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Google's YouTube facing $750 mn loss due to advertisers pulling content

Sahil Bhalla | Updated on: 2 April 2017, 0:00 IST
(YouTube)

 

YouTube's gross ad revenue came in at $11 billion last year. This year though, the Google-owned company is having a rocky start. Some analysts are predicting that this boycott of YouTube will cost parent-company Google as much as $750 million. YouTube has warned creators that the site could "demonetize" videos.

I thought that YouTube was like TV. But it isn’t,” Robert Kyncl, YouTube’s business lead said at Google’s annual advertising show. “YouTube talks back. It’s interactive. And YouTube is everywhere.”

 

The problem

 

Since last week, a host of major advertisers have pulled the plug. From Verizon Communications (one of USA's largest telecom companies) to Johnson & Johnson (baby-care products), YouTube is having a tumultuous time. These companies have been pulling out one by one because out of concern that their ads can feature next to offensive/racist videos, some as problematic as hate speech.

"Ad buyers are likely to demand greater direct control over ad placement, which could take time and resources to implement," a note from analysts at Nomura Instinet reads.

It's this automated system that where ads are bought and placed online that is causing much of the trouble.

Unlike traditional television wherein advertisers choose which program they want to advertise in the middle of, YouTube doesn't give advertisers that option. Instead the technology that comes into play, known as programmatic advertising, allows advertisers to lay out a certain set of parameters about their target audience.

This plays into what Google and Facebook and other major platforms do best. These big companies use data and run some algorithms and let the advertisers reach their intended audience. Google, for their part, has said that it has presented the running of ads near offensive content "in the vast majority of cases,” but not in all.

"There's a difference between the free expression that lives on YouTube and the content that brands have told us they want to advertise against," Google continued in the blog post.

That sheer scale, coupled with its reliance on algorithms rather than humans to filter out the objectionable content after it appears, has been Google’s main defense. More than two million websites are a part of its display advertising network.What YouTube wants is a mix between working with advertisers demanding healthy safe-for-work content while maintaining an active creators community.

What YouTube wants is a mix between working with advertisers demanding healthy safe-for-work content while maintaining an active creators community.

 

Which brands have pulled out

 

Here's a list of some of the brands that have pulled out in the UK and the USA:

  • AT&T
  • Johnson & Johnson
  • Verizon
  • Heinz
  • HSBC
  • ITV
  • L'Oreal
  • Lloyd's Bank
  • Marks & Spencer
  • McDonald's
  • RBS
  • Sainsbury's
  • Tesco
  • The Guardian
  • Toyota
  • Transport for London
  • UK Government
  • Volkswagen

Temporarily, there may be dip in revenue for YouTube creators according to Google. Google is adding new controls for advertisers in the wake of the controversy.

If you’re seeing fluctuations in your revenue over the next few weeks, it may be because we’re fine tuning our ads systems to address these concerns,” reads a YouTube community manager post from 20 March. “If you think your video was demonetized in error, request an appeal by clicking on the yellow $ icon next to the video in Video Manager.”

 

Google's response

 

In an interview to Fox Business Network, chairman of Alphabet, Google's parent company, had this to say: “What we do is, 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. We’ve had to tighten our policies and actually increase our manual review time, and so I think we’re going to be O.K."

While we recognize that no system will be 100 percent perfect, we believe these major steps will further safeguard our advertisers’ brands, and we are committed to being vigilant and continuing to improve over time,” Google’s chief business officer Philipp Schindler said in a statement on 20 March.

Creators get revenue from ads on their videos. Alternatively, they can get revenue from individual views but that's not until they are well into the hundreds of thousands. On 20 March, YouTube released new policies for monetisation.

 

YouTubers are unhappy

 

Take Ethan Klein, also known as H3H3 Productions, said that many videos were demonetised without any advance warnings. Klein, who has hundreds of videos, says he can't immediately tell which ones are in violation of the guidelines.

 

 

Here's another YouTuber, Egoraptor Jones taking to Twitter to ask a pertinent questions:

 

How long will this last?

 

YouTubers have bemoaned the lack of transparency from Google and are using this latest battle to extract as much as they can from the company. Essentially, if there is an opening against a giant like Google, people will take it up. On the flip side, they need to reach their audience and that limits how much they can fight against Google.

In all probability, this will only last a couple of weeks. As we know, YouTube is by far the most dominant player in the online-video market. We also know that brands need to reach their audiences and hence this will quickly pass.

 

First published: 2 April 2017, 0:00 IST
 
Sahil Bhalla @IMSahilBhalla

Sahil is a correspondent at Catch. A gadget freak, he loves offering free tech support to family and friends. He studied at Sarah Lawrence College, New York and worked previously for Scroll. He selectively boycotts fast food chains, worries about Arsenal, and travels whenever and wherever he can. Sahil is an unapologetic foodie and a film aficionado.