Effect of YouTube boycott may yet hit Google

YouTube’s inability to keep big- brand ads off unsavoury videos is threatening to transform a rising star in Google’s digital family into a problem child. It’s not yet clear whether a recent ad boycott of YouTube will be short- lived or the start of a long- term shift away from the video service — one that could undercut Google’s growth and that of its corporate parent, Alphabet.

Alphabet’s first- quarter results, released yesterday, provided few clues. Major advertisers didn’t start pulling their money from YouTube until the three- month period was nearly over.

The company’s earnings rose 29 per cent to US$ 5.4 billion ($ 7.9 million) while revenue climbed 22 per cent to US$ 24.8b.

In yesterday’s trading, shares surged nearly 5 per cent, to $ 933.

But the fallout from the YouTube boycott is likely to be felt through the rest of this year.

Skittish advertisers have curtailed their spending until they are convinced Google can prevent their brands from appearing next to extremist clips promoting hate and violence.

Google CEO Sundar Pichai told analysts yesterday that the company had had “thousands and thousands” of conversations with advertisers as YouTube took steps to protect their brands. “We are evolving overall to a better place,” Pichai said. He assured analysts that YouTube was still experiencing “extraordinary” growth without providing specifics.

Even if YouTube continues to lose advertisers, it won’t leave a huge dent in Alphabet’s earnings. That’s because marketers are expected to keep feeding the company’s golden goose — Google’s dominant search engine.

Ads appearing alongside the billions of search results Google churns out each day still generate most of Alphabet’s revenue even as it expands into other fields.

But ad spending had been accelerating at a rapid pace on YouTube over the past two years as brands sought to connect with its audience of more than 1 billion people. Now it looks like things might taper off.

Before the boycott began, YouTube’s ad revenue after subtracting commissions was expected to rise 26 per cent this year to US$ 7b, based on estimates from the research firm eMarketer. Alphabet doesn’t disclose YouTube’s finances.

Advertisers began to flee YouTube last month, after The Times in London and other media outlets turned up evidence that their brands were appearing alongside clips promoting terrorism and racism.

The findings alerted advertisers that YouTube did not have adequate technology or staffing to shield brands from some of the appalling material that gets posted on a site that receives 400 hours of video every minute.