Google is going nowhere, Why it will continue to dominate video advertising

The increasing popularity of Digital Video Advertising is driving ad spend in this market

The UK digital video advertising market is anticipated to be one of the fastest growing areas of advertising spend between now and 2020. The market, consisting of mobile and desktop video advertising, is forecast to grow at a CAGR of 20% between 2015 and 2020, from £746m to c.£1.9bn.

The growth will be primarily driven by advertiser and brand investment on the mobile channel, targeting the growing number of mobile and tablet users. The growing focus on digital video advertising spend will help the market to grow much faster than TV. In 2015, video advertising spend represented 18% of TV spend , by 2020, digital video is expected to represent almost 50% of TV spend. The US digital video advertising market is also expected to deliver similar levels of growth, but this market represents a far greater quantum, with spend estimated to reach c.$17bn by 2020.

Recent events have impacted short-term investment

YouTube (owned by Google parent, Alphabet has recently featured negatively in the press with many retailers and brands terminating advertising campaigns on the site, due to their adverts being displayed alongside videos that advocate terrorism and other extremist views.

It is estimated that so far more than 250 companies and organisations have suspended their advertisement campaigns including Audi, the BBC, Channel 4, Enterprise, GSK, The Guardian, Havas UK, HSBC, L'Oreal, Lloyds, McDonald's, O2, Royal Bank of Scotland, the UK government and Verizon.

These concerns have provided an opportunity for competitors to target lost advertising revenue previously spent on the platform, as advertisers and clients are forced to search for alternative channels, and Facebook has been the principle beneficiary given these two giants' effective duopoly across the entire digital advertising industry, and in the short term, these recent events could help to support the use of othermore controllable media channels, such as print.

Google has been slow to react, but it is making changes

Although Google was initially slow to respond to criticism of its YouTube platform, it has recently increased significantly its efforts to address the concerns raised by both its clients and the wider market. It is reviewing its process for identifying inappropriate content on the platform, whilst providing more control to advertisers by allowing them to better manage how their advertisements are placed on sites.

  • During a recent conference, Google's Matt Brittin (European President of Operations) announced a three-pronged approach to tackle the issue consisting of:
  • Improving its policies to better define hate speech and inflammatory content;
  • Creating simplified advertiser controls and adding safer defaults; and
  • Increasing investment in enforcement to remove identified content faster.

It will also use its advanced artificial intelligence (AI) technology to better decipher and identify content across YouTube's vast video library. It already leverages AI and machine learning to provide automated video recommendations on YouTube. Earlier this month, Google indicated that this approach had already helped its identity significantly more inappropriate video and content for removal.

How can Google secure its dominance

In reality, it is unlikely that advertisers and brands will be able to reduce their reliance on Google and YouTube for long. These advertising platforms are vast in scale and have significant access and influence on audiences globally. Google has opportunity to cement its dominance of the industry by regaining the trust of its clients by implementing positive changes and control of content.

To do this, Google will need to prove to its clients that it has truly resolved the problem and has vastly reduced potential user exposure to inflammatory content. Though it will be unable to isolate every piece of such content, it can make significant progress to minimise the volume. The implementation of advanced AI technology, along with effective processes will help to deliver tangible and transparent results. This investment acts as yet another barrier to entry. Only Facebook really has the scale to rival it in this area , or: - video advertising. It will also allow the Company to recapture lost short-term spending, and strategically position the platforms to capture the long-term growth in the digital video advertising market.

28/04/2017 - Update following the announcement of Alphabet's First Quarter 2017 Results

Last night Alphabet, the parent company of Google, announced that despite concerns raised by advertisers and brands on the YouTube platform, sales had increased by 22%, driving a 4% increase in its share price. The company outlined that it has taken "serious and significant steps" to tackle the issue, with advertisers recognising improvements made to the sites, leading to very positive follow-on conversations. Despite the short-term gains, the company will need to continue its investment to maintain client confidence in its platforms and prevent similar negative publicity in the future.

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