How the New Boss Duped the White House (Again) to Protect Intermediaries and Brand Sponsored Piracy

This is an honest house.


That’s why we’d like to see your husband.


                     Facing certain criminal charges that might be brought against some
people that are innocent, we just feel that it would be…


It’s really for his benefit.


No, it’s not.


No, it’s not.


Debbie, tell them to come in.

 From All The President’s Men, by William Goldman

I’ve spoken about brand sponsored piracy to a lot of people in the online advertising business.  These are the worker bees, not the people who make the millions or more and have the big Google or Omnicom jobs.  I talk to the people who are being set up for a fall by the people who make the millions and by the people for whom the giant Omnicom and Publicis merger is probably their last liquidity event in their exit strategy.  Their last get out of jail free card in the game of brand sponsored Monopoly.

I notice a couple of things about these conversations that are common.  First, the employees are petrified that anyone will ever find out that they talked.  So until they want to come forward, they will remain anonymous.  And of late we’ve all seen how well whistleblowers fare.

But this is more than just an average fear of losing their jobs.  No one has actually said this, but some of them, the ones with the firsthand knowledge exhibit what I would characterize as an existential dread.

Then there are others that know exactly what the mechanics are behind the curtain and have more of what I would call a practical dread—they know exactly what to do to fix the problem and could do it, but they don’t have the full support of their companies and don’t want to be first.

And when I see the destruction of the world’s creators being perpetuated by some of the richest people in the world, and certainly the richest people in the online advertising space, I share with the worker bees another belief that they all have to one degree or another:  These are all contemptible people who deserve to be punished.  It is this self-loathing that they all have some of that will eventually lead to a true whistleblower who will just not be able to live with themselves anymore.  And that person will come forward—not because they think it will advance themselves, and not because of riches, certainly.

They will come forward because we all have a voice inside our heads that is our mother, father, pastor, rabbi, teacher, scout master or coach—whoever it is that is who helped us cast our our moral compass.  A voice that tells us that there is something bigger than ourselves that we are a part of, and a voice that blocks out threats from bad guys.

And for these people, there’s going to come a moment when that voice will be the only guide they have in an otherwise rudderless moral sea.  And that voice will be what drives that person to come forward and tell the truth.  And like Debbie and Hugh Sloane, it will not be because it’s to their advantage to do so or for fear of not doing so.  It will be for another reason, a much simpler reason.

Because theirs is an honest house.

Let the Duping Begin Again

For those of you coming to the issue of brand sponsored piracy for the first time, it is important that you understand a bit about the online advertising ecosystem and how it differs from offline advertising.

One of the constraints on offline advertising is that brands are limited in the available channels for advertising—just the legal ones run by (relatively) reputable advertising publishers.  For example, when McDonald’s wants to launch a campaign in the traditional offline channels, they buy advertising space from television networks, radio, newspapers, magazines, billboards, a host of outlets.  These outlets are by and large devoted to a legitimate business.

McDonald’s would not tell their ad agency to buy ad space near drug dealers to encourage users with the munchies to buy a Big Mac.  They might think about it–but they would need to find a way to mask that campaign.

This is not to say that criminals do not watch, listen to or read these media outlets and no one tries to prevent them from doing so.  But these are not criminal enterprises.

The ABC network of television and radio stations buy, produce or license programming.  They are all based in the US and are regulated by the FCC.  We know where to find them and if they were to start profiting from unlicensed programming, they’d get sued and they know it.

The use of legitimate advertising publishers causes scarcity and that causes prices to be higher as advertisers fight over that scarcity—the Superbowl is a case in point.  At least for now.

Online advertising is a vastly more complex system that looks roughly like this:


Online advertising has many benefits, including microtargeting of consumers and the fact that any video online invariably comes with an advertisement in the pre-roll or a popup add on the video itself.  Advertising on sites like YouTube should—should–have the added benefit of knowing what a user is searching for on YouTube through keywords.

Yet, it doesn’t seem to work that way.  For example, a YouTube search for “thai teen girls” served this ad for President Obama’s reelection campaign:


A YouTube search for Anwar Al Awlaki returned this ad for Mazda:

Mazda Ad on Terror Video close up

And a YouTube search for “jailbait” returned this ad of highly suggestive dancing by a girl of indeterminate teenage years for Senator Cornyn’s campaign against Obamacare:

Cornyn Stripper3

Then there is this ad for both Honda and The Tile Shop served against a video of “748 Cute Girls Kissing” also in response to the search term “jailbait”:

Honda Girls Kissing

Each of these examples of online advertising comes from the highly controlled YouTube environment, the showpiece of Google’s advertising model and Google’s prized extension of its search monopoly into the video search vertical.  Google actively promotes YouTube as a replacement for television.  YouTube is also promoted as the epitome of targeted advertising, an advertising model that Google would have advertisers believe will replace the current advertising model in traditional media.

