YouTube quietly stopped paying the bill for brand safety, and a battle with agencies could be escalating

Susan Wojcicki, youtube, sv100 2015

Brand safety continues to be a hot topic for marketers, though there's mounting evidence that YouTube thinks it can control those issues on its own.
For more than a year, YouTube has paid some of the fees that web video players OpenSlate and Pixability charge agency holding companies to make sure their clients' ads only run next to specific content, according to sources.
In December, YouTube notified agencies that it would stop covering the costs, to agencies' frustration.
YouTube has made progress on controlling brand safety on its platform, but agencies still want to have independent third parties to vet their campaigns.

It's been two years since YouTube started getting publicly criticized by advertisers like McDonald's and L'Oreal after incidents of campaigns running next to offensive content like ISIS or racist videos were documented.

YouTube has pumped money and resources into catching questionable uploaded content before it surfaces on the platform. When AT&T — one of YouTube's longest boycotting advertisers — announced last month that it would return to YouTube, the move signaled to advertisers that YouTube took advertisers' concerns seriously and that it was now safe for even its biggest critics.

But just a month before, YouTube stopped paying the tab for advertisers who want to use third parties that ensure their ads run within safe videos.

Over the past couple of years, a cottage industry of ad-tech firms including OpenSlate, Zefr, and Pixability have grown to help advertisers ensure their ads only run on a certain set of videos. Within just months of brand-safety issues popping up, OpenSlate inked deals with all the major media-buying firms to handle their brand safety concerns.

According to six advertising execs who asked not to be identified because they were sharing private information, Google-owned YouTube quietly reimbursed holding companies who used OpenSlate and Pixability for more than a year after brand-safety issues starting popping up. In some cases, the funds came in the form of refunds or credit returned to brands after a campaign ran.

Then in December, YouTube notified agency execs that it would stop picking up the tab, saying they would be responsible for picking and paying for their own company to work with in 2019, according to three sources.

YouTube declined to comment on its deals with advertisers or third parties, saying its agreements are advertiser-specific.

"We're committed to offering advertisers choice in how they manage and measure their campaigns on YouTube, and we work closely with a number of third-party partners who specialize in these areas," YouTube said in a statement.

Privately, agency execs expressed frustration that YouTube decided to stop covering for brand-safety. Part of their hunch is that YouTube thinks it's made significant progress cleaning up its platform, reducing the need for third parties.

While brand-safety fees are not huge, YouTube's decision exposes a rift between the video giant and agencies over fees. Agencies have long asked for "walled gardens" to open up their platforms to third parties for independent measurement and targeting.

"They've come a long way, but at the same time, there is still a significant amount of content that our clients would prefer not to appear next to," said Joe Barone, a GroupM managing partner of brand safety in the Americas.

Fees for third parties vary depending on the advertiser but are based on a percentage of media spend. For example, one exec said that a brand running a $100,000 YouTube campaign might pay another $10,000 (or 10%) to make sure that its ads run only on specific videos or channels.

"It's pennies on the dollar," said one source about the cost of brand-safety services.

There's more competition to ensure brand safety — including YouTube's own efforts

There are a few possible explanations for YouTube's change in approach.

With more ad-tech companies offering brand-safety services, sources speculated that YouTube stopped paying fees to avoid appearing to favor a particular vendor. Up until recently, only a few third parties were plugged into YouTube to manage brand safety, but as the number of new companies grows, YouTube may have decided to stay agnostic and not pay for any added fees.

Around the time YouTube notified agencies of the reimbursement change, two ad-tech companies, Integral Ad Science and DoubleVerify, expanded their beta programs and became fully accredited by YouTube to cover brand safety and verification, which ensures that ads were seen by humans. According to YouTube, beta tests with Integral Ad Science and DoubleVerify are seeing more than 99% success rates on brand-safety issues across YouTube's reserved and auctioned inventory.

YouTube fully integrated DoubleVerify and Integral Ad Science's software because advertisers asked for more third-party tools to prove that Google isn't grading its own homework, said another agency exec.

"Google never wants to look like they're endorsing things," said one agency exec.

YouTube also has made progress in stamping out brand-safety issues on its own. It hired 10,000 people just to vet videos, rolled out tools that catch questionable content through artificial intelligence, and significantly upped the requirements for creators to make money from their videos.

After dealing with a slew of PR headaches, YouTube "feels that they've made a lot of progress" with brand safety, said one tech firm executive.

Another agency exec suggested that YouTube has been trying to nudge third parties out of its platform altogether, saying that the company "begrudgingly" allowed third parties into its platform a couple years ago to smooth over advertisers' concerns.

"They didn't like the fact that we wanted to use a third party, but we never gave them the choice," the exec said.

Still, agencies want to work with third parties to vet its campaigns, and agency sources noted that there will always be brand-safety risks with advertising on YouTube because of the video platform's scale with user-generated content.

"The industry has moved past trusting a monetization engine to decide which videos and which creators get media dollars," said Mike Henry, OpenSlate's CEO. "There are more than 4 billion minutes of ad-supported content on YouTube and a lot of bad actors. Advertisers see the need for an independent third party to bridge the chasm between what they deem suitable and what Google deems monetizable."

Brand-safety vendors are moving beyond YouTube

Companies like Pixability and OpenSlate have begun diversifying away from YouTube.

Pixability CEO David George said that his company has intentionally kept the brand-safety portion of its business small, anticipating that YouTube would eventually offer its own tools that compete with companies like his.

Beyond brand-safety tools, Pixability helps marketers decide how to spend their video ad dollars across platforms and match content categories to brands. Brand safety isn't a black-and-white issue, and while topics like pornography and violence may be obvious no-nos, topics like hard news are less clear, George said.

"As YouTube has introduced significant improvements to ensure brand-safe advertising, Pixability has returned to primarily focusing on helping brands better optimize their video investment on YouTube for maximum efficiency and effectiveness across content that is most resonant, as well as appropriate for those brands," George said.

OpenSlate's technology recently plugged into Facebook to let advertisers create block lists of videos where they don't want to serve ads.

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