Alphabet beat its earnings forecast in the first quarter, sending the stock up 5% in after-hours trading. Revenue increased 22% year over year to $24.75 billion.
The positive earnings report, however, was overshadowed by investor questions about the YouTube brand safety crisis. Since January, brands and agencies have withdrawn spend, leading Google to improve controls and cut off channels with fewer than 10,000 views from monetization.
Addressing the brand safety issue in his prepared remarks – though not by name – CEO Sundar Pichai highlighted the progress Google has made.
“We worked incredibly hard to create the best environment for brands on YouTube,” Pichai said, noting that a “cornerstone” of its existing YouTube offering, Google Preferred, allowed brands to advertise only against the top 5% of content.
“We also announced new safeguards for our advertisers through a combination of updated ad policies and enforcement, new default settings around where ads can appear, improved controls for advertisers and third-party brand safety reporting,” he added.
One investor asked if Google’s brand safety challenges were a technical problem that was already solved or could be solved over time.
“We have taken it pretty seriously, and we have taken significant steps,” Pichai said. “As part of doing that we brought new technical solutions in place, and machine learning is a great example of it. It helps us enforce as we improve our policies. … As machine learning gets better, we’ll be able to do this better and create this virtuous cycle.”
The investor also asked if Google had seen revenue decline from brands withdrawing spend, which Pichai didn’t answer directly.
“Advertisers have clearly noticed all the improvements we made, and our conversations with them are very, very positive,” he said. “I’m optimistic we will continue to make progress here.”
Google employees made “thousands and thousands of calls and in-person conversations,” highlighting the strength of Google’s advertiser relationships. “Feedback from partners is positive and constructive,” he added.
To cast a positive light on YouTube, Pichai shared an advertiser success story with brands seeing positive results with shorter ads. In the first quarter of the year, Google killed 30-second ads on mobile devices, and it wants to show brands that shorter ads work. Research on 120 brands using its six-second ads showed “significant lift on brand awareness and brand recall,” Pichai said.
UnderArmour, which used both TrueView ads and six-second ads, saw double the product interest when users saw both ads, proving its ability to deliver results for brands in a short time span.
Pichai said to expect more changes to strengthen brand safety.
“We are going to continue to invest a lot here,” he said. “It’s super important to us that the ecosystem works well. It matters for advertisers, and it matters for content creators.”