Study Shows Piracy Losing Premium Ad Revenue

Among the standard responses to any proposal to mitigate online piracy is an insistence that it just cannot be stopped.  Perhaps not entirely. But it can be starved.  That was the underlying goal of SOPA, but people decided the criminal sites deserved the money they were making because freedom.

As many readers know, the piracy universe is still largely supported by advertising.  The majority of the ads on many sites are “non-premium,” which is a polite way of saying sleazy.  These are usually promos for snake-oil products, VPNS to hide your identity so you can pirate more, and “dating” services offering men the opportunity to spend hundreds of dollars to exchange sexy emails with Sabrina in Odessa, who is more likely to be Todd in Duluth.

Research varies with regard to how much premium vs non-premium advertising supports particular sites, but major advertisers have been working for a few years now to bring their own contribution closer to zero. Although the total amount of premium advertising on pirate sites represents a small fraction of the US digital ad buy of over $60 billion/year, the advertisers view the presence of their brands on these sites as generally bad for business.   In addition to representing waste and lack of transparency in the digital advertising ecosystem; appearing on pirate sites associates their brands with criminal activity and spammy advertising; and it associates their brands with the increasing risk that visitors to pirate sites will stumble into malware.

In February of 2015, the major advertisers launched the Brand Integrity Program Against Piracy, led by the Trustworthy Accountability Group (TAG). As described in this post written at the time, the program was designed to establish protocols to certify suppliers and partners that work to mitigate exposure to risky entities with the ultimate aim of keeping premium brand dollars out of the pockets of pirate site owners.  A new report released today by EY indicates that these efforts seem to be working. From the report …

“If the industry were taking no quality-control steps and digital piracy operators served only premium advertisers, we estimate those operators could earn $213m annually from digital ads. In actuality, they earned an estimated $111m from those ads in 2016. The difference of $102m is a strong indication that quality-control efforts are having a significant effect.”

The study is based on analysis of 672 websites with a “high degree of infringing content that also serve advertising.”  Again, these numbers are fairly small as a portion of overall digital advertising, but they are more significant relative to revenue estimates for the piracy market overall.  For instance, this post from May 2015 cites a Digital Citizens Alliance study of just under six hundred infringing sites earning total revenue of $209 million of which $149 million came from major brand advertising.  So, if these quality-control efforts by the advertisers have legitimately denied over $100 million to piracy sites, that’s significant enough to begin to have a market effect.

If this trend continues, I suspect a few things will happen in the relatively near future.  The site operators earning well under a million dollars in revenue will probably get out of the piracy business because these sites represent fairly low-level investments designed to pick up the easy money of advertising “remnants” that fall through the cracks in the digital advertising system. The more entrenched and higher-yield sites will presumably become more dependent on spammy ads and malware, both of which are designed in one way or another to fleece users.

While it’s true that many committed pirate site users are sophisticated enough to avoid these hazards, it must also be true that plenty of users are unsophisticated enough for the scammers and hackers to be on these sites at all.  Thus, if pirate sites are further delegitimized by starving them of premium ad dollars and, as a result, they become more hazardous in the minds of, say, parents who think their teens are engaged in a harmless activity, there is decent chance the sites may lose their less-sophisticated user base.  At that point, the value to the snake-oil advertiser disappears.

If every pirate site user were savvy enough to avoid malware and sleazy ads, the only revenue model left is direct payment.  Many sites do receive subscription and donation revenue; but then of course, the lion’s share of more casual users who access these sites do so because they’re not in the habit of paying for the media they consume.  So, maybe it isn’t possible to stop piracy, but it does seem quite possible to starve it down to a more manageable size.  In the meantime, these efforts by the advertising industry should help reveal piracy for what it is—an illegal business, not a social movement.