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Alphabet's YouTube to Toughen Stance on Disturbing Content

Alphabet Inc.’s GOOGL YouTube announced on Monday that it is planning tougher initiatives to free its platform from harsh, violent and disturbing videos and comments.

Google has been revamping its policies since the YouTube ad controversy surfaced in March. The issue that primarily centered on the U.K., went global in no time, with over 250 brands suspending their advertising on YouTube. The list included big names from private as well as public sectors including Transport for London, The FCA, HSBC, Toyota, McDonald’s, Heinz, The Guardian, Channel 4, L'Oreal, Marks & Spencer, Hargreaves Lansdown and Sainsbury’s.

We observe that Alphabet shares have rallied 27.7% year to date, outperforming the industry’s 21.8% gain.

Increasing Manpower

YouTube will deploy more human resource toward identifying unsuitable content and expects the number of employees working on this to cross 10,000 in 2018. YouTube is also collaborating with industry groups, academics and subject matter specialists to gain better insight into emerging issues.

The company stated that since June, the trust and safety teams have manually reviewed nearly 2 million videos for inappropriate content, aiding its machine-learning technology to find similar videos. Teams are collaborating with various child safety organizations across the world to report unacceptable activities and accounts to law enforcement bodies.

Alphabet Inc. Revenue (TTM)

Using Machine Learning

Google has been deploying machine learning to flag inappropriate contents for quite some time now and is expanding this capacity to other challenging areas of content.

YouTube has an automated software that detects problematic videos and is expanding its reach to those videos that contain hate speech or are against child safety.

Stricter Criteria, Regular Reports

The company plans to implement stringent standards, increase manual curation and significantly expand ad review teams to safeguard advertisers and creators from unsuitable content.

The company is planning to produce regular reports containing information about the flags it receives and the steps taken to remove policy violating videos and comments.

Our Take

Steps like these make sense as advertisements are extremely important to Alphabet from a business standpoint. We believe that regular policy updates will help Google not only address the growing controversy about misinformation on the web but also put up a clean image to advertisers.

There are only two really big digital ad-serving platforms, Facebook FB and YouTube. The platforms draw large number of users and it’s advantageous for brands to have a presence on both.

So, while YouTube can’t take too hard a stand when negotiating with brands, it may also avoid getting pushed into a corner; more so because it can also point to Google Preferred to access the top 5% content on YouTube (at a premium of course). The bottom line impact will also likely be insignificant because Google is already investing in artificial intelligence and machine learning to enhance its algorithms and search results.

Zacks Rank and Stocks to Consider

Alphabet has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A couple of better-ranked stocks in the broader technology sector include Activision Blizzard ATVI and Five9 FIVN, each carrying a Zacks Rank #2 (Buy).

Long-term earnings per share growth rate for Activision and Five9 is projected to be 13.8% and 20%, respectively.

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