Quantifying Google’s Profit From Piracy

Without Google (and other ad serving companies) transparently disclosing how much they profit from rogue sites it’s hard to back into a number that quantifies how much Google actually makes from selling advertising on (or in popups on the way to) pirate sites (typically without the knowledge of their advertisers).  You can gather a hunch about the value that must be present for the company to take the chance on the downside of a potential criminal prosecution in the United States for their activities.  But let’s look at a couple facts.

There is one case we can read about in a newspaper that may offer some baseline assumptions about Google’s profits from piracy–and also know that there is nothing new about this unholy alliance.  (I wasn’t able to find hard numbers in any other service, so we will use Google as an example.)  The Wall Street Journal noted in 2007 (reporting on a case that may date back to 2003):

“Instead of relying on spam emails to drive traffic to [EasyDownloadCenter.com and TheDownloadPlace.com], [these rogue sites] decided to rely on Google advertising. The high volume of traffic on EasyDownloadCenter.com and TheDownloadCenter.com caught Google’s attention, according to people familiar with the [case]. To help stoke the traffic further, Google assigned the sites account representatives who suggested keywords they could bid on. Google also offered [the sites] credit so they didn’t have to use their credit cards to pay Google’s fees….The defendants in the case, Brandon Drury and Luke Sample, said in sworn statements that Google representatives offered them credit to buy advertising on Google’s search engine. They also said Google supplied them with keywords, including terms such as “bootleg movie download,” “pirated,” and “download harry potter movie,” which boosted traffic to their sites, according to people familiar with the case. In court filings, both men deny any wrongdoing.” (Emphasis mine.)  Of course–this case settled.

The Wall Street Journal also tells us that “[a] Google employee deposed in the [Easydownloading] case largely corroborated the defendants’ accounts, these people said. The Google deposition has been sealed by the court. [Or more likely, Google successfully moved to have the court seal the deposition because they didn’t want the admission used against them.] Of the $1.1 million in revenue the two sites — EasyDownloadCenter.com and TheDownloadPlace.com — generated from 2003 to 2005, $809,000 was paid to Google for advertising, the people said. The sites have since been shut down.” (Emphasis mine.)

So before Google’s acquisitions of AdMob and DoubleClick, and in the pre-cyberlocker world with the relatively small potatoes of these sites, Google made $809,000 over a few years on websites that were a far cry from Megavideo and Megaupload (two sites in the top 100 websites in the world–or on the Internet–according to Alexa).

Recent studies show over 50 billion visit pirate sites annually.  Apologists for piracy immediately discount these studies, so let’s say it’s just 25 billion–no, better yet, 5 billion.  How about that?  Let’s say the study was off by 90%.

If Google made an average of $200,000 a year or so off selling advertising on one relatively small web property that was dedicated to piracy starting 8 years ago–how much do you think they make now from an available market of 5 billion in traffic?  Or over 50 billion if the study is correct?

Remember that in the 2007 case, Google said “Google said it prohibits advertisers from promoting ‘the sale of copyright infringing materials.’ It also said, ‘We are continually improving our systems to screen out ads that violate these policies.’”  Of course–it’s not the advertisers who are the problem,  it’s not the ads that are the problem, it’s the sites hosting the ads using Google AdSense accounts (or links, pop-ups or other connections to those ads designed to obfuscate the AdSense connection despite the “Ads by Google” logo). 

Of course, what is even more interesting about this particular part of the WSJ story is that some 8 years later, Google is saying practically the same thing about needing improvements in its AdSense policies.  As Ellen Seidler found in her research, the advertisers trust Google not to impugn their brands (such as Deutsche Bank) by serving their ads to rogue sites–frequently without the advertiser’s knowledge or approval.

The rumor number of Google’s annual profit from piracy is $500 million.  When you look at these factors, the rumor number may well be low.  Since Google has more or less admitted that it’s profiting from the misery of creators, maybe they would be transparent enough to disclose just how much they do make.

Maybe this transparency should be on Larry Page’s short list now that he is replacing Eric Schmidt.