Wal-Mart, PepsiCo join other major advertisers in suspending ads on YouTube after discovering their campaigns were placed alongside offensive videos.
Four years ago, Robert Kyncl, YouTube’s business lead, confessed a mistake. “I thought that YouTube was like TV. But it isn’t,” he said at Google’s annual advertising show. “YouTube talks back. It’s interactive. And YouTube is everywhere.”
Kyncl’s message resonated with advertisers. Gross ad revenue at YouTube soared from roughly $4 billion in 2013 to $11 billion last year, brokerage firm Monness Crespi Hardt estimates. At the same event in 2016, Chief Executive Officer Susan Wojcicki boasted about taking ad dollars from traditional TV networks.
Yet now the same traits Kyncl said made YouTube better than TV have plunged the video service into crisis. Some of the world’s largest advertisers, from Verizon Communications to Johnson & Johnson, stopped spending on YouTube because of concern their ads could appear next to offensive videos.
More big companies pulled back on Friday, including PepsiCo, Starbucks and Wal-Mart Stores, after The Wall Street Journal reported their ads had been automatically placed by Google next to racist content on YouTube.
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“We were shocked to learn about our brand being depicted in an inappropriate way,” a Starbucks spokesperson said Friday, noting its advertising had been removed. “We are currently in discussions with Google/YouTube to determine the best way to prevent this moving forward and have pulled our ads until we are confident that measures will be in place to adhere to our brand guidelines.”
This week, $26 billion was knocked off parent company Alphabet’s market value.
Rob Griffin, chief innovation officer at marketing agency Almighty, said the controversy “will dent their long-term prospect of making YouTube an alternative to TV.”
While the shift to online video viewing favors YouTube, it is scrambling to reassure companies and ad agencies they’ve made the right decision to spend money on the site. It must convince them YouTube will protect their ads from offensive material in the future.
Google attempted to curb the controversy Monday, pledging publicly to roll out new controls for marketers. In a memo sent to partners later in the week, Google described more detailed changes, including a new video-verification process, long sought by advertisers, and a staff hotline dedicated to brand safety.
Another feature Google promised will use machine learning, a type of artificial intelligence, to flag suspect videos. The new approach would now yank ads if offensive language appeared on a T-shirt in a video, for instance, something that didn’t happen before, according to the memo.
Google aims to implement most of the changes by Sunday, according to the memo, a copy of which was obtained by Bloomberg News. A Google spokeswoman declined to comment on Friday.
Even if the company meets that deadline, it may struggle to solve the issue. While TV companies have almost total control over what appears on a given channel, creating a safe space for brands, YouTube opens itself up to anyone who wants to post a video.
Advertisers often buy ads across the whole site, or large groups of popular videos, instead of buying ads for a specific channel. The company has safeguards to block offensive content, but the volume of video being uploaded is too great to identify every infringing video.
YouTube warned as much in its memo. Forthcoming changes “should give [advertisers] confidence that their ads will not appear against inappropriate content,” the memo read, “albeit with the volume of content involved this can never be 100% guaranteed.” Google noted that four of the 48 videos highlighted by news outlets over the past month would, even under the new policies, not automatically disable ads.
“What they have done clearly is not enough,” said Paul Verna, an analyst with EMarketer. “They must sit down with advertisers and literally show them how they are changing these algorithms.”
Advertisers are now urging Google to let outside companies track issues like safe content, measurement and fraudulent ads on YouTube, according to David Cohen, North American president for Magna Global.
In its memo to advertisers this week, Google said it will offer detailed reporting at the level of specific videos and YouTube channels.
That includes “Google Preferred,” a premium service that lets advertisers pair their ads with top-performing videos. One industry executive said this is an important change giving more advertisers more insight into where their ads run.
Advertisers have long bemoaned the lack of information they get from YouTube and are seizing an opportunity to extract a bit more, said James Cakmak, an analyst with Monness Crespi Hardt & Co.
“It’s a power struggle. If you see an opening against Google, you take it,” he added.
“The stakes have never been higher in the competition between legacy TV players and digital,” Magna’s Cohen said. “But linear television is an eroding asset.”