New Report Says How Much Advertising Is Going to Piracy Sites

$227 million in 2013

In the longstanding fight to combat online piracy, there’s been growing pressure on the advertisers whose ads appear on sites that steal copyrighted material. The Obama administration has called for private-sector actions to reduce piracy. The 4As and ANA have adopted best practices to keep their members’ ads off such sites, and industry leaders have spoken forcefully on the subject.  

Now, a new report out today from the Digital Citizens Alliance, a nonprofit focused on Internet safety issues, claims to be the first to tally how much ad revenue these sites are actually pulling in: $227 million in 2013.

Piracy is not only a threat to the content creators whose material is being stolen but the reputations of the advertisers whose brands appear on the sites and the credibility of the digital advertising ecosystem, says the report, titled "Good Money Gone Bad: Digital Thieves and the Hijacking of the Online Ad Business."

“These premium ads are on sites that are stealing content, which gives the content the incentive to keep going, and at same time, it damages the credibility of the brands,” said Tom Galvin, executive director of the alliance.

The alliance commissioned media advisory firm MediaLink to do the report. Researchers for MediaLink examined content sites that it determined were ad-supported and had many requests against them to take down stolen content. It ended up with 596 content sites, ranging from bitTorrent sites like Pirate Bay to video streaming host sites like AlbaFile. Researchers then calculated the ad spending by looking at the number of ad positions on the sites and their audience size. They assumed straight CPM, cost-per-click and cost-per-action pricing models were used. They also took into account a certain amount of revenue from fraudulent ads.

The report lists the sites it studied as well as the dozens of blue-chip advertisers whose ads were seen on the offending sites, including AT&T, Lego and Toyota.

“The reality of it is, this is a big business,” said Wenda Harris Millard, president and COO of MediaLink. “I think people thought it was a cottage industry.”

Figuring out where to place the blame for ads winding up on piracy sites has been difficult because of the number of parties involved in placing digital ads and the rise of automated buying that minimizes human beings’ role in the process. The report emphasizes that it’s trying to draw attention to the problems rather than point fingers, but clearly has sympathy for the brand advertisers, whom it calls “unwitting.”

At the same time, the report calls on advertisers, with their agencies, to improve their best practices and to press agencies, networks and exchanges to improve their site-blocking methods, as they’ve already done with porn and hate sites.

“Some of it happens without [advertisers and agencies] knowing it,” Galvin said. “Second, the system doesn’t give them a lot of power over where their ads are going to appear. We really sympathize with the advertisers. They’re victims of a system that doesn’t always work in their favor.”

While there’s sure to be quibbling with the alliance’s methodology, there’s likely to be more agreement than not that the issue exists.

“This is a serious problem, regardless [of the methodology],” said Eric Franchi, co-founder of ad network Undertone and also an IAB board member. “The past 10 or so years, exchanges and networks have proliferated. The brands don’t know how it can happen, and agencies need to make sure they’re protecting their brands as well. And with the growth of audience buying, that naturally opens up buys to exchanges.”

Agencies and exchanges can start by making sure ads aren’t placed outside exchanges’ safe, white-listed sites, and use a verification service to provide monitoring, Franchi said.

If the study brings helpful attention to the problem, the study’s authors acknowledge that it will take time and resources to stop the flow of ads to online pirate sites and some undoing of longstanding buying practices and assumptions. With automated buying, for example, advertisers are incentivized to serve ads to greater numbers of people people, not fewer.

“There’s something to be temporarily lost to everybody,” Harris Millard said. “This has been a way of life, and that will have to change. And that will, quote, inconvenience a lot of people.”