Advertiser angst -- and an eagerly vigilant European media -- will put a squeeze on YouTube's ad sales potential over the coming months, according to a prominent analyst.
Brian Wieser of Pivotal Research Group said that concerns over brand safety on YouTube, where ads were recently seen running alongside terrorist-inspired videos, would have a chilling effect on the site's revenue.
"Alphabet's Google is facing a serious issue in the U.K. with brand safety issues, which has global repercussions," Mr. Wieser wrote in an investor note on Monday. "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 versus prior expectations."
Last week, Havas and a string of top brands indicated they would halt spending on YouTube ads in the U.K. until the video site could assure their spots wouldn't run near offensive content.
Google, which owns YouTube, responded by saying it would take steps to better monitor content on the site and give advertisers more control over where their ads appear.
"I would like to apologize to our partners and advertisers who might have been affected by their ads appearing on controversial content," said Matt Brittin, Google's EMEA president, who spoke at Advertising Week in Europe on Monday. "We take our responsibilities to these industry issues very seriously."
The issue of brand safety has become a top industry concern, especially since last year's election, when a proliferation of questionable websites sprung up to spread fake news.
Both Facebook and Google had to investigate how their online ad networks helped support such low-quality sites, and advertisers started applying more scrutiny to where their ads showed up.
Last week, the Financial Times found ads from the U.K. government and others running with YouTube videos by U.S. white nationalist David Duke and an Egyptian terror advocate.
That set off another round of advertisers scrambling to understand how and when their ads appear online.
Mr. Wieser said that the focus on YouTube in Europe was particularly hard for the company, because traditional media there would be dogged in their reporting.
"Making the problem potentially worse if it is not fully solved," Mr. Wieser wrote, "Google faces a hostile industry of media owners in Europe (many of them owners of print properties which have been negatively impacted by Google's successes in recent years) and we expect they will be all too happy to highlight future brand safety failings, negatively impacting brands."
It will be tough to eradicate everything anyone might find offensive on the platform. Even YouTube's biggest star PewDiePie, Felix Kjellberg, was tarnished after joking about anti-Semitism.
YouTube is launching a new TV cable bundle, where it might find it has more control over a more curated digital video experience.
Also, it has been giving more power to users to report content they find offensive.
However, it's not always easy to understand where the line is between free speech and censorship.
"We think that Google will probably need to articulate goals that sound more like a zero-tolerance policy to alleviate concerns before it can fully recover," Mr. Wieser wrote.
