A boycott of Google and its platforms that began in the United Kingdom has spread to the United States amid backlash due to advertisements appearing next to hateful and offensive content.
Last week AT&T (No. 4 on the DiversityInc 2016 Top 50 Companies for Diversity list) said in a statement, "We are deeply concerned that our ads may have appeared alongside YouTube content promoting terrorism and hate. Until Google can ensure this won't happen again, we are removing our ads from Google's nonsearch platforms."
The Times in London reportedly triggered the boycott when an article reported in February that companies including Sandals Resorts, Honda, Thompson Reuters and Mercedes-Benz were among those whose advertisements on YouTube appeared alongside content including pro-ISIS videos and videos for groups with al-Qaeda affiliations. About 250 organizations have since reportedly withdrawn their advertisements from Google and its subsidiaries. For most companies, ads will still appear in Google searches.
Meanwhile, shares for Alphabet (Google's parent company) have been on the decline over the last week.
Google, which has never applied to participate in the DiversityInc Top 50 competition, has an astounding lack of diversity in its leadership ranks. According to its own diversity data, women make up just 24 percent of leadership throughout the company. Ethnic diversity is also dismal, with leadership being 70 percent white, 25 percent Asian, 2 percent Black, 2 percent two or more races, 1 percent Hispanic and less than 1 percent "other."
The DiversityInc Top 50 Companies for Diversity, when expressed as a stock index, outperform the rest of the market, suggesting that good judgment in one area permeates throughout an organization.
Morgan Stanley and RBC Capital Markets both noted that the boycott is likely to have a significant impact on Google's long-term revenues. However, analysts with Nomura Instinet calculated that the company could lose as much as $750 million as a result. Business Insider reported: "According to the note, YouTube, which relies extensively on big brands, would take a 7.5% hit to its revenues, which are estimated to be $10.2 billion for 2017. Five of the top 20 US advertisers, which make up 7.5% of the US ad spend, have frozen their advertising with Google — alongside dozens more around the world."
Google said in a blog post it would "be making changes in the coming weeks to give brands more control over where their ads appear." In another post Philipp Schindler, chief business officer, said the company would be "taking a tougher stance" and said that its current policies work "in the vast majority of cases."
However, companies have continued announcing the boycott even after Google's "public commitment" — indicating that perhaps its promises do not go far enough.
Martin Sorrell, CEO of WPP Group, said last week on CNBC that it is no longer acceptable for Google to not take ownership for the content that appears on its platforms. YouTube reportedly receives 400 hours of new content uploaded every minute. But with such massive success and power comes responsibility — and accountability.
"They claim the volumes are so great, that it's impossible to monitor," Sorrell explained. "With success, with Google and Facebook controlling 75 percent of digital advertising — which in turn is about 30 percent of the worldwide market — with that success comes responsibility, and the responsibility is … they have to exert more control on behalf of our clients, have to take more responsibility for it. They can't just say, 'Look, we're a technology company, we have nothing to do with the content that is appearing on our digital pages.'"
Notably, WPP has not announced it would get behind the boycott. WPP, which also has does not participate in the DiversityInc Top 50, has a lack of diversity in its ranks as well, with just 33 percent of executive leaders being women. Only 13 percent of executive leaders are "ethnic minorities." (Incidentally, the company came under fire last year over a £70m pay package for Sorrell, a deal 33.5 percent of the company's shareholders voted against. According to the company's sustainability report, "We do not currently collect or report data on pay in relation to gender at a group level.")
Media analyst for Pivotal Research Group Brian Wieser said that the company's outlined strategy does not address how serious the situation is.
"They're saying they're trying harder — that's insufficient," he said. "They don't seem to understand the scale of the perceived problem."
In a report Pivotal downgraded Google stock from "Buy" to "Hold" in light of the "serious issues" pertaining to "brand safety."
"Although spending by advertisers who have announced their intention to suspend spending on YouTube and other Google properties is relatively small so far, we think that awareness of the incident will marginally curtail global growth this year vs. prior expectations, leading us to reduce our price target on Alphabet slightly, to $950 vs. $970 previously," the report states.
"[Google's] approach comes across to us as attempting to minimize the problem rather than eliminating it, which is the standard we think that many large brand advertisers expect," Pivotal said. "We think that Google will probably need to articulate goals that sound more like a zero tolerance policy, to alleviate concerns before it can fully recover."
Alphabet Executive Chairman Eric Schmidt said on Fox Business last week, "What we do is, we match ads and the content, but because we source the ads from everywhere, every once in a while somebody gets underneath the algorithm and they put in something that doesn't match." He added that the company has had to "tighten" its policies surrounding advertisements.
When asked if the company's steps would guarantee that ads are not placed where advertisers do not want them Schmidt said, "We can in this case" but added that because "the ads come from everywhere" and sometimes come in violation of the company's own policies, "we can't guarantee it, but we can get pretty close."