Pirate sites profit from untracked ad dollars, report says

Major advertisers are inadvertently supporting websites that offer pirated movie and television content, because they are increasingly buying ad space using automated ad-buying services, a Wall Street Journal article asserts.

The practice is allowing even small pirate sites to earn potentially up to $100,000 a year just through ad space. And the top 56 piracy sites combined bring in an estimated $227 million a year in ad revenues, the WSJ reported, citing a study by MediaLink performed for the Digital Citizens Alliance.

The advertising and marketing firms are largely unaware that their clients' ads are being placed on copyright-violating sites. And many of those clients include major brands like Target, Kraft and Toyota.

"Marketers are increasingly buying online ad space through complicated automated marketplaces and chains of brokers, instead of directly from website owners themselves," WSJ's Jack Marshall wrote.

Tracking where those ads go and how they perform is an increasingly difficult problem. A New York Times article outlined the issue, citing a Vindico study that found that 57 percent of online video ads are never seen by their intended audiences. They're often placed across random sites, positioned too low to be seen, or otherwise not viewable--and marketers often have no idea where the ads are going, nor are they receiving a complete picture of whether their intended audience is seeing the ads and interacting with them.

The Digital Citizens Alliance report, published in late February, was telling in terms of the amount of dollars flowing into copyright violators' pockets. Without licensing and other fees to worry about, sites like BitTorrent, which streams peer-to-peer, and other online video pirates ranging from direct download hosts to video streaming hosts to plain old linking sites could be seeing profit margins ranging from 80 percent to 94 percent. Torrent-type sites and linking sites are the biggest drivers of ad revenue.

"The online advertising industry knows this is a problem," the DCA said in the report. "As an ad industry insider told MediaLink, 'Even one premium brand ad on one of these sites is too many.'"

The DCA called on the advertising industry to start following its own best practice standards and work to improve them. "A coordinated effort by all stakeholders in the online advertising ecosystem is urgently required to preserve the value of digital media and help make the Internet a safer marketplace for legitimate commerce," the report said.

DCA MediaLink pirate video revenue

Breakdown of piracy sites' revenue. At left, sample size of each segment; at right, estimated actual revenue. (Source: DCA / MediaLink)

For more:
- The Wall Street Journal has this story
- see the DCA report (.pdf)

Related articles:
Less than half of online video ads are even seen, Vindico says
New advertising formats, timing could help monetize online video advertising
Can online video advertising outpace TV ads? Skeptics sound off
AOL sees huge opportunity in $5B online video advertising market

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