New findings from the Wall Street Journal show that around 80% of the ads YouTube serves on the web violate its own terms of service and are therefore eligible for a refund.

This could cost Google billions of dollars and compound the company’s existing problems, such as growing dissatisfaction with search results and two ongoing antitrust lawsuits.

Google rejects the claims made in the report, saying its methods are inaccurate.

Google’s YouTube advertising practices under scrutiny

Advertisers pay YouTube to have their ads appear before or after videos on the platform. However, according to a study by Adalytics, about half of those ads don’t actually appear on YouTube.

YouTube also displays ads on other websites and mobile apps through its “Google Video Partners” program. Google claims that these third-party sites offer the same advertising experience as YouTube, with audio-enabled, full-view ads that can be skipped.

However, Adalytics has found that 80% of the time, ads on these partner sites are muted, auto-play at the edge of the screen, and cannot be skipped. In other words, the ads advertisers pay YouTube to display don’t get the attention or experience that YouTube promises.

The financial implications are significant. Brands typically pay around $100 per 1,000 views of their ads on third-party sites and expect high-quality ad placements. However, Adalytics found that they typically served lower-quality ads instead, selling for as little as $5 per 1,000 impressions.

In other words, brands pay a higher price and expect their ads to be featured prominently on YouTube. In reality, more than half of their advertising budget is spent running low-quality ads on non-YouTube sites.

This difference in price and quality represents a huge discrepancy that costs advertisers a lot of money.

Ads served on low-quality websites

The Adalytics study examines advertising campaigns from over 1,100 major brands, representing billions of advertising impressions between 2020 and 2023.

Big brands whose ads are inappropriately placed on rogue websites include Johnson & Johnson, American Express, Samsung, Sephora, Macy’s, Disney+, and The Wall Street Journal.

Even government organizations such as Medicare, the US Army, the Social Security Administration and New York City municipal authorities were affected.

Your ads were found on websites spreading misinformation, hosting pirated content and other low-quality websites. This goes against Google’s promise that ads will only appear on high-quality and carefully vetted websites.

In response, advertisers seem rightfully upset and are taking action to get their money back for these inappropriate ad impressions. This threatens to damage Google’s relationships with advertisers and credibility in the advertising market.

Joshua Lowcock, global chief media officer at ad agency UM Worldwide, told The Wall Street Journal:

“This is an unacceptable breach of trust by YouTube. Google needs to fix this issue and provide full refunds to customers for all fraud and impressions that violate Google’s policies.”

Google’s answer

Google has released a statement refuting Adalytics’ claims.

Google said the report used “unreliable sampling and proxying methods” and that claims about the Google Video Partners (GVP) network were “extremely inaccurate.”

Google wants to clarify that the “overwhelming majority” of video ad campaigns run on YouTube and not GVP.

GVP is a small, separate network that helps advertisers reach additional audiences and increase campaign reach by over 20%.

According to Google, advertisers have full control and transparency over their GVP campaigns.

You can opt-out of GVP at any time, exclude specific sites, and get real-time reports on where your ads are showing and how much is spent on YouTube vs. GVP.

Google also defended the quality and viewability of GVP ads, stating that over 90% of GVP ads are viewable, which is well above the industry average.

Google works with third-party providers DoubleVerify and Moat to validate GVP ads.

Internal enforcement and third-party verification allow advertisers to rely on GVP for their ad placement, according to Google.

Possible consequences and effects

The revelations from the Adalytics report could have the following far-reaching ramifications for Google, its advertisers, and the digital advertising industry.

Loss of trust and credibility

Google’s reputation could suffer because of these results. Advertisers may lose faith in Google’s promise to deliver quality ads.

This loss of trust could lead advertisers to spend their money differently. They could advertise on different platforms or ask for stricter rules to ensure quality ads are well placed.

Impact on Google’s revenue

Due to problems with its advertising systems, Google may have to pay back billions of dollars to advertisers.

This could significantly reduce Google’s revenue at a time when the company faces other problems. Google’s search ads business is slowing and the company is also facing multiple antitrust lawsuits.

Regulatory Oversight and Legal Action

Adalytics’ report could encourage state regulators to more thoroughly examine Google’s advertising systems and policies.

This increased scrutiny could potentially result in Google being penalized financially or otherwise.

Advertisers can also file legal claims against Google to recover lost money or force Google to revise ad placement to prevent future problems.

Changes to the digital advertising ecosystem

The issues identified in the report demonstrate the need for more transparency and control when buying and selling digital ads.

There are several ways to fix this:

• New industry best practices or rules could be introduced to bind companies to higher standards.
• New technologies could be developed to better verify that ads are appearing alongside appropriate content.
• Governments could enact laws or regulations that require more transparency and accountability.

The overall goal is to ensure advertisers get what they pay for.

Google’s next steps?

To counter the criticism and backlash, Google may need to invest more effort and resources into improving ad placement and monitoring.

Some options might include:

• Thorough review of the websites that serve Google ads.
• Greater transparency into how and where ads are being served.
• Watch closely where ads appear to make sure they appear alongside appropriate content.

If Google can fix these issues, it could potentially regain advertisers’ trust, improve its reputation, and avoid further monetary losses.

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