Google parent Alphabet Inc. (ticker: GOOG, GOOGL) shares are down more than 4.1 percent in the past five days as the company deals with a major controversy related to its YouTube advertising business. Google uses advanced programmatic advertising algorithms to place ads on content targeting specific user demographics. A growing number of advertisers have realized that a handful of that content is inappropriate or harmful.
As of late last week, a number of high-profile advertisers, including AT&T (T), Verizon Communications (VZ), Volkswagen, McDonald’s Corp. (MCD), Honda Motor Co. (HMC), Lloyds Banking Group (LYG), Johnson & Johnson (JNJ) and the Royal Bank of Scotland (RBS) have withdrawn their YouTube ads. Other major companies that are boycotting include PepsiCo (PEP), Wal-Mart Stores (WMT), Dish Network Corp. (DISH), Starbucks Corp. (SBUX) and General Motors Co. (GM), according to The Associated Press.
“We are deeply concerned that our ads may have appeared alongside YouTube content promoting terrorism and hate,” an AT&T spokesperson said. “Until Google can ensure this won’t happen again, we are removing our ads from Google’s non-search platforms.”
Nearly 90 percent of Google’s total revenue comes from advertising, which is why investors are concerned about the exodus of high-profile clients. However, UBS analyst Eric Sheridan says the controversy will eventually blow over. According to Sheridan, many of the advertisers intend to return to YouTube in the future.
Following the initial reports of advertisers abandoning YouTube, UBS talked to a number of ad industry contacts who expressed skepticism about the YouTube boycott.
“While many advertiser actions are focused on legitimate industry concerns over brand safety, many of the announcements also seem to have elements of opportunism,” Sheridan says.
He says the YouTube protest comes at the same time “advertisers and agencies are looking for negotiating leverage” to use against Google and other online advertisers.
UBS predicts that any ad revenue losses related to the current controversy will be temporary. In the meantime, Sheridan says…
Click here to continue reading
Want to learn more about how to profit off the stock market? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common Sense. I don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!
