YouTube's bid to grab TV dollars imperiled by advertiser revolt

Thu Mar 23, 2017 10:14pm EDT
 
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By Julia Love, Jessica Toonkel and Tim Baysinger

(Reuters) - The decision by a handful of high-profile consumer brands to pull advertising from Google’s YouTube over offensive content could threaten the site’s long-term strategy of stealing ad dollars from television, analysts and ad industry professionals said Thursday.

The immediate financial impact of the controversy is likely to be limited, in part because a big chunk of YouTube revenue comes from smaller advertisers who lack the budget for TV campaigns and do not have easy alternatives. Some analysts also believe that departing advertisers, eager to reach YouTube's millennial audience, will quickly return.

But with "brand safety" emerging as a major concern for marketers amid a surge in hate speech and other types of offensive content across the internet, the widespread assumption that major advertisers are ready to shift large chunks of their budgets from TV to digital now looks much more dubious.

The timing may also favor television networks as they usually present their fall line-ups and woo big advertisers starting in May, agency executives said.

YouTube, part of Alphabet Inc (GOOGL.O: Quote), has spent years courting big brands that spend hundreds of millions annually on air time. But over the past week, companies including Verizon Communications Inc (VZ.N: Quote), AT&T Inc (T.N: Quote) and Johnson & Johnson (JNJ.N: Quote) have canceled their YouTube ad deals.

“Video is actually a lot more fragile of an ecosystem than the Silicon Valley, software-eats-everything crowd may want to think," said Joel Espelien, a senior analyst at the Diffusion Group, which studies the future of television. "The point is all content isn’t actually the same, all advertising isn’t actually all the same. There is an element of taste. And when you ruin that, the whole thing does kind of start to fall apart.”

Google offers little visibility into YouTube’s financial performance, but analysts view it as a key driver for the company’s growth as its traditional search advertising business matures. Analyst Mark Mahaney of RBC Capital Markets estimates YouTube will bring in about $14 billion in revenue this year.

Alphabet shares have fallen more than 3 percent since Monday, closing at $839.65 on Thursday.   Continued...

 
FILE PHOTO: YouTube unveils their new paid subscription service at the YouTube Space LA in Playa Del Rey, Los Angeles, California, United States October 21, 2015.   REUTERS/Lucy Nicholson