Google's YouTube in Hot Water Again Over Ads on Inappropriate Content
Youtube's advertisers aren't happy.

Alphabet Inc.'s (GOOGL) YouTube is in hot water again for advertisements showing up on videos and channels featuring inappropriate content.

This time, CNN found that ads from over 300 companies and organizations, including major retailers, recently ran on YouTube channels promoting Nazis, white supremacists, conspiracy theorists and other controversial content. Many of the advertisers said they were unaware of the problems and at least one, shoe and apparel giant Under Armour (UA) , said it was suspending its YouTube advertising while it investigated what happened.

The issues follow a major headache faced by the fast-growing video unit beginning in March 2017, when a group of brands including Coca-Cola, (KO) Walmart (WMT) and AT&T (T) fled the platform due to ads showing up next to offensive content. Giant advertiser Procter and Gamble (PG) only returned to advertising on YouTube this week, albeit on a more limited basis than before. 

YouTube's latest controversy "highlights the challenges created by the explosion of content," Greg Portell, lead partner in Retail Practice at AT Kearney, said in an email.

"With programmatic ad tech enabling one-to-one ad placements that can vary by time and location, automation has made compliance monitoring almost impossible," Portell said. Portell said that what makes issues like these more complicated is that ad impressions are delivered so quickly today, a brand might not know that its ad was misplaced.

But this doesn't excuse YouTube's error, Portell said.

"YouTube's channel structure was designed to more easily manage ad placement and content curation," he said. "Marketers are right to question where YouTube's guard rails failed."

In response to the issues experienced last year, YouTube said it had moved to improve its algorithms to detect inappropriate content, placed limits on which users and channels could show and be compensated for ads and hired more human beings to review content. 

Tim Bajarin, president of Creative Strategies, said that the news of another issue like this is "surprising, given the fact that this whole issue of hate speech has been a problem for quite a while," though not only for YouTube.

"They all use sophisticated algorithms to place ads," Bajarin said. "But in many cases they are not [sufficient] to keep those ads off of areas that advertisers don't in any way support."

There is so much content being uploaded to YouTube, though, that Bajarin said he doesn't think the company can keep up with screening everything. "I don't believe the algorithms do enough to protect advertisers," he said. 

Going forward, "advertisers certainly will be very conscientious on YouTube and where they place ads," Needham analyst Kerry Rice said. Rice noted, though, that search ads still represent the majority of Alphabet's revenue so the YouTube issues "don't hit the company as hard." Google doesn't break out the results for YouTube in its reports. 

Alphabet stock was down 1.5% to $1,073.33 in afternoon trading Friday. Since the beginning of the year, shares have increased about 2%. The company reports first-quarter earnings on Monday after the close.

Alphabet is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells GOOGL? Learn more now.

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