Tightening up Online Advertising will starve Pirate Websites of their Means of Support

It’s a truism that there is no such thing as a free lunch, and this old adage applies in spades to the phenomenon of pirate websites that allow users to access “free” content. The only thing free about the content is that it is “free” to the content theft websites because they have obtained it illegally through various means and then made it available to users who download or stream content they have not paid for. But these pirate sites are not charity operations. They need a revenue stream and that revenue stream, in the absence of any payment for the content they have purloined, is from advertising.

Watching ads is a concession that many consumers make in order to access legitimate sites. For example, while more and more journals and newspapers are setting up paywalls, many still allow users either limited or unlimited access to their content, with the bargain being that users are served ads. Sometimes, the consumer has to watch an ad before being given access to the content; sometimes the ads are simply served up within or alongside the content. Fair enough. News organizations are having a tough enough time as it is making ends meet; if they can monetize their content to offset some of the costs of production that is a good thing. Of course, it is not just news sites that work on the principle of attracting and then monetizing visits from potential customers.

Advertisers want eyeballs, preferably eyeballs that are interested in their products, pre-selected by the choice of content. If you are selling dog food, listings on a home baking website are less useful than on one for pet grooming. And if you have a product that has carefully built up its brand equity and integrity over many years, you do not want to damage your brand by advertising on the wrong platforms, such as a dodgy website promoting pirated content. Unfortunately it still happens, often inadvertently. To fight this, the advertising industry is taking several initiatives to help advertisers steer clear of pirate website traps, and these efforts are starting to pay off.

In a recently released report, the Trustworthy Accountability Group, or TAG, which describes itself as “an advertising industry initiative to fight criminal activity in the digital advertising supply chain”, highlighted the following key findings;

• Digital ad revenue (in the US) linked to infringing content was estimated at $111 million last year (2016), the majority of which (83 percent) came from non-premium advertisers.
• If the industry had not taken aggressive steps to reduce piracy, those pirate site operators would have potentially earned an additional $102-$177 million in advertising revenue, depending on the breakdown of premium and non-premium advertisers.
• Ongoing industry efforts against piracy have reduced the advertising revenue of pirate sites by 48 to 61 percent.

This is one of those “glass half full or half empty” situations. It is good news that pirate site operators had their potential advertising revenues reduced by an estimated $102-$177 million in 2016-17 but it is distressing that digital ad revenue linked to content infringing sites still totalled more than $100 million. Some $36 million of that was still from premium advertisers who found their ads misplaced on infringing sites. The industry has fought back against misplacement through various means, such as an enhanced awareness campaign directed at major advertisers, ensuring appropriate language in insertion orders, using ad verification vendors, compiling and using lists to block undesirable sites and so on. This is having an effect but tightening up ad placement is clearly still an issue. The most recent report to point to the role of online advertising as a major element of the support system for piracy is the 2017 USTR Notorious Markets Report, released on January 12.

Placement of ads on undesirable sites is not the only problem though; outright fraud is also a major headache.

An Ernst and Young report in 2015 commissioned by the Interactive Advertising Bureau documented the staggering figure of $8.2 billion as the cost to advertisers in the US alone from fraudulent online advertising, malware and “malvertising”, and access to infringing content. Of the total, $4.4 million was from invalid traffic. Many ruses are used by unscrupulous websites to defraud advertisers such as stacking ads on top of each other so that only the top impression is seen by website visitors but all of them earn revenue, shrinking ad units down to a 1 x 1 pixel size and placing hundreds on a page so they will be paid for the impressions even though no-one will see them or buying bot traffic from ad networks, thereby earning a healthy profit margin on the resulting ad impressions. As reported by AdWeek, another study in 2016 estimated the losses to digital advertisers globally from fraudulent ad impressions driven by bots at $7.2 billion.

Consumers accessing infringed content accounted for $2.4 billion in lost revenue opportunity costs while malware and “malvertising” accounted for $1.4 billion, including the cost to fight illegal activities, lost revenue from password sharing, lost revenue from search engine blacklisting when a website is impacted by malware and lost revenue from malware related ad-blocking.

These negative impacts on the advertising industry from malware are more than matched by the impact on consumers. Numerous studies have confirmed that use of pirate sites substantially increases vulnerability to downloading of viruses and malware, leading to such consequences as identity theft. A study conducted in 2015 by the Digital Citizens Alliance found that one of every three content theft sites exposed users to malware and that internet users who visited such sites where 28 times more likely to get malware from these sites than from mainstream sites. Indeed, as legitimate advertisers tighten restrictions against placing ads on pirate sites, increasingly the sites are turning to criminal organizations to fund their activities. The “free” download that consumers may think they are getting often comes at a heavy price down the road when financial or other personal information is compromised.

While efforts in the US are being led by industry bodies such as TAG through its multi-faceted program (“eliminating fraudulent digital advertising traffic, combating malware, fighting ad-supported Internet piracy to promote brand integrity, and promoting brand safety through greater transparency”), in the UK a successful program has been launched by the City of London’s Police Intellectual Property Crime Unit. The London police program involves the creation of an Infringing Websites List (IWL) which is then shared with advertisers, advertising agencies and others in the ad placement ecosystem so that they can avoid placing ads on these infringing websites. The IWL is developed in cooperation with industry.

The IWL process is being employed in a number of countries in Asia (Indonesia, Vietnam, Hong Kong), the most recent being Taiwan, where a Memorandum of Understanding has just been signed between the country’s intellectual property alliance and its leading advertising agencies to establish an IWL that will be updated monthly. Implementation is voluntary, but it is a start.

This problem affects both developed and developing countries. In India, the Federation of Indian Chambers of Commerce and Industry (FICCI), which hosts the annual Indian film and TV convention FICCI FRAMES every March, commissioned a study that showed that three quarters of the pirate sites surveyed, many of them hosted in India, relied on advertising. Many of the ads were for legitimate products, while about half were considered “high risk” advertising, such as ads for goods or services associated with things such as malware, gambling, adult dating, and pornography and other unregulated products. This mix of mainstream and high risk advertising taints legitimate products while associating them with illegal activity and also has undesirable social consequences by exposing consumers, including underage users, to the seamy side of internet advertising.

The FICCI report, entitled “Badvertising-When Ads Go Rogue” concluded that;

“The best way to deter advertising revenue from going to pirate networks would be to build comprehensive risk management frameworks in ad agencies, ad networks and advertisers to address this risk proactively. ISPs need to proactively build block lists and adhere to site blocking orders issued by the courts to limit access to pirate sites.”

Good advice for India, and good advice everywhere. If advertisers and the advertising industry become more aware of the problem and cooperate to combat it, they can starve the pirate websites out of existence by choking off their means of support. Many will have to cease operation. Some of the more determined pirate sites will no doubt continue to exist and will turn even more to high risk advertising and criminal activities to survive, but in doing so they will become more and more isolated and high risk. This hard-core will have to be tackled by other means, such as site blocking and domain name seizures. These are useful tools, but cannot do the job alone.

Advertisers need to continue making concerted efforts to cut off revenues to pirate websites. Current efforts are encouraging but more needs to be done.

© Hugh Stephens 2018. All Rights Reserved.