Google’s Ads Fiasco May Cause More Headaches Than Anticipated

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As you might have read, Google’s found itself in some hot water with some of its largest YouTube advertising customers over the past few days. Many advertisers are now boycotting purchasing ads on YouTube over the unchecked proximity of ads to content deemed offensive and harmful to the advertiser’s brand.

The boycott, which first emerged in the UK, is being carried out by over 250 customers, including the likes of Verizon (Google’s third-largest ad customer), AT&T (the fourth-largest), the BBC, Johnson & Johnson, Volkswagen, GlaxoSmithKline, Toyota, HSBC, Audi, McDonald’s, and L’Oreal.

YouTube was the initial target for the boycott, but it has since expanded to include AdSense, Google’s tool for advertising on third-party sites. To date, the most critical source of ad revenue, AdWords, remains unscathed.

While this is terrible optics for a company whose motto is “Don’t be evil,” a team of internet analysts from RBC Capital Markets projects that Google’s revenues won’t be significantly affected in the short term. In fact, they were so bullish as to declare, “Google is one of the strongest, most consistent fundamental stories in tech. Period.”

Morgan Stanley analysts were similarly optimistic, noting that the advertising segments affected by the boycott only account 10% of Google’s net revenue.

Not Looking So Pleasant

Even with these positive projections from investment analysts, the situation doesn’t look nearly so rosy from a more bird’s-eye perspective.

This mistake feels like one that should have been handled ages ago, ideally from the outset. Google’s failure to account for major ads appearing on videos espousing hate speech and terrorist propaganda highlights a severe lack of insight into or care for the user experience.

Google is projected to lose hundreds of millions in ad revenue, which may not be a huge damper on its earnings report, shareholders certainly won’t be pleased to know the losses were due to an error with such an obvious preventative solution.

Even though the storm will likely be weathered and overcome, this boycott presents an opportunity to restructure what the playing field looks like for online advertising.

Although the titan of search may not have faced the same controversy as Facebook over fake news, the social giant’s algorithmically-driven advertising system for both Facebook and Instagram may seem more appealing to advertisers, especially when one considers Facebook’s focus on video in 2017.

This controversy also stands to encourage Verizon to pursue digital transformation and continue building its own adtech ecosystem, independent of Google. The telecommunications behemoth launched a video streaming service called Go90 in September 2015 and what little user statistics are available suggest it’s doing well enough.

As well, Verizon acquired AOL and is actively acquiring Yahoo, aiming to integrate their proprietary ad technologies, such as Yahoo’s BrightRoll. Through this effort, Verizon can not only wean itself off of Google’s advertising services, it can also begin rolling out a market-facing tool to generate revenue and directly compete with Google in the online advertising arena.

AT&T has also been exploring its own adtech solution by means of AdWorks, aiming to integrate advertising capabilities across TV and mobile.

While none of these appear to be nails in the coffin, they do speak to a lack of care from Google and its failure to properly institute platform rules and standards. When a platform business of this magnitude screws up something so simple, the response is cacophonous.

Content platforms like YouTube, Twitter, and Facebook have long struggled to walk the very precarious line between ensuring free speech and preserving decency within its network. While censorship is not recommended, disarming promoters of hate speech seems ideal, as well as protecting the brands of its largest customers.

The Fixes

In response to the whole mess, Google promised a slate of changes to its advertising policies and capabilities.

The company will institute more stringent for reviews for harmful content and running quality control for authenticity of creators. Advertisers will be able to funnel and define their ad strategies more closely to prevent this travesty from happening again. And the company will hire on a team of people and develop AI-powered tools to better manage the content and provide new levels of transparency to advertisers.

While these steps are necessary and to be appreciated, this fiasco has damaged Google’s relationships with some of its largest customers. Repairing is essential to moving forward, but the company has opened a window for advertising competitors to chew into previously safe margins.

It’s unlikely anyone will topple Google’s dominance in online advertising, but there are now questions raised about its competence and it could face direct competition it doesn’t need. Headaches are headaches and Google may be well-served if it explores some alternative revenue streams as a hedge.

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