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Google's Rating Cut Over YouTube Ad Placements

Joseph Lu

Alphabet Inc. GOOGL, the parent company of Google, received a downgrade today to “Hold” from “Buy” by Pivotal Research analyst Brian Wieser. The reason for the rating cut centered on the placement of YouTube’s ads. Some ad buyers had voiced that their ads appeared next to videos carrying homophobic or terroristic videos on YouTube.

This has become a large problem for Google in the UK, as many of the largest brands have suspended their advertising on YouTube. Agency holding company Havas HAVSF announced that it has suspended all advertising on YouTube and Google Display Network for its clients in the U.K. Havas’ clients includes the UK Government, L’Oreal LRLCY, McDonald’s MCD, and Sainsbury, JSAIY.

“We think that the problems which have come to light will have global repercussions as marketers potentially adapt their U.K. policies to other markets and as marketers around the world become more aware of the problem,” said Wieser in a report.

Outside of the U.S., Britain is Google’s largest market for advertising revenues. It generated almost 9% of Alphabet’s total revenues in 2016.

On Friday, Google said that it worked hard on making sure ads don’t appear on pages or videos with hate speech, or gory or offensive content but with 400 hours of video uploaded to YouTube every minute, it is very hard to get everything correct.

“We have always said Google, Facebook and others are media companies and have the same responsibilities as any other media company. They can’t masquerade as technology companies, particularly when they place advertisements,” said Martin Sorrell, the CEO of WPP Plc. WPPGY, the world’s largest advertising firm.

Google apologized on Monday for the incidents and made a commitment to simplify advertiser controls, add safer defaults and increase investments to enforce its ad policies faster.

Alphabet closed the day with a decrease of $4.46 (0.51%) to $867.91 per share.

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