence against women.

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The crisis has steadily spread with now hundreds of advertisers around the world withdrawing their advertising from YouTube and Google’s display ad network. Among them are giants AT&T, Johnson & Johnson, General Motors, Coca-Cola, Pepsi, Starbucks, McDonalds, Verizon, Walmart, HSBC, Dish Network and L’Oreal.

Google says it’s working to fix the problem, improving the technology that scans videos for objectionable content, adding more human reviewers and promising to give advertisers new controls.

The issue is a thorny one for companies — and not just because of a potentially negative impact on image. Companies could be accused of funding extremists, however unwittingly. For every 1,000 times an ad is played on YouTube, the advertiser pays a commission, typically $7 to $12, that is split between YouTube and the creator of the video content.

“Identifying offensive content is not a trivial problem,” says Michael Trusov, associate professor of marketing at the Smith School. With hundreds of hours of new videos uploaded to YouTube every minute, Trusov says, the bulk of this task must be automated. And while Google continuously works on improving its algorithms, getting content analysis technology that is perfect on every piece of content is hard.

Moe says the only way to truly address the problem is with a team of human analysts. “But this is costly,” she says, “not only in terms of dollar costs, but also in terms of the psychological costs for the analysts.” Moe cited a lawsuit filed against Microsoft earlier this year by two employees who were hired to review video content. The employees, who worked for the company’s online safety team, filed suit against the company, saying their jobs, which required them to view abhorrent photo and video content, caused them post-traumatic stress disorder, or PTSD.

The partial boycott — it affects display ads but not Google’s more lucrative search ads — could cost the tech giant as much as $750 million this year, say analysts from the Nomura Instinet investment house, estimating a 7.5 percent hit to YouTube’s annual $10 billion business.

And at the upfronts, some executives will be playing a stronger hand, not only with their ability to control content, but also with recent Nielsen ratings showing cable news posting strong first-quarter gains in viewership.

Google parent Alphabet’s stock price, though under pressure, is largely weathering the crisis, shedding only about 4 percent. Analysts from RBC Capital Markets say they expect the ad backlash to shave just 2 percent from the company’s net revenue this year.

The type of advertising affected by the boycott comprises just 10 percent of Google’s overall ad sales. Targeted search advertising is where Google brings in most of its revenue. The boycott might have its biggest impact on the scores of YouTubers who develop content and make a living off the ads on their videos, Moe says. How the boycott plays out for YouTube’s big stars, from top-ranked video-posters PewDiePie and Roman Atwood, who bank millions on the network each year, and its lesser-known and up-and-coming stars, Moe says, remains to be seen.

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