YouTube Ad Boycott Expected to Have Minimal Revenue Impact on Google, Analysts Say

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Google is facing a worldwide advertiser backlash over ads programmatically placed on YouTube in videos containing hateful, terroristic and racist messages, but the near-term impact from the controversy will be “minimal,” according to RBC Capital Markets analysts.

“Yes, this is a headline negative and we can understand why brands would be upset,” RBC’s team of internet analysts led by Mark Mahaney wrote in research note Thursday. But the firm is not altering its revenue projections for 2017 for Alphabet, Google’s parent company. The RBC analysts reiterated their “outperform” rating on Alphabet and their $1025-per-share price target on the stock. “Google is one of the strongest, most consistent fundamental stories in tech. Period,” they wrote.

The uproar quickly swept across the U.K. advertising community, following an expose last week by the Times of London about ads from major brands appearing on YouTube against videos from white supremacists and radical Islamic preachers and other brand-unsafe content. On Wednesday, AT&T and Verizon said they were pulling ads from YouTube and Google’s non-search ad networks. GSK and Enterprise are among other U.S. marketers joining the boycott, along with more than 250 advertisers in the U.K. including Volkswagen, McDonald’s, the BBC, L’Oréal, Marks & Spencer, HSBC, Royal Bank of Scotland, Lloyds, Audi and Havas.

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Google has responded to the issue by outlining a number of steps it plans to take to combat ads inappropriately placed against such offensive content, including hiring more staff and developing artificial-intelligence algorithms to better identify hate speech. Google also says it is improving the controls and reporting tools advertisers have about where their ads are displayed.

“We’ve begun an extensive review of our advertising policies and have made a public commitment to put in place changes that give brands more control over where their ads appear,” the tech giant said in a statement Wednesday. “We’re also raising the bar for our ads policies to further safeguard our advertisers’ brands.”

The RBC analysts noted that Google released “an apology/proactive change press release” to try to reassure advertisers that it’s taking good-faith efforts to correct the problems. Still, Google and YouTube execs seem to have been caught off guard by how broadly and swiftly the ad pullback over hate-speech content has spread.

To gauge the potential effect on earnings from the boycott, RBC estimated that a 10% hit to YouTube and Google display network revenue would amount to $1.5 billion for 2017, reducing Alphabet’s total revenue by 1.7%, while a 2% drop in YouTube and Google network ad revenue would result in total revenue declining $309 million, or 0.3%. That’s based on the analysts’ rough estimates that YouTube will account for roughly $14 billion in revenue in 2017, and Google’s display network will generate $4.8 billion.

But again, RBC isn’t currently changing its forecasts for Alphabet. That said, the RBC analysts noted, any drop in advertising on YouTube stands to benefit Facebook and Instagram, given marketers’ strong interest in reaching audiences on social, mobile and video networks.

