Google can't stop ads running near extremist content: Schmidt
Eric Schmidt, chairman of Google's parent company, Alphabet, has said the company cannot guarantee adverts won't be placed next to or near extremist content on YouTube. In an interview on Fox Business Network, Schmidt said: "Because we source the ads from everywhere, every once in a while, somebody gets underneath the algorithm and puts in something that doesn't match." More than 250 brands have suspended advertising on YouTube, where Google claims 400 million hours of video is uploaded every minute. Analysts at RBC estimate the scandal will have a 2% total impact on Google's revenue.
Google can't say for certain that ads placed with its various massive platforms won't end up near an offensive video or website.

At least that's the opinion of Eric Schmidt, chairman of Google's parent company, Alphabet, and the most prominent public face of the search giant.

Schmidt conceded the point during an interview on Fox Business Network(opens in a new tab) Thursday in response to a growing advertiser boycott against the company. More than 250 brands have pulled ads after reports that they were appearing near YouTube videos from terrorists, Nazis and other hate-mongers.

"We can't guarantee it, but we can get pretty close," Schmidt said of the company's ability to police the problem.

"Very close" doesn't seem to be enough for the hundreds of brands outraged by offensive placements. Despite Google's announcement this week that it would beef up review staff and add more brand safety controls, big American companies like AT&T, Johnson & Johnson and Verizon joined the revolt the next day.

"We can't guarantee it, but we can get pretty close"

Given the billions of videos on YouTube -- Google claims 400 million hours are uploaded every minute -- it seems pretty safe to say it is nearly impossible to vet every single one.

The issue is further complicated by the fact that YouTube ads are placed through automated exchanges run entirely by software.

The system is designed to aim ads based on what it knows about user demographics. And advertisers can exclude videos about certain topics or, as of this week, specific channels or categories.

Yet even with those controls, brands are still flying blind to a certain extent.

Schmidt alluded to the challenge this poses with his own vague and very understated explanation.

"It's important. What we do is we match ads to content," Schmidt said. "Because we source the ads from everywhere, every once in a while somebody gets underneath the algorithm, and puts in something that doesn't match."

He also seemed confident that the steps Google announced this week to fix the problem will help.

"We've had to tighten our policies and actually increase our manual review time so I think we're going to be okay," Schmidt said.

It may not matter either way to the company's overall bottom line. Analysts at RBC said on Thursday that the boycott would ultimately result in a less than 2 percent total revenue hit, despite the involvement of some of the world's biggest advertisers.

“Yes, this is a headline negative and we can understand why brands would be upset,” RBC’s analysts wrote in a research note assuring investors that it wouldn't downgrade the stock. But, they wrote, “Google is one of the strongest, most consistent fundamental stories in tech. Period.”

An analyst at Morgan Stanley also echoed this assessment.

People are paying attention to diversity in 2017. Credit: justin sullivan/Getty Images

That opinion is contrary to what another analyst wrote earlier in the week, though. Pivotal Research's Brian Wieser downgraded Alphabet stock's rating with the firm on Monday, predicting that the boycott, then contained to the UK, would soon spread worldwide. His prognosis proved correct when American companies joined two days later.

Alphabet's stock price has dipped a little more than a percent in the past five days after trading at an all-time high.

Even if the immediate impact might be muted, the lasting significance of the boycott may come in the precedent it sets.

A number of long-simmering advertiser frustrations with the digital world are now coming to a head -- rampant ad fraud, measurement concerns, transparency in how ads are sold -- and some in the industry have recognized that the only way to counterbalance Google and Facebook's duopoly control is through collective force.

This boycott may be the first instance in which they actually make good on that idea.