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YouTube’s Algorithm Isn’t The Problem For Alphabet Stock Investors

The more people that view YouTube videos, the more ad revenue Alphabet (NASDAQ:GOOGL) takes in. The more ad revenue, the higher the GOOGL stock price goes.

And while the tragedy in New Zealand is awful, the solution isn’t to force Google to alter its algorithm to eliminate from YouTube the violent rhetoric like that spewed by the 28-year-old Christchurch white supremacist shooter and his ilk.

Alphabet stock is little changed since Friday’s incident, while the Nasdaq Composite index is up 1% in the intervening days. In the past month, GOOGL stock had three times the gain of the broader gauge. Earlier today, EU antitrust regulators fined Alphabet’s Google business unit 1.49 billion euro ($1.69 billion) for blocking rival online search advertisers, the company’s third penalty in two years.

Value to Advertisers

Gun enthusiasts argue that guns don’t kill people; People kill people. Well, the same argument could be made that YouTube’s algorithm doesn’t kill people. People do.

Web algorithms — including those underpinning Facebook (NASDAQ:FB) and Snap(NYSE:SNAP) — are designed to learn about your interests and then feed you content that revolves around those interests. The idea is that the more you watch, the higher your engagement, and ultimately your value to advertisers.

You see, even extremists like the gunman in New Zealand have products and services they’re predisposed to, making this week’s most-prominent hater a potential consumer and brand enthusiast.

A little harsh. Probably, but true nonetheless.

“It all comes down to people spending time on the site,” said Joshua Fisher-Birch, a content review specialist at the Counter Extremism Project. “YouTube’s in this to make money.”

If you own GOOGL stock, you’re probably nodding in agreement.

Trump is Not to Blame

It’s also easy to blame President Trump’s total lack of empathy for Muslims and nonwhites as a cause for the New Zealand shooting. However, it’s intellectually lazy to think this way, no matter how much you want to believe it’s true.

The fact is — and I’m one of his biggest detractors — he’s no more responsible for what happened in New Zealand as the pilot who flew President Kennedy to Dallas on that sunny day in November 1963.

According to a recent Pew Research study, the number of people who get their news from YouTube has doubled over the past five years. Also, more than half of YouTube’s adult users use it to find out about what’s happening in the world.

That, right there, explains why shootings like this latest tragedy happen. People are too lazy to learn the old-fashioned way: read a newspaper, a magazine, go to the places you want to learn about, demonstrate a little intellectual curiosity.

Get out in the world.

Sure, President Trump’s xenophobia doesn’t help Americans think globally, but that’s his problem, not yours.

And while I wouldn’t lose a minute of sleep if Google altered its YouTube algorithm to cut out extremist videos, I don’t think it will. Nor should it because it’s a slippery slope when we start saying what’s suitable for viewing. (And, where else but on YouTube can a click of your mouse transport you back to one of rock history’s great moments?)

Bottom Line on GOOGL Stock

My InvestorPlace colleague Vince Martin did a good job recently discussing Alphabet’s stable earnings. Correctly, he pointed out that over the past three fiscal years, GOOGL stock averaged earnings per share growth of 16%, an outstanding number for a relatively mature, $827 billion company.

No doubt, Alphabet will continue to wrestle with the question of what video content is appropriate viewing for YouTube users. It’s also likely that politicians and activists will continue to push for change in their algorithms, and those of other platforms.

If you own Alphabet stock, I wouldn’t worry about whatever comes down the pike on this issue. It’s a must-own for the long-term tech investor.

The algorithm isn’t the problem. People are.