The U.S. digital marketing, advertising and media industry lose $8.2 billion annually, according to a study prepared by EY for the Interactive Advertising Bureau, as a result of ad fraud; stolen video programming, music and editorial content; and malware.
The report observes that each of these categories, i.e., "invalid traffic," "infringed content" and "malvertising," can be interrelated.
An excellent example is a consumer who visits an infringed content site containing malware and infects the consumer's browser with a robot that is later used to drive invalid traffic. If the industry can eliminate the profits earned by serving ads next to infringed content, it can reduce the amount of money available to drive illegal activities in the supply chain.
Thus, for example, content producers lose $2 billion in revenue from infringement, while advertisers and content producers lose $456 million in legitimate advertising opportunities. Malware from infrigement sites helps to produce invalid traffic (e.g., robot-generated ad requests made without the consumer's consent) that costs advertisers a total of $4.4 billion in out of pocket expenses. Ad blocking and site blacklisting that is considered to be primarily for the purpose of combating malware results in the further loss of advertisement opportunities valued at $781 million and $57 million respectively.
The report recommends improvement in business practices, "such as knowing your business partners and investigating new business relationships using address information, tax IDs and backkground checks" to help industry reclaim some of the $8.2 billion in costs.
Advertising--or more specifically, the ability of advertisers to "deliver the right ad at the right time to the right user"--helps fuel the Internet ecosystem. This report suggests that content theft doesn't just impact the balance sheets of publishing dynasties and Hollywood studios and record labels. There are downstream consequences for Internet vendors, ecommerce and consumers.
CNBC talked to CreativeFuture CEO Ruth Vitale about the findings. She points out that illegal downloads heavily impact smaller media companies that focus on independent productions, and that 5.5 million people are employed in the creative field in the U.S.
A sampling of 596 web sites that deal primarily in pirated content made an estimated $227 million in annual advertising revenues, according to the Digital Citizens Alliance (See: "Good Money Gone Bad: Digital Thieves and the Hijacking of the Online Ad Business - A Report on the Profitability of Ad-Supported Content Theft"). "The 30 largest sites studied that are supported only by ads average $4.4 million annually, with the largest BitTorrent portal sites topping $6 million. Even small sites can make more than $100,000 a year from advertising."
"It is important to note that the advertising profits garnered by content thieves do not equate with the losses incurred by the owners of the content," notes the report. "These losses are unquestionably greater by many orders of magnitude..."
Fortunately, the advertising industry is not willing to tolerate intellectual property infringement. "The future health of digital media is at stake," according to Bob Liodice, head of the Association of National Advertisers, "and we owe it to ourselves, our industry and its brands to attack the issue head-on."
Continue reading "Advertisers vs. ad-supported pirate sites" »
Showdowns are likely in the Senate and House of Representatives later this month on legislation combating online piracy. The House Judiciary Committee is expected to vote on the Stop Online Privacy Act, H.R. 3261 (SOPA), and the full Senate on the Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act, S. 968 (Protect IP Act). These measures have generated some overheated rhetoric.
A recent column in Roll Call by Stephen DeMaura and David Segal, entitled "All Candidates Should Be Concerned About SOPA," for example, suggests that SOPA could be exploited by political opponents to restrict free speech.
Here's a plausible campaign scenario under SOPA. Imagine you are running for Congress in a competitive House district. You give a strong interview to a local morning news show and your campaign posts the clip on your website. When your opponent's campaign sees the video, it decides to play hardball and sends a notice to your Internet service provider alerting them to what it deems "infringing content." It doesn't matter if the content is actually pirated. The ISP has five days to pull down your website and the offending clip or be sued. If you don't take the video down, even if you believe that the content is protected under fair use, your website goes dark.
Another recent column in Politico
by Tim Mak entitled "Bloggers: SOPA's the end of us
" makes a similar claim and implies a tidal wave of opposition is forming (we shall see).
