When Google acquired YouTube in 2006 for $1.65 billion, it was considered a pricey gamble, one made with the belief that an online service known for pirated videos and vapid user-generated content could appeal to major advertisers.
The bet paid off. YouTube is now one of the pillars of Google's advertising business and the most valuable video platform on the internet. In recent years, advertisers, unable to ignore its massive audience, flocked to YouTube to reach younger people who have started to shun traditional broadcast television.
But the technology underpinning YouTube's advertising business has come under intense scrutiny in recent days, with AT&T, Johnson & Johnson and other deep-pocketed marketers announcing that they would pull their ads from the service. Their reason: The automated system in which ads are bought and placed online has too often resulted in brands appearing next to offensive material on YouTube such as hate speech.
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On Thursday, the ride-sharing service Lyft became the latest example, removing their ads after they appeared next to videos from a racist skinhead group.
"This is beyond offensive," a Lyft spokesman, Scott Coriell, said. "As soon as we learned of it, we pulled our advertising on YouTube."
The pullback from advertisers strikes to the core of YouTube's appeal. Unlike television, with specific programming during which brands choose to run their advertising, YouTube mirrors the internet's sprawl, specializing in niche content that may not appeal to a mainstream audience but attracts engaged viewers. This provides YouTube with an enormous audience watching one billion hours of videos a day, perfect for new ad technology that minutely slices and dices an audience so that companies can target specific viewers.
That technology, known as programmatic advertising, allows advertisers to lay out the general parameters of what kind of person they want to reach — say, a young man under 25 — and trust that their ad will find that person, no matter where he might be on the internet. This approach plays to the strengths of tech giants like Google and Facebook, allowing advertisers to use automation and data to cheaply and efficiently reach their own audiences, funneling money through a complicated system of agencies and third-party networks.
But more than 400 hours of content are uploaded to YouTube every minute, and while Google has noted that it prevents ads from running near inappropriate material "in the vast majority of cases," it has proved unable to totally police that amount of content in real time. And that has advertisers increasingly concerned.