Leading analysts at New York-based Pivotal Research have downgraded Google’s stock from Buy to Hold following the news on Friday that agency giant Havas and a number of leading advertisers would be pausing their spend on YouTube and the Google Display Network following brand safety concerns. Senior analyst Brian Wieser said that the moves will have global repercussions.
Writing in one of Pivotal’s equity research updates, Wieser said, “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. Paired with the stock’s recent run up, narrowing the potential upside from current levels, we are now downgrading Alphabet from Buy to Hold.”
Whilst the momentum has been building in favour of improvements in ad quality and brand safety for a number of years, although one of the more recent tipping points came earlier in the year when P&G’s Mark Pritchard slammed the industry’s standards and lack of transparency.
Havas is the world’s sixth largest global agency and said that its UK division would be suspending spend from Google’s YouTube and Google Display Network because Google was “unable to provide specific reassurances, policy and guarantees that their video or display content is classified either quickly enough or with the correct filters”.
Many of the UK’s largest brands (including the UK Government, L’Oreal, RBS, HSBC, Sainsbury’s, Sky, Marks & Spencer, McDonald’s and Audi, as well as media competitors like Channel 4 and The Guardian) also said that they would suspend their advertising on YouTube and / or other Google ad products because of identical concerns.
The news comes after News Corp’s The Times reported how several large brands’ video ads are being served against content posted by Islamic and neo-Nazi extremists. Wieser noted, “While Google has apologized for the incidents, and while the scale of the underlying problem may be relatively small in absolute terms, for large marketers, any one instance of an inappropriate brand placement may be enough to seriously harm a brand’s business value.”