The conservative and liberal blogospheres are unifying behind opposition to Congress's Stop Online Piracy Act, with right-leaning bloggers arguing their very existence could be wiped out if the anti-piracy bill passes.
There is no way these bills would permit an opposing campaign or campaign committee to pull down websites harboring "infringing content," nor would they authorize censorship of lawful speech.
Continue reading "Opponents overreact to online piracy legislation" »
The New York Times reports that officials at the Federal Trade Commission are exploring a "Do Not Track" option on websites and browsers similar to the "Do Not Call" list which prevents unwanted telemarketing calls. Meanwhile, the White House has established an interagency panel to ensure that any restrictions do not impede law enforcement and national security efforts.
A "Do Not Track" feature won't protect consumers from unwanted ads, only relevant ads they are more likely to find useful. That's the whole purpose of tracking. Advertisers, who underwrite much of the cost of Internet content, applications and services, will lose an efficient opportunity to connect with potential customers. For what?
Meanwhile, even if there will be no tracking for commercial purposes, there will still have to be full tracking for law enforcement and national security efforts. ISPs and websites will have to continue to track everyone to comply with warrants or subpoenas they may receive in the future. As long as this information is collected and stored, there's a risk it can be misued. The principal risk isn't the ISPs or websites themselves. They would suffer reputational damage. The primary threats are from hackers and over-eager investigators.
A more appropriate first step would be for Congress to amend the Electronic Communications Privacy Act to provide the same legal protection for information gathered by ISPs and websites as for the information stored on your PC or in your safe deposit box.
With U.S. Rep. Rick Boucher (D-VA) and now the Federal Trade Commission holding hearings on privacy and online advertising, it seemed like a good time to visit the Google Privacy Center to see what categories Google believes I fall into based on my online behavior.
My interests were:News & Current Events
That was it.
I could opt out of interest-based advertising or manage my ad preferences at the Google site, but, I figured, what's the point?
A Google representative told the New York Times that the Privacy Center pulls in tens of thousands of visitors each week. For every one person who opts out, four people change the categories they have fallen into, and 10 people do nothing, just look over the information on the site.
The same article quotes an academic who notes that some consumers do not understand behavioral advertising, and that "people are confused about which part of a Web page is advertising." So apparently the argument is regulation is justified because it would relieve some people of the responsibility to get educated.
But one of the chief problems with any regulation -- no matter how well-intentioned -- is the difficulty containing it. For example, "a number of parties have suggested it would be appropriate to extend these privacy rights as a consumer protection to the offline side as well," Rep. Boucher says.
"We're looking, of course, at ways to extract payments from the consumers of our news -- micro-payments, subscriptions, memberships, licensing, even voluntary donations," Bill Keller, executive editor of The Times, said last week.
Online newspaper publishers traditionally have wanted us to give them our credit card information so they can charge recurring subscription fees. Or they want us to give them our credit card information so they can charge us $3.75 or some such fee to view individual articles. They're no different from every other online vendors, who don't want to pay another middleman to help them handle transactions.
Do consumers object to paying for online content, as many fear, or perhaps do consumers just view giving out their credit card information all the time as both inconvenient and likely to increase their exposure to the risk of identity theft?
The New York Times cites a report by Piper Jaffray, a market research firm, saying it expects consumers to spend $13 billion on downloads to their cellphones in 2012, up from $2.8 billion this year.
The report called Apple's popular iPhone application store "a tipping point in consumer consumption" over phones.
Apple's payment model strongly resembles that of the phone industry. A consumer enters his credit card data once, and all subsequent downloads are automatically charged to that account.
By making the process convenient, Apple has been able to sell software applications that, accessed through a computer, would be free. LiveStrong's calorie-counter app, for example, is free online but a version of it costs $2.99 in the iPhone App store.
Amazon.com offers a similar shopping experience for all types of products. I find myself shopping online increasingly at iTunes or Amazon.com or not at all.
The article notes that there is research confirming that consumers are less likely to buy something depending on the number of steps they must take to pay.