Yet as an increasing body of research shows—if you don’t want to believe your own eyes—what keeps the YouTube advertising model going is that brands have little or no control over where their ads are placed.  And these ads are served to YouTube by Google’s ad exchanges—the very companies that are part of the Internet Advertising Bureau’s “best practices” for online advertising.

Let’s Get this Party Started

It should start becoming clear that the ad exchange really doesn’t care what they sell with the brand’s advertising or what they do to attract an audience–even ads served by Google’s own DoubleClick on Google’s own YouTube platform.

It should start being clear that the IAB’s “best practices” are designed to protect all the gatekeepers and intermediaries–everyone in the advertising chain except the brand and consumers.

Because what keeps the online advertising ecosystem chugging out profits for companies like Google is the fact that companies like Google have convinced advertisers to agree that ad exchanges can serve ads based on one overarching criteria—the ad will be served to the publisher that produces the greatest profit for the ad exchange at the moment the ad can be served, wherever the ad is served, regardless of the context.  That is certainly true on YouTube where Google has total control.  Imagine what it will be like when we look at unlicensed sites where Google has much less control.

And it is to this end that the IAB’s “best practices” devote themselves.  Not to getting value for their advertising clients, not for avoiding unsavory associations between Honda and “jailbait”, not for keeping the brand’s money out of the hands of criminals and God knows not to impose any accountability on those in the advertising chain who brands entrust to get it right—not for any of these worthy reasons.

No, the IAB’s “best practices” are designed for one purpose—keep the party going.

Who Do They Think They Are Fooling?

The UK’s Serious Organised Crime Agency has been very interested in that party for quite a while.  (SOCA is roughly the equivalent of the Federal Bureau of Investigation.)  As SOCA noted in a recent “Amber Alert” warning to international advertisers (Criminal Finance from Third Party Advertising on the Internet, SOCA Alert A2A725N, Nov. 2012):

It is highly likely that [brands are] unaware that [your] advertising was placed on [unlicensed sites] due to the way that internet advertising operates.  The aggregation of advertising from various companies by advertising networks [and advertising exchanges], and the contracting of advertising to “fourth parties” (who may be less reputable or simply less thorough in their verifications) all serve to complicate the audit trail for advertisements….[I]llicit website[s], underpinned by the theft of [creators’ works]…used the income stream from online advertising space as its sole source of revenue.  This revenue support[s] the criminal activitiy of the site.

SOCA then identifies one of the biggest, and certainly the most serious, problems with online advertising—the large number of criminal enterprises posing as advertising publishers.  This is particularly true with unlicensed sites featuring music, motion pictures, television programs and broadcast television streams as well as books and other creative media.

Google’s UK Policy Manager is quoted as acknowledging the role of criminal enterprises in a recent debate on brand sponsored piracy:

“[M]ost people doing piracy are not some guy in his bedroom altruistically sharing music with his friends. It’s people making money out of piracy, and it’s big business: some of these sites have 2m visitors regularly, and they’re not doing a bad business from advertising.”

It is important to understand that “most people doing piracy” are in it for the money—not because they want to be in the media distribution business.  I know this to be true because many of the top illegal p2p sites (including Limewire) rejected an opportunity to “come in from the cold” using SNOCAP—both immediately before and immediately after the Supreme Court ruling in the Google-backed Grokster appeal that was a huge loss for the criminal class.   Why?  Because at least three of them told me straight up that they couldn’t afford to pay royalties at the prices they got for their “high risk” advertising.  Plus they couldn’t be bothered to bear the accounting burden.

So to Google’s credit, they did try to get a court ruling in their favor (through Lessig and the EFF). But when they couldn’t do it legally, they just did it illegally (remember that the Grokster ruling came down at roughly the same time that Google’s Adsense supplied advertising to Megavideo that they continued to do until the site was shut down–easy to understand why it would be important that Kim Dotcom never be brought to trial in the US with all that awkward discovery.)

Remember—when unlicensed and brand sponsