Alphabet, the parent company of Google and several other subsidiaries have suffered from a sharp decline in revenue. The stock value of the company went down more than 8% on Tuesday, wiping out $70 billion in value.
This Monday, it was reported that the ad revenue grew by 15% when compared to the previous year’s growth of 24%. Shortly after this report was out, Alphabet saw a huge decline as the stock went down more than 8%.
Ruth Porat, CFO of Alphabet said that this decline in ad revenue can be attributed to the issues surrounding YouTube and the new changes that they have been implementing in the recent past. She also suggested that they were willing to miss out on some short-term earnings for the sake of their company’s long-term health.
“While YouTube clicks continue to grow at a substantial pace in the first quarter, the rate of YouTube click growth rate decelerated versus a strong Q1 last year, reflecting changes that we made in early 2018, which we believe are overall additive to the user and advertiser experience.”
If we rewind the clock to a year ago, it’s quite simple to understand what exactly happened with YouTube. Google implemented several changes to YouTube in the first quarter of 2018. Algorithms were designed and deployed to stop any “harmful” content such as conspiracy theories, fake news and so on from appearing on recommendation feed. For instance, if there was a shooting at a school, YouTube would recommend you videos about this incident from authoritative sources such as news channels but would avoid showing you any recommendations of “conspiracy theories” or more surrounding such an incident.
The mainstream media have been campaigning and pushing for YouTube to squash independent creators and to instead favor more mainstream sources. However, relatively speaking, those mainstream sources like The Guardian and CNN don't interest many YouTube viewers. YouTube's audience want more authentic and personal content from original creators, not mass media organizations.
The banning of Alex Jones and other similar independent creators have been a costly mistake.
On top of this, thousands of channels and videos violating the so-called “content policies” of YouTube were wiped out. Though these videos were questionably violating few guidelines, they were the ones to drive the engagement rates up. When YouTube got rid of such videos and creators, it is inevitable to see such a fall in ad-revenue.