Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) shares have shed roughly 4 percent since the YouTube ad-boycott controversy erupted. Sell-side analysts for their part, raised red flags — lowering estimates, ratings and price targets — while there were others who saw it as a temporary issue.
Some European companies, including Guardian, GlaxoSmithKline plc (ADR) (NYSE: GSK) and HSBC Holdings plc (ADR) (NYSE: HSBC) announced their intentions to boycott advertising on Google's YouTube channel due to YouTube airing objectionable content alongside the companies' advertising.
Subsequently, U.S. companies followed suit, including:
- AT&T Inc. (NYSE: T).
- The Coca-Cola Co (NYSE: KO).
- General Motors Company(NYSE: GM).
- Johnson & Johnson (NYSE: JNJ).
- PepsiCo, Inc. (NYSE: PEP).
- Starbucks Corporation (NASDAQ: SBUX).
- Verizon Communications Inc. (NYSE: VZ).
- Wal-Mart Stores Inc (NYSE: WMT).
General Motors confirmed to Benzinga that it has suspended ads on YouTube until Google adheres to its brand standards.
Nomura Sees A 7.5% Hit To Top Line From Boycott
A boycott from over 250 advertisers could cost Google $750 million in 2017, according to a Statista report quoting Nomura. Nomura has lowered its 2017 revenue forecast for Google by 7.5 percent.
Putting Things In Perspective
For many companies, a $750 million hit could mean an end to their business. But not for Google. Google's ad revenues, net traffic acquisition cost, totaled $63 billion in 2016, with the potential for $70 billion in 2017. The potential $750 million in foregone revenues would represent 1.07 percent of Google's total ad revenues.
Here is the comparative chart prepared by Statista of Google's ad revenues, with and without the impact of a boycott:
Leaving No Stone Unturned
Philipp Schindler, Google's chief business officer, outlined in a blog post measures that would give brands more control over where their ads appear. They include:
- Raising the bar for Google's ad policies. This includes removing ads more effectively from content that attacks or harasses people based on race, religion, gender or similar categories. The company intends to tighten safeguards to ensure that the ads show up only against legitimate creators in its YouTube Partner Program.
- Increased brand safety levels and controls for advertisers. The company intends to achieve this by evolving safer defaults for brands, offering simplified management of exclusions and more fine-tuned controls.
- Increasing resources, accelerating reviews and improving transparency.
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