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  1. Reckless. That’s the only word I can use to describe the knee jerk reaction the advertisers undertook boycotting YouTube. Long gone are the days of those such as JFK and Ted Sorensen (Sorensen the speech writer of all those great words JFK spoke and Sorensen the man who was tasked by JFK to write THE letter to Khrushchev to solve the Cuban Missile Crisis) both who analyzed every impact and consequence of the Kennedy administration BEFORE acting.
    Eric Feinberg is also 110% correct. The man who first identified the problem and raised the alert is correct. His mission to rid the internet of hate is a just one. It should be supported an applauded. The ad agencies and YouTube are not.
    The human impact: over a million of YouTube creators are now out of work. Yes millions (estimates have the number at approx six million). Where do you think all those videos come from anyway? If this were to happen to any another industry, like the car industry, there would be hell to pay for the consequences of a handful multi-billion dollar ad agencies thrusting millions of people out of work on an ill planned knee jerk reaction. That’s reality. So now what do these six million people do? There is no safety net for the self employed remember. Get a job. Oh yeah, when was the last time you tried to do that? In case you missed it, the middle class is decimated; there are no jobs. YouTube was an opportunity for self employment for, let me repeat, millions. Nice job ad agencies (snowflakes in suits) way to think that through, give yourselves a pat on the back; you sure showed them!
    As a further consequence, YouTube has also now panicked and have also over reacted with draconian knee jerk policies. They boast of integrating their new cutting edge “AI” to sort out the videos. However, they’re new cutting age “AI” is incapable of being able to differentiate between an anti Nazi Holocaust video and pro one (scum videos). Case in point: my own show Brent Holland Show. I interviewed Lydia Reich who befriended Anne Frank in the camps. Now call me old fashioned, but, this is not a silly cat video, teen make-up video, or brainless content. This show describes the Holocaust (Shoa) from a first person witness who went the horrors of humanity. This show tells all the neo nazi scum who decry that Anne Frank was a fictionalized character made up to gain some twisted form of sympathy from the world, that , no, Anne Frank and the Holocaust were real. But the show now has no ads attached to it. My show is weekly, takes me 50- -60 hours, primarily discuses history and historical figures usually people who were there, like Ted Sorensen, PM of Canada, Jane Goodall, etc. I built the show from scratch, no crew, no money just pure desire. YouTube gave me the opportunity. I now have over 300 shows, 2 million views & edging in on 10,000 subscribers and for that effort my income today was $3.88. To be honest the money, even at its peak two weeks ago before the boycott, was never more than enough to keep me from being homeless. As a senior that is a scary thought, now a reality. This show gave back to the global community by showing today’s youth how crises get solved by people who went through them, skills they could integrate into their own lives, knowledge or as Ted told me once, dialogue before bullets; thought before action.
    With so many now cut off from their income, THAT, my friends, is the REAL crisis (and don’t get me started on how the ad companies now totally control what gets put as content and vulgar attack on free speech on YouTube). The ad companies do have a valid point which is no one wants to be associated with scum. But in truth how many videos are we talking about?
    [Update from Google rep: “When we spoke with many of our top brand advertisers, it was clear that the videos they had flagged received less than 1/1000th of a percent of the advertisers’ total impressions. Of course, when we find that ads mistakenly ran against content that doesn’t comply with our policies, we immediately remove those ads.”]
    Now once again call me old fashioned, but I am going to argue that 99.9999% of people know that when they see a walmart ad running on scum bag video , they don’t think walmart, or some other advertiser, are endorsing the content. So please “snowflakes in suits”: give your brains a chance and hence my point to both you and YouTube on knee jerk reactions without considering the consequences of those actions beyond the end of your nose.
    Some badly needed advice for the “snowflakes in suits” and YouTube: maybe you should have watched my show with Ted Sorensen. He did after all save the world from nuclear annihilation with a letter to Khrushchev, proving once again the pen is mightier than the sword. Dialogue before bullets; thought before action. I think Ted Sorensen could have solved this so called “crisis” as well, all without a single shot being fired.

  2. John Duarte says:

    As a youtuber… I have dropped ad revenue by over 40% due to the changes. Reports from youtubers are coming in all over that their numbers are dropping badly. My content is in the green, its even child friendly. And my revenue is dropping quicker then a rock thrown in a lake.

  3. David K Winnett Jr says:

    Well, a big (sarcastic) THANK YOU to the idiot at the Wall Street Journal who, with his knee jerk reaction to one or two YouTube channels displaying objectionable content has caused hundreds or maybe thousands of YouTube content creators to lose most of their advertising money. In other words, punish hundreds of content creators by running them out of business because of a very few bad apples.

    Hey, Wall Street Journalists…you guys ever heard of a concept called FREE SPEECH????

  4. I would tend to agree that the impact is minimal in the short term. The bigger threat is a long term failure on the part of Google/YouTube and others to recognize that consumer preferences for ads are changing and ad tech is making some ad formats (like audio with Pandora and virtual reality with VirtualSKY) clear winners that will shape the future of advertising. Meanwhile. FB, google, and a whole slate of both social and mobile ad platforms are failing to innovate and keep up with trends and opportunities. If that doesn’t change, the list of powerhouses in digital/mobile advertising will look much, much different in 3 years than it does today.

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