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More firms join boycott of YouTube ads

LIMITED IMPACT:Moody’s forecast that the backlash would not last long, as Google is ‘laser-focused’ on the issue, while an analyst said revenue would only take a 2% hit


An advertising boycott of YouTube LLC is broadening, a sign that big-spending companies doubt Google’s ability to prevent marketing campaigns from appearing alongside repugnant videos.

PepsiCo Inc, Wal-Mart Stores Inc and Starbucks Corp on Friday confirmed that they have also suspended their advertising on YouTube after the Wall Street Journal found Google’s automated programs placed their brands on five videos containing racist content.

AT&T Inc, Verizon Communications Inc, Johnson & Johnson, Volkswagen AG and other companies pulled ads earlier this week.

The defections are continuing even after Google apologized for tainting brands and outlined steps to ensure ads do not appear alongside unsavory videos.

It is not an easy problem to fix, even for a company with the brainpower that Google has drawn upon to build a search engine that billions trust to find the information they want in a matter of seconds.

Google depends mostly on automated programs to place ads in YouTube videos, because the job is too much for humans to handle on their own. About 400 hours of video is now posted on YouTube each minute.

The company has pledged to hire more people to review videos and develop even more sophisticated programs to teach its computers to figure out which clips would be considered to be too despicable for advertising.

Contacted on Friday, Google stood by its earlier promise, signaling the company’s confidence that it will be able to placate advertisers.

As part of that effort, Google intends to block more objectionable videos from ever being posted on YouTube — an effort that could spur complaints about censorship.

Some outraged advertisers are making it clear that they will not return to YouTube until they are certain Google has the situation under control.

“The content with which we are being associated is appalling and completely against our company values,” Wal-Mart said in a statement.

Besides suspending their spending on YouTube, Wal-Mart, PepsiCo Inc and several other companies have said they will stop buying ads that Google places on more than 2 million other third-party Web sites.

If Google cannot lure back advertisers, it could result in a loss of hundreds of millions of US dollars in revenue.

However, most analysts doubt the ad boycott will seriously hurt Google’s corporate parent, Alphabet Inc.

Although they have been growing rapidly, YouTube’s ads still only represent a relatively small financial piece of Alphabet, whose revenue last year totaled US$73.5 billion after subtracting commissions paid to Google’s partners.

YouTube accounted for US$5.6 billion, or nearly 8 percent, of that total, based on estimates from research firm eMarketer Inc.

At most, RBC Capital Markets analyst Mark Mahaney said he expects the YouTube ad boycott to trim Alphabet’s net revenue by about 2 percent this year.

Moody’s Investor Service predicted that the backlash would not last long, because Google is “laser-focused” on cleaning things up on YouTube.

Alphabet’s stock price has fallen nearly 4 percent since the boycott began last week after an investigation by British newspaper the Times revealed the ads of major brands were appearing in YouTube videos delving into contentious themes.

Alphabet shares on Friday fell US$4.51 to close at US$835.14.

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