It is not just the creative community – online piracy is damaging to consumers and legitimate brands
Today, Digital Citizens Alliance released Good Money Still Gone Bad, a follow up to last year’s Good Money Gone Bad on the revenue that stolen content sites make from advertisement. For 2014, the sample of 589 sites generated $209 million in aggregate annual revenue, with an 89.3% average profit margin for sites supported only by advertising. The report’s findings reveal the scope of online piracy’s impact beyond the creative community. This report also adds to increasing literature on the scale of ad profits for online pirate sites all over the world.
Who makes money from advertising on pirate sites – and how much
The report used the same sample criteria as the previous year – namely, sites that were at least partially ad supported where infringing content appeared to be a significant portion of the site. The study focused on four types of sites:
Type of site
2013
2014
% of the sample
% of total revenue
% of the sample
% of total revenue
BitTorrent & P2P
24.2
38.2
23.1
50.3
Linking sites
47.5
41.3
40.9
18.4
Video streaming
12.6
12.1
17.8
22.2
Direct download sites
15.8
8.4
18.1
8.1
Interestingly, for 2014, more than 40% of the 596 sites sampled in 2013 had closed or dropped below the threshold for tracking a year later – and yet, the same selection criteria yielded a sample of almost the same size. This suggests that online content theft is a cyclical industry where sites that are caught or shut down, spring elsewhere on the web under a different address.
One of the report’s new findings is that as illegal streaming sites have become more popular, their percentage of ad revenue in the content theft universe has also significantly increased (from 12.1% in 2013 to 22.2% in 2014) not only because there are more streaming sites but also because advertising rates are higher for video. The report also shows that smaller streaming sites, that are usually harder to catch, are making more money than in 2013.
Risks to consumers
This year, the report also examines the risk that malware poses for consumers when hidden in ads on pirate sites. Links to viruses and other malware are commonly hidden underneath play or download buttons; and sometimes they automatically download, without the need for a click. Malware appeared in 32% of the sampled sites and generated an estimated $60 million in revenue for 2014.
Risks to legitimate brands
Premium brands are also at risk according to the study. When legitimate advertisings appear on infringing sites or next to offensive ads, the reputation of many brands suffers. Moreover, legitimate brands are also being defrauded through the use of software bots that generate millions of impressions that actually do not take place (some estimates claim that bots are responsible for 30 to 40% of ad impressions) or that ‘hide’ ads so that brands are charged for millions of impressions for ads that are not visible. Another form of fraud is in the form of schemes that “launder” impressions by making it appear that ads are going to legitimate sites when they actually are on bad sites. In this context, the report underscores the need for all participants in the online ecosystem to address piracy through voluntary initiatives, such as the Brand Integrity Program Against Piracy, launched by the Trustworthy Accountability Group earlier this year.
The need to take into account piracy’s broad impact
Reports such as this one should compel policy makers and industry groups to take more effective action against online piracy – not just for the sake of the creative community, but to ensure the well-being of society as a whole. This report also contributes to dispel any misconceptions that piracy is some form of altruistic sharing.
The Internet’s reach into households all over the world increases everyday. It is therefore necessary to implement policies and laws that ensure the maximization of the Internet’s many social benefits and the minimization of its drawbacks.
Digital Citizens Alliance is a consumer-oriented coalition focused on educating the public and policy makers on the threats that consumers face on the Internet and the importance for Internet stakeholders to make the Web a safer place. The organization is based in Washington, DC.
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