Report: Advertising revenue on piracy sites exceeds $200 million

Rogue websites hosting pirated material made nearly a quarter of a billion dollars last year from advertising, a report has claimed.

The report, Good Money Gone Bad: Digital Thieves and the Hijacking of the Online Ad Business, was released this week by US-based Digital Citizens Alliance (DCA), a group which aims to highlight the dangers of the Internet to consumers.

It analysed nearly 600 websites around the world which it said had combined revenues of $227 million in 2013.

The 30 most prominent, including peer-to-peer portal and BitTorrent sites, took in between $4 million and $6 million each. They were based in countries including the US, Netherlands and Germany.

All of the websites offered pirated music, films and television programmes available for download.

DCA commissioned MediaLink LLC, a US research firm, to identify and calculate profits from the sites.

The study said that nearly 30 percent of the sites carried “premium” adverts, for brands including Amazon and McDonalds, while around 40 percent carried “legitimate secondary ads” for websites including legal gambling forums.

The report added that, because the websites took their content from others, profits ranged from 80 to 94 percent.

DCA executive director Tom Galvin said advertising profits were the “tip of the iceberg” and the report highlighted just a “small sample” of websites benefitting from content theft.

“Let’s be clear, the quarter of a billion dollars that these sites make from adverts in a year is a huge sum, but it’s only a fraction of the financial losses inflicted on the creative economy and its workers,” Galvin said.

Paul Fakler, partner at Arent Fox LLP in New York, said given the low operating costs of running file-sharing websites, advertising could be seen as a “passive revenue provider.”

But, said Fakler, while cooperation is needed from both sides, (advertisers and rights holders) companies themselves could not be blamed, and were also damaged by having their logos appear on infringing websites.

“Most companies will employ an advertising agency and don’t have much control over where an advert is placed,” he said.

“The process is mostly automatic. They [advertising agencies] will use algorithms to place adverts on websites. These websites are based on traffic and traffic drives advertising revenue.

“A major company can go to an advert placement company and say ‘I don’t want adverts on these sites,’ but that takes an incredible amount of time and research.

“There needs to be cooperation across the board from those looking to advertise, advert placement companies, record labels and rights holders.”

The research did not analyse the losses incurred by the victims of content theft, such as writers, producers, musicians and actors.

Galvin added: “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.”