YouTube ad boycott could cost Google parent Alphabet $US750m

Updated

March 30, 2017 18:34:51

The world’s second largest company by market capitalisation Alphabet, which owns Google, is under pressure in its key source of income – advertising.

Companies are pulling their ad dollars from Alphabet-owned YouTube after discovering their brands were being linked with extremist content because of a numbers-based system driven by profiling and popularity.

This week Australian companies including Telstra joined a host of global brands that have stopped advertising on the platform, and analysts say the boycott could cost Alphabet $US750 million – a big number but a small fraction of the company’s expected revenue of $US73 billion.

“Back in 2015 we struck an arrangement with YouTube and we noticed towards the backend of the year that there were issues arising from brand safety that we had no control of and we started advising our clients that if they’re going to buy YouTube they should be aware that there could be brand safety issues,” said John Steedman, chairman of WPP Media Services in Australia — one of the country’s largest ad buyers.

The problem stems from the core of the YouTube business model, which relies on user-created content that YouTube then uses to generate advertising.

“What’s happened is it’s started to resemble a bit like the Wild West where advertisers are finding and clients are finding that their advertising is turning up in some nasty places, extremist situations, hate speech and so on and this has not been picked up on,” Chairman at Switch Digital, Stuart Simon, said.

Google said it was trying to fix the problem and had made a public commitment to “put in place changes that give brands more control over where their ads appear”.

Some ad dollars redirected to local media

Analysts say some of the ad dollars being pulled from Google are being redirected to local media companies, but warned those companies should not get excited about the benefits.

“We…

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