Published: Sat, March 25, 2017
Markets | By Lucia Cruz

J&J pulls ads from YouTube over 'offensive' videos

Google outlined several steps created to raise the bar for its ad policies.

Major advertisers across Europe and Asia are still appearing alongside extremist YouTube videos days after technology giant Google said it was taking steps to protect its clients from inadvertently supporting hate.

It wouldn't have been long until the issue of advertisements showing up by hostile substance spread from the United Kingdom to the US. The UK government has been researching the state of extremism on the web since the summer of 2015.

On Monday, Google apologised for the placement of ads on extremist content and pledged it would address the concerns.

A simmering controversy in the United Kingdom about advertising appearing alongside inappropriate content on YouTube is threatening to erupt into a full-blown crisis for the Google-owned video channel.

Even a "draconian" estimate of fiscal damage was limited to whittling perhaps a percent off Alphabet's revenue, Morgan Stanley said in a note to investors. Most online ad placement services use "programmatic advertising", which targets people instead of websites.

Yet, for most companies, Google's response doesn't go far enough.

Following the United Kingdom government's inquiry and subsequent report came a mostly quiet period.

"The sheer amount of video that is being uploaded to YouTube is mindboggling", Borchard said. The paper found, for example, an advertisement for Mercedes E-class next to an ISIS video praising jihad.

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Others to pull the plug, temporarily at least, include the BBC, The Guardian newspaper group, McDonalds UK and the British arm of the major advertising agency Havas.

On March 17, the United Kingdom government sent Google a strongly worded letter demanding answers as to why extremist outfits - and Google - were "still profiting from hatred".

"In cases where advertisers find their ads were served where they shouldn't have been, we plan to offer a new escalation path to make it easier for them to raise issues", he explained.

Regardless, the dominoes fell - and seemingly continue to fall - quickly.

Financial analysts are also reacting to the negative press.

"The Johnson & Johnson Family of Consumer Companies takes this matter very seriously, and we have made the decision to pause all YouTube digital advertising globally to ensure our product advertising does not appear on channels that promote offensive content". Yet it's unclear just how effective Google's new tools will be, and what it might take to bring advertisers back.

The continued negative headlines if "more advertisers come out against GOOGL" could be a "likely tactical headwind to GOOGL's stock performance and trading multiple", he warns. The internet giant's chief business officer, Philipp Schindler, said in a blog post earlier this week that Google is improving the controls and reporting tools advertisers have about where their ads are displayed.

"But we also have a responsibility to our advertisers who help these publishers and creators thrive".

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