Google’s parent company Alphabet’s stock fell more than 8% on Tuesday, and the company blames YouTube -- which saw a fall in ad revenue growth of just 15% versus 24% last year.
In Q1 2018, Google began making changes to YouTube’s algorithms that were designed to prevent toxic content from appearing in the recommended videos feed. The aim was to make it harder for users to find conspiracy videos, fake news and such similar waste that repel advertisers. Instead, the algorithm will guide users to more authoritative sources bringing accurate information. Additionally, YouTube has removed millions of channels and videos from its platform that are detrimental to its content policies, for example Alex Jones.
But this proved to potentially be counter-productive, as all the negative content kept engagement high. Investors believe this may not be the only cause of ad revenue decline and the subsequent hit to the stock price. Many suspect other undisclosed factors that could be at work, but YouTube’s sudden shift to responsibility and safety and compliance with content regulations seem to be the top cause as of now.