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Many major advertisers have left YouTube after finding that their ads were shown on controversial videos. Source: Google Images

Several major brands have recently retreated from advertising on YouTube after finding that their ads had been placed on controversial videos, such as those with extremist or anti-Semitic content. Some of the brands that pulled out of YouTube advertising include General Motors, Audi, McDonald’s, Pepsi, Wal-Mart, Johnson & Johnson, AT&T, and Verizon – just to name a few. This issue has caused advertising rates on YouTube to go down as much as 75% in the past two weeks. YouTube is responding quickly to the problem by updating its ad placement algorithms – but many stakeholders are still not happy.

This issue affects several parties, including the advertisers, the video creators, and of course, YouTube itself. By pulling out of YouTube advertising, brands are losing out on the exposure of advertising on a major advertising platform. A 2016 study determined that Facebook and Google (YouTube’s parent company) are responsible for 90% of the online advertising industry’s growth, according to recent article by the Guardian. At the same time, however, brands are afraid that consumers will associate them with the controversial content of some of the videos on which the ads are placed, and feel that this decision will protect the brand.

YouTube video producers are also affected greatly by this issue. Many have come to rely on the ad revenue for income and funding of new video content. Ad placement algorithms have become stricter and are leaving even non-offensive videos without advertisements, so many YouTubers are seeing less money come in. According to a recent NPR article, YouTube video producers are upset not only that they are earning less money, but also that YouTube has simply “decided that there are a whole new set of rules…and they didn’t tell anyone. They just suddenly started removing people’s advert revenue,” according to one video producer, David Firth.

Since the undesirable ad placements have been brought to light in the media and more and more brands are taking a stand by leaving YouTube advertising, YouTube is doing what it can to improve its ad placement algorithms and bring back advertisers. However, the new algorithms are leaving many non-offensive videos without advertisements, as they will “take some time to learn where they should show ads, and where they should not,” according to the director of enterprise at YouTube, Jamie Byrne, in the NPR article. In addition to perfecting the algorithm that matches ads to “brand-safe” videos, YouTube is also allowing advertisers to have more control over where their ads are placed. Brands are able to choose from categories of videos with which they prefer to be shown, and can request to be kept away from any particular type of content. Also, in a recent Recode interview, Phillip Schindler, Google’s chief business officer, said that YouTube will begin allowing outside companies such as DoubleVerify and comScore to audit its ad placement process. Mr. Schindler also said that Google “cannot promise a perfect system,” but is working on making it better.

Overall, it’s clear that YouTube is in a tough spot. If it’s not able to gain back the major advertisers that have left, it could lose up to $750 million this year, according to the NPR article. The company will need to ensure its ad placement system is effective at keeping ads away from controversial content, while considering the needs of both its advertisers and video producers.

From a marketing management perspective, here are some questions to consider:

  • Do you believe these major brands did the right thing by pulling their advertising out of YouTube? Why or why not?
  • Research how Facebook, one of YouTube’s largest online advertising industry competitors, handles this ad placement issue.