Today the Digital Citizen’s Alliance* released a report “Good Money Gone Bad: Digital Thieves and the Hijacking of the Online Ad Business,” which how quantifies how online piracy is fueled by ad-supported content theft. Highlights of the report’s findings include:
1. The websites researched make a projected $227 million in annual ad revenue. The 30 largest sites that profit exclusively from advertising averaged $4.4 million annually, with the most heavily trafficked BitTorrent and P2P portal sites topped $6 million annually.
2. Even small sites studied could make more than $100,000 a year in advertising revenue.
3. Because they rely entirely on the works of others for their “product,” their profit margins range from 80% to 94%, underscoring that crime can pay when you steal other people’s content.
4. Nearly 30% of large sites carried premium brand ads.
5. Nearly 40% of large sites carried legitimate secondary ads.
This report confirms that content theft isn’t a cottage industry—it’s big business. Plain and simple, ad-supported rip-off sites are exploiting the Internet and advertising community to get rich. The result is a damage to brand value for advertisers and serious harm to people who work in the creative industries. We hope this report pushes the online advertising community to take additional steps to protect brand value and stop ads from appearing on content theft sites that are undermining the vibrancy and safety of the digital marketplace.
The issue of ad supported piracy is a topic I’ve been researching and writing about about since the spring of 2010 when my indie film was released (and pirated). When I began searching for, and removing, pirated copies of our film online I quickly discovered that piracy was big business and driven by profits and created a blog (www.popuppirates.com) to document how piracy’s business model worked and the significant role advertising revenue played in incentivizing online piracy and sustaining it. Given today’s news I thought I’d take a look back and include an excerpt from a post I wrote four years ago that unfortunately–as the DCA study results show–could just as easily have been written today.
I created this video, “Follow the Money: Who Profits from Piracy?” to provide an overview on piracy’s link to advertising profits.
Online piracy isn’t about altruism, it’s about income. Today’s technology allows web pirates to steal content and monetize that content with a click of a mouse. Meanwhile, “legit” companies encourage and facilitate this theft while also profiting from it (ad service providers, advertisers and payment processors). The time has come for reasonable measures to be taken to discourage this theft. Content creators and consumers will benefit. Only the pirates and those who profit from their theft will lose.
In the process of scouring the web for the thousands of illegal download links and online streams of our film (more than 55,000 documented to date) I quickly discovered that various, theoretically legit companies, seemed to be (indirectly) generating income through the placement advertising on websites featuring streams and download links to pirated films. In addition, and most troubling, is that fact these ads generate income for operators of these pirate websites and add to generous profit totals for ad providers ($2.80 billion for 4th quarter 2011 for Google’s AdSense – all sources). More on Google’s financials can be found here.
The nature of the advertising varies, but I was dismayed to discover that the ads were not limited to cheesy online gaming sites, etc. Rather, they include a number of legit companies like Sony, Radio Shack, Pixar, Porsche, ATT, Chase, Network Solutions, Auto-Zone and even Netflix (particularly ironic since they carry our film). The list of advertisers goes on and on. It’s the same situation, if not worse for other films. Ads are ubiquitous on pirated content throughout the web…
…This dubious connection to piracy is not limited to the companies whose ads appear on various pirate sites. Even more problematic are those companies, like Google (via AdSense), that generate their own robust revenue stream by providing the interface for the pirate-site pop-up ads themselves. In this equation everyone, except the actual content creators, make money from this theft.
One could argue that the companies that provide the ads, as well as the companies being advertised, have no control over where the ads appear and thus bear no responsibility–hear no evil, see no evil? Is claiming ignorance any way to run an ad campaign or a business? It seems that the answer is “yes”–as long as there’s profit involved.
From my perspective, their implicit involvement, intentional or not, should be revealed. Every time one of these illegal files is added to a website where these ads appear, Google and et al earn money at the expense of the content creators. This just isn’t right.
In the scheme of things, our successful (highly-pirated) little indie film is a mere drop in the piracy bucket–we are one among thousands. However, collectively, this tainted revenue is significant, as is the harm done to those whose work is being stolen with the mere click of a mouse.
Certainly companies with the technological capacity (and robust balance sheets) of Google can afford to turn some attention to this issue. If these companies can offer ad placement based on cached cookies and metadata, why can’t they vet the websites where their ads appear? It ain’t rocket science folks. I daresay that if these websites were offering porn and not pirated films, these ads would NOT be popping-up, at least not for long.
Now, four years later, has anything really changed when it comes to ad sponsored piracy? As today’s study results make clear, the answer seems to be “not really.”
The Digital Citizens Alliance report also makes this important point:
The research does not represent the losses incurred by the victims of content theft – writers, producers, musicians, actors, and the thousands of others who work in creative industries. Content thieves are responsible for illicitly distributing millions of copies of valuable works, costing their owners billions of dollars in rightful revenues. The fact that the value of the content they illegally distribute is far greater than the advertising profits they reap is of no concern to the thieves, because they pay nothing for the content that drives their business.
Perhaps this study will serve as the tipping point that will motivate advertisers (and ad networks) assert more control over where their ads appear and into whose pockets their money goes. At least one can hope, but given the industry’s tendency to provide lip-service rather than real action to sever ties with online pirate sites, I remain skeptical. After all, if the fact that ads for popular brands are prominently displayed alongside piracy site sex ads won’t move them into action, I’m not sure what will.
* Full disclosure, I am a member of the Digital Citizens Alliance Advisory Board .