The Strategist

Google may lose $ 750 million thanks to UK ads scandal

03/28/2017 - 14:44

Analysts of the Nomura investment bank reckon that Google may lose $ 750 million a year due to boycott that major global companies set up. The digital company will lose a significant portion of advertising revenue thanks to advertisers outraged with the fact that their ads was shown alongside nationalists and extremist videos on Google-owned YouTube platform. According to Nomura, the above-mentioned amount of losses will grow by extra $ 50 million. This money will go to salaries of hundreds of additional employees who will have to view and track nationalistic and extremist content. Analysts also predict that this year Google will still be able to compensate for the boycott losses during the Christmas sales season, but in 2018 the negative consequences will be very tangible for the company.

Robert Scoble via flickr
Robert Scoble via flickr
Several companies, including Coca-Cola, PepsiCo, Walmart, Starbucks, General Motors, Toyota, Kia, Tesco, Nestle, BBC, L'Oreal etc., have already refused services of Google and severed advertising agreements. Analyst of Pivotal Research Group Brian Wieser, damage from the boycott, which began with Britain, and is now spreading all over the world, could increase to $ 1 billion a year. The analyst believes that Google simply incorrectly estimates extent of the advertisers' concerns. The company has already twice apologized to advertisers, but has not yet increased its staff to track inappropriate content. Google's revenues this year, according to some estimates, may exceed $ 130 billion, and a loss of $ 1 billion will be similar to the "rounding error". However, says Mr. Wieser, "it's still important".

The UK government, Channel 4, BBC, The Guardian, L'Oreal - advertisements of all these organizations coexisted on Google and YouTube with materials of nationalists, religious preachers and extremist groups whose activities are recognized as illegal. As soon as the scandalous fact was revealed, the British government invited representatives of the American corporation to the Cabinet of Ministers, demanding explanations. Apparently, the company will have to miss income from ads of The Guardian, Channel 4 and, of course, the British government itself unless Google assures them that this will not happen again in the future. Each of the advertisers has already withdrawn all materialsg from Google’s AdX service.

"Digital advertising is a cost-effective way for governments to attract attention of millions of people to important programs, such as recruiting and donating blood", a government spokeswoman said. "Google is responsible for ensuring that government advertising is not placed near unacceptable content. We have temporarily suspended placement of our advertisements on YouTube until Google provides assurances that government communications are be properly communicated to people. Google was called to the Cabinet to explain how the company is going to guarantee proper execution of the government's requests execution on behalf of taxpayers".  

Google itself has already issued an official statement, where promised to take into account the comments and do everything to ensure that such situations do not repeat in the future: "We have strict protecting users and advertisers from inappropriate content. We recognize that we do not always have everything going according to plan, and sometimes advertisements appear where they should not be. We intend to work even better and make all necessary changes to our rules", the corporation said.  


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