YouTube is facing another brand-safety crisis, and agencies see it as an opportunity to get the video platform to pay the brand safety tab

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Big brands like McDonald's, Nestlé and AT&T pulled their ad spend this week with YouTube after they found ads running next to videos with inappropriate comments.
YouTube this week held an hour-long conference call between ad agencies with Philipp Schindler, Google's SVP and chief business officer, and YouTube's chief product officer Neal Mohan, to address the situation.
The news comes as YouTube recently decided to stop paying third parties to make sure ads run next to specific videos.
YouTube is still negotiating such contracts and agencies said the newest brand safety snafu could give them leverage to get YouTube to pay the brand safety tab.
According to data from MediaRadar, five of the advertisers that pulled YouTube ads this week are spending 70% less on the platform than a year ago.

Another brand-safety crisis has hit YouTube, and this time advertisers think they could use it as leverage over the video platform.

On February 17, blogger Matt Watson posted a 20-minute video showing how YouTube videos featuring children included inappropriate comments that linked to pornography. By Wednesday, big brands like McDonald's, AT&T and Nestlé that ran ads alongside the videos had pulled or paused their ad spend with YouTube.

While the videos only represent a sliver of advertisers' YouTube spend, the advertisers that pulled spend are some of the biggest advertisers on the platform and make up its core, according to analytics company MediaRadar. The episode also is the latest example of how brand-safety concerns continue to plague YouTube.

This week, Google set up an hour-long conference with holding companies and a handful of its executives including Philipp Schindler, SVP and chief business officer, and YouTube's chief product officer Neal Mohan to go over the steps that it has taken to protect minors on its platform, according to one holding company exec.

The brand-safety issue comes at a critical time as agencies and YouTube are negotiating 2019 contracts. Two weeks ago, Business Insider reported that YouTube recently notified holding companies that it would stop paying for third-party brand safety fees. Tech firms like OpenSlate and Pixability provide software that allows brands to make sure that their ads only appear on a vetted group of videos.

"They've been communicating heavily every day — lots of detail [about] short-term, long-term plans," the exec said. "They spent a lot of time going through the actual step-by-step process."

During the call, YouTube execs told agencies that it has shut down 400 channels and removed comments on millions of videos. Execs also detailed some longer-term changes to the platform like comment-moderation software that allows creators to control comments and updates to a strike system that YouTube uses to determine if a creator can serve ads alongside their videos.

"Any content including comments that endangers minors is abhorrent, and we have clear policies prohibiting this on YouTube," said a spokesperson for YouTube. "We took immediate action by deleting accounts and channels, reporting illegal activity to authorities and disabling comments on tens of millions of videos that include minors. There's more to be done, and we continue to work to improve and catch abuse more quickly."

YouTube execs on the call also talked about the possibility of requiring videos creators to approve comments on their videos before the comments could be posted on YouTube. However, the massive number of videos that are uploaded to YouTube makes vetting videos and their comments resource-intense. The agency exec said that YouTube is encouraging creators to "police their own feed."

"If you think about the ratio of videos to comments, the order of magnitude of reviewing comments in a pre-screen mode is just too daunting," an agency exec said.

YouTube's snafu represents a small amount of ads

The snafu may not amount to a lot in terms of advertising dollars, but it has affected some of the largest spenders on the platform.

Only $8,000 in advertising was spent on the videos in question in the past two months, according to a knowledgable source.

The agency exec said a couple of its clients had only spent an average of $3 advertising on the videos in question since the beginning of January.

"It's very limited exposure. That doesn't change the concern about the content and the comments," the exec said. "The underlying issue is that these things aren't happening periodically. It's the nature of the beast."

MediaRadar crunched data for seven companies that have pulled their ads this week. They include YouTube's biggest advertisers: Disney, AT&T, Epic Games, McDonald's, Nestlé, Clorox and Hasbro. The data tracks ad spend between January and February 17, when Watson posted the video.

Five of the seven companies spent up to 70% less on the platform versus a year ago, according to MediaRadar. Nestlé was the only one of the seven that pulled its spend during last year's issue, though the company came back two weeks later.

In other words, the impact of this episode on YouTube could be large if those brands' actions are any indication.

MediaRadar said that these advertisers typically buy ads on YouTube's homepage and on popular channels like The Ellen Show and WWE.

"It will be interesting to see how many of these advertisers truly discontinue their advertising with YouTube," said Todd Krizelman, CEO and co-founder of MediaRadar. "This is not YouTube's first brush with brand safety concerns, and in previous cases, the majority of advertisers returned to the platform within weeks of the breach."

Agencies could gain leverage with YouTube

For more than a year, YouTube reimbursed agencies who used third parties' brand safety protection in the form of refunds or credit. In December, YouTube notified agencies that it would stop picking up the bill in 2019.

Agency sources said YouTube believed it made significant progress in cleaning up its platform in the two years since brand-safety issues started getting a lot of marketers' attention. YouTube also added new ad-tech vendors like DoubleVerify and Integral Ad Science to its platform in recent months and sources speculated that YouTube didn't want to look like it favored one vendor over another.

Deals are still being negotiated and the agency exec said advertisers could use the latest outcry over brand safety to get YouTube to pick up the brand safety cost again.

"Unfortunate events like this demonstrate the need for greater third party oversight — no question," the source said. "It's hard to imagine that this would not give us more leverage."

Not all brands are pulling spend

Not all brands are pulling away from YouTube. Burger King, Johnson & Johnson, and Anheuser-Busch InBev told Business Insider they are sticking with the platform.

While brand safety is important to Burger King, it is satisfied with YouTube's efforts to tackle the issue, Burger King's CMO Fernando Machado told Business Insider.

YouTube dedicated 10,000 employees across Google to vet videos, rolled out tools that catch questionable content through artificial intelligence, and significantly raised the requirements for creators to make money from their videos.

"The most important part is that they seem to be committed to solving the problem," Machado said.

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