YouTube Boycott Solution Highlights Google’s Value Proposition, Protects Creators

YouTube Boycott Solution Highlights Google’s Value Proposition, Protects Creators

Alphabet’s (NASDAQ:GOOG) (NASDAQ:GOOGL) YouTube and Google Display Network businesses are under fire over the past month for allowing advertisers’ ads to appear on videos and sites unaligned or inappropriate for their brands. A growing list of advertisers are pulling their spend from these channels, including large U.S. companies like Johnson & Johnson (NYSE:JNJ), Verizon (NYSE:VZ) and Wal-Mart (NYSE:WMT). Analysts disagree on the exact dollar impact on revenues, as much of the affected ad inventory will still be sold. However the boycott could shave a significant 0.5 to 1.0% off the top line this year.

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Interestingly, while the boycott lowers revenues in 2017, its proposed solution highlights the strength of Google’s core value proposition. The same targeting capability used to deliver high advertiser ROI can be employed to increase brand safety and advertiser control. And maybe more importantly, Google’s solution for advertisers seems focused on protecting the platform of legitimate creators and publishers that provide the ecosystem’s views. This dual focused approach, if successful, can convert the current short-term boycott crisis and share price decline into shareholder value and a buying opportunity.

The Solution

Last month Google forwarded a revised, three-pronged approach to brand safety: strengthen community guidelines and “where ads display” policies, more tactical control given to advertisers of where ads appear, and increased insight and review options for advertisers. The advertiser friendly guidelines and policies already limit monetization of creator content that’s sexually suggestive, violent, profane, drug related or of a sensitive nature. In addition to strengthening these policies, an added emphasis in recent weeks adds hate speech to the list.

Advertisers’ default settings will exclude more potentially questionable content, though they can still opt-in to the content for greater reach. Simplified management of exclusions from specific sites and channels will be offered. And the fine tuning capabilities, of which content ads will be show against, will be expanded. Below is a screenshot from a Google AdWords support page for “content exclusions.” Note how some categories are listed as “beta.”

Finally, Google is working with comScore (NASDAQ:SCOR) to provide brand safety reports to advertisers on YouTube. Technology from comScore can monitor patterns in text content to provide transparency to the context in which ads are displayed.

Protecting Creators

Interlaced in Google’s communications around advertiser brand safety was an acknowledgement that YouTube and the Display Network depend on creators and publishers to bring viewers into the system. The main strength of the system is the diversity of channels and sites. These diverse voices build communities of loyal users/viewers for Google. But this diversity also challenges Google to fairly judge the content for demonetization. One initiative helping creators in this regard is expedited review of videos that have been demonetized for content reasons.

Google also is protecting creators by strengthening their crack-down on impersonators who hijack views from other creators. Whether this crackdown strengthens the focus on content re-uploaders (thieves) remains to be determined. Additionally, as content is removed from monetization for violating the advertiser-riendly guidelines discussed above, legitimate content should benefit from increased monetization.

In March CBO Philipp Schindler blogged about advertiser safety. He concluded his lead paragraph with the following:

We have a responsibility to protect this vibrant, creative world-from emerging creators to established publishers-even when we don’t always agree with the views being expressed.

While time is still needed to ensure Google’s commitment, Schindler’s focus on creators, even as he attempted to reassure advertisers of their brand safety, should be appealing to shareholders concerned with the entire ecosystem.

Conclusion

The current brand safety boycott has hurt video and site monetization across Google’s channels. The company has forwarded a reasonable solution for advertisers that includes stricter appropriateness guidelines, more tactical control into ad placement and better insight tools into placement context. Interestingly, these tools highlight Google’s unique targeting capability. This capability drives advertiser ROI and is the core value proposition for Alphabet’s largest segment.

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While discussing their response to the crisis, Google has remained focused on their commitment to creators and publishers. If they follow through on this commitment, the recent decline in share price is an opportunity to add to holdings.

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