Is it taking a stand, or grappling for control—with a side of free publicity?
Swiss companies, such as Swiss Life and soft-cheese manufacturer Baer, have announced that they’re halting advertising on Google, because ads have appeared alongside YouTube videos with inappropriate content , such as neo-Nazi speeches or extremist videos. U.S. telecom giants AT&T and Verizon have followed suit.
In the UK, more than 250 companies are calling for a Google boycott. This has led to a 4.5 percent decline in share prices for Alphabet, Google’s parent company—which translates to a $22 billion loss in Alphabet’s market capitalization. Investors are asking whether this controversy marks the beginning of the end for Google’s advertising dominance.
This interesting case can be interpreted in different ways. Consider the following:
1. Baer/Swiss Life boycott
Swiss Life and Baer said that they will no longer advertise on YouTube and the Google Display Network (GDN). However, despite the anger expressed by communications professionals, they will eventually return to Google.
The public boycott is free PR.
The companies also had an opportunity to communicate their own values. A brand is unlikely to be damaged by the display of an ad alongside negative content. Internet users know that Baer and Swiss Life are not seeking to cozy up to neo-Nazis and extremists.
It’s unlikely that an organization will leave advertising on Google to their competitors in the long run. Also, no brand manager is going to boycott Google completely. This would mean reducing search engine optimization on the search engine giant, or programming your organization’s website in such a way that Google is unable to find it.
2. A YouTube error in the 0.01 percent range
It’s clearly a mistake when an organization’s ad is displayed alongside hatred-filled videos, and Google is doing everything in its power to prevent that from happening again.
Google advertising is matched to your interests with scary precision (and it learns quickly). The above cases are clearly exceptions. Bear in mind that 400 hours of video are uploaded to YouTube every minute. Sorting these videos works well, but things do go wrong occasionally.
The digital revolution has taught us that systems and algorithms are continually improving.
3. Everyone wants viral campaigns and total control
The current controversy underlines how organizations communicate their message and how such communication has been profoundly transformed.
Before the digital revolution, PR and marketing pros had almost total control over their own communication channels. Social media has a major effect on this. It creates new opportunities, such as viral campaigns, but the disadvantage is that they are viral, meaning there is no control over dissemination.
No organization can prevent its brand from being “liked” or shared by anyone on Facebook. The one area where organizations still retain control is their budget, and they are making use of it.
4. Google’s dominance creates anxiety
Another factor in this controversy is Google’s dominance as a search engine and advertising platform (AdWords and AdSense), along with tools such as Google Maps and YouTube.
If you examine the expenditures of organizations that rely heavily on marketing, such as brokers, you’ll notice that Google advertising represents the largest expense. If a search term is particularly popular (e.g., insurance, loans), each click costs $40 or more. In terms of competitive strategy, it makes sense for marketers to use a boycott to unite and counter Google’s dominance.
5. Exchange rate
A loss of $22 billion within a few days sounds dramatic. As a point of comparison, Credit Suisse shares are valued at around 30 billion Swiss francs ($29.72 billion). This means the Google nosedive is equivalent to two-thirds of the value of the major Swiss Banking group.
A look at Google share prices over time shows a fall from an all-time high of $852. On March 29, prices returned to their level of Feb. 17—roughly $820. Despite the drop and the controversy, investors have not lost confidence in Google’s business model.
Google must respond quickly and effectively and improve its advertising placements.
Stefan Michel is professor of marketing and service management at IMD business school in Switzerland, where he directs IMD’s EMBA program. A version of this article appeared on the organization’s blog.