U.S. News – A new study from MediaRadar revealed that an advertiser boycott of Google’s YouTube may have cost the video platform 5 percent of its top advertisers last month – a finding that threatens the stock of Google parent company Alphabet Inc (ticker: GOOG, GOOGL).
In late March, several high-profile YouTube advertisers left YouTube after reports that YouTube’s programmatic advertising algorithms were placing ads near content that is inappropriate or harmful.
“We are deeply concerned that our ads may have appeared alongside YouTube content promoting terrorism and hate,” an AT&T Inc. (T) spokesperson said.
Alphabet shares initially dropped more than 4 percent on news that high-profile advertisers such as AT&T, McDonalds Corp. (MCD), General Motors Co. (GM) and PepsiCo (PEP) would be abandoning YouTube. Investors seemed to shrug off the potential impact of the boycott later in the month, and shares are now up more than 12 percent since March 1.
Still, MediaRadar’s assertion that YouTube lost 5 percent of its top advertising clients in April is concerning. Advertising accounted for roughly 90 percent of Alphabet’s total revenue in 2016.
The good news for GOOG investors is that, while concerning, losing 5 percent of its YouTube advertisers likely won’t have a major impact on the company’s bottom line. Wall Street research firm Mizuho estimates that a 10 percent loss in advertisers would only cost Google roughly 15 cents per share in earnings in 2017, hitting EPS by less than half a percent.
Both Google and online advertising rival Facebook (FB) are aggressively fighting to prevent inappropriate content from tarnishing their reputations with users and advertisers. During its recent earnings report, Facebook said the company is hiring 3,000 new employees to help quickly identify and remove inappropriate or illegal content from its platform.
Google recently modified its famous search algorithm to reduce the amount of fake news websites that show up at the top of its search results. In addition, Google has altered its advertising policies to give advertisers more control over where their ads appear.
Back in March, UBS analyst Eric Sheridan said “advertisers and agencies are looking for negotiating leverage” by boycotting and have no intention of leaving YouTube for good.
The full impact of the YouTube boycott will not be revealed until Google’s next quarterly earnings report. In the first quarter, GOOG reported a 22.2 percent year-over-year increase in advertising revenue, crushing expectations.
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