Advertiser exodus from YouTube catches fire as Google stands to lose millions

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Google Inc. stands to lose millions of dollars as more companies boycott advertising on the site after ads appeared next to content promoting hate speech.

The U.K. government pulled all of its ads from YouTube last week because some of them appeared on extremist channels, and now a slew of companies around the world has gotten on board and joined the exodus. Some of the biggest names so far to boycott the site include Wal-Mart Stores Inc., PepsiCo Inc., The Coca-Cola Co., Starbucks Corp., AT&T Inc., Verizon Communications Inc., Volkswagen Group AG and the BBC.

Australia’s General Motors-Holden’s Ltd. and Kia Motor Corp. are the latest companies to join that list over the weekend. The companies opted to pull advertising after their ads appeared next to a misogynistic video. “We value our good relationship with Google but in line with General Motors’ global response and Holden’s diversity stance, we have instructed our media agency to temporarily suspend all advertising on YouTube until we are confident Google can protect our brand from inappropriate or offensive content,” Holden said in a statement.

Kia issued a statement saying that until YouTube could fix the problem of programmatic advertising and its name appearing next to repugnant content, its ads “will remain suspended until such time as we can meet with Google to further clarify the application of this type of advertising.”

Google has responded to the crisis by promising to raise the bar regarding its ad policies, which will include “removing ads more effectively from content that is attacking or harassing people based on their face, religion, gender, or similar categories.” Although companies do have some control over where their ads appear, it seems YouTube still has some work to do on refining its ad placement algorithms.

Google has taken most of the heat, but it’s far from alone. Some critics said this is just what happens when you use programmatic, or automated, advertising. “If you’re trusting an ad algorithm to do this, this is what can happen,” Andy Kill, spokesman for genetic testing company 23andMe Inc., told The Washington Post. Companies can choose what kind of site their ads appear on, but with programmatic advertising an algorithm will choose where the ad appears, based on the habits and web history of the person browsing.

“This marks a turning point for YouTube,” Alex Krasodomski-Jones, a researcher at U.K. think-thank Demos, told The Guardian. “For the first time, it’s dealing not only with reputation damage but revenue damage.” Google’s ad system reportedly generated around $79 billion last year, with around $5.6 billion coming from YouTube. That number was predicted to rise, before the present boycott hit the company.

How much it will affect Google remains uncertain. “Google will have a harder time persuading advertisers to shift spending to Google – and YouTube in particular – from TV than might otherwise have been the case,” Pivotal Research Inc. analyst Brian Wieser wrote in a note to clients. “It will also be less likely to receive new budgets without more scrutiny than it previously would have received. If large brands, representing a quarter of Google’s total spending, are the only advertisers who are concerned about the issue, and that spending was increasing at 20-25 percent or 25-30 percent annually, our guess is that spending increases more like 15-20 percent and 20-25 percent this year and next.”

The bottom line, he wrote: about a 1 percent impact on revenues. “Not particularly significant vs the rest of Google’s business, but not nothing, either.”

Image: Manuel Cernuda via Flickr