The Startup That Polices YouTube for Twerk-Averse Advertisers

(Bloomberg) -- Everyone close to Google's YouTube has had a rough year as a string of controversies plagued the world's largest online video site. Everyone but Mike Henry.

Henry runs OpenSlate, a company that screens and grades YouTube videos for marketers. Several advertisers halted spending with YouTube after flare-ups involving inappropriate clips. Marketers are returning now, but they're still worried their ads may mistakenly endorse an offensive video.

That concern has placed OpenSlate at the center of a booming cottage industry for policing the billions of ad dollars flowing into the giant tech platforms. Starting last year, Alphabet Inc.'s Google bowed to advertiser pressure and opened up more of its inner workings to outside monitors. That created a rare opportunity for companies like OpenSlate, DoubleVerify Inc. and Oracle Corp.'s Moat, which sell software that scans online videos for trouble.

"It seems so obvious, but sixteen months ago, brands weren't thinking about where their ads were running," Henry said in an interview at OpenSlate's New York headquarters. "So, yeah, it's kept us very busy."

Formed in 2012, OpenSlate began by providing advertisers with a kind of channel guide for the almost endless stream of videos on YouTube. As YouTube's content problems mounted, OpenSlate turned its offering into a vetting service. The company's software scans some 400 million YouTube videos a day, analyzing descriptions, views, likes, comments and shares. It then ranks each clip on a scale, deducting points for risque topics like politics, religion, sex and even twerking.

This year, Henry expects $2 billion worth of YouTube ads will be filtered through OpenSlate's software, up 150 percent from last year. OpenSlate gets a small percentage of the money advertisers spend on YouTube campaigns. For some deals, it nets around two or three percent, according to a person familiar with the arrangement who asked not to be identified discussing private matters. Other advertisers pay a different, fixed amount for a year or a month, Henry said. The privately held company doesn't disclose revenue.

"It's really proven its worth," said John Montgomery, head of brand safety for GroupM, a unit of ad giant WPP Plc. Last month, CNN flagged several ads that ran on YouTube videos touting white supremacy and North Korean propaganda, another round of embarrassing press for Google. When that story hit, Montgomery said he could assure GroupM clients that their ads were not involved because OpenSlate had filtered the clips out.

Procter & Gamble Co. recently returned to YouTube after a yearlong hiatus -- but the largest U.S. advertiser is running spots only on select videos, and OpenSlate is scoring some of the clips.

Henry said OpenSlate is exploring an offering for Facebook Inc., which is expanding its video service. Longterm, he wants the software to become as successful as Nielsen Holdings Plc, an $11 billion public company that measures TV audiences for advertisers.

Standing in the way are the internet companies themselves, which are developing their own ways of checking videos and like to control advertiser relationships directly.

Google is hiring thousands of employees to moderate YouTube videos, and Facebook Inc. is making a similar push. "It's an arms race of who can hire the most people," said Joshua Lowcock, brand safety officer for media buyer UM Worldwide.

At an industry event in New York on Thursday night, YouTube presented a new slate of programming for advertisers, and emphasized the steps it's taking to clean up the site. For example, YouTube is now screening every clip that goes into Google Preferred, a selection of popular videos that command higher ad prices.

Still, many ad buyers aren't ready to drop external auditors and trust YouTube again.

"Just because the city is safe," said GroupM's Montgomery, "you wouldn't fire the police force."

To contact the reporter on this story: Mark Bergen in San Francisco at mbergen10@bloomberg.net.

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Alistair Barr, Andrew Pollack

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