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Alphabet's YouTube Could Benefit from Facebook Ad Boycott: Analyst

YouTube's progress on brand safety could help it capture more ad dollars in the second half of the year, according to Jefferies.
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Alphabet's YouTube is poised for a strong second quarter, according to Jefferies. 

Based on an interview with a marketing executive, analyst Brent Thill wrote that various trends are working in YouTube's favor for the quarter ending in June and the second half of the year. Alphabet  (GOOGL) - Get Alphabet Inc. Class A Report shares were up 0.35% on Tuesday to $1,402.03.

A combination of positive pricing and demand trends, YouTube's size and reach in connected TV (CTV) advertising, and relatively strong positioning in "brand safety" -- ensuring that advertisements aren't shown on offensive content -- make YouTube an attractive place for ad buyers, Thill wrote. A good chunk of unspent political advertising budgets should also flow to YouTube ahead of the upcoming elections, 

"A lot of political ad budgets (~$5Bn in PAC money) remain unspent, with Nov elections approaching fast," he explained. "In addition, live events, especially sports, will be compressed into ~6 weeks from ~2 1/2 mos., and it will be difficult for linear TV budgets to find enough ad inventory. YouTube, CTV, and other digital advertising channels should benefit as a result."

A growing advertiser boycott of Facebook, and of social media in general, may also benefit YouTube, particularly in the second half of the year.  

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As of Tuesday, around 100 advertisers have pledged to pull ad budgets either from Facebook  (FB) - Get Meta Platforms Inc. Class A Report or all social media platforms at least through July, and some through the end of the year. The boycott is a response to misinformation and hate content on Facebook, which has been slow to address inflammatory tweets by President Trump and other sources of problematic content. 

If ad boycotts extend past July, some unspent ad dollars may be allocated to YouTube, according to Thill. 

A few days ago, Unilever  (UL) - Get Unilever Plc Report -- one of the world's largest advertisers -- said it plans to halt ads on Facebook and Twitter  (TWTR) - Get Twitter, Inc. Report through the end of the year. 

Google only recently began breaking out revenue for YouTube. YouTube's ad sales for the March quarter were $4.04 billion, and Alphabet CFO Ruth Porat describes the video platform as a key driver of the company's overall ad revenue growth. Alphabet's total revenues for the first quarter came in at $41.2 billion. 

Shares of Alphabet are up about 5% year to date. 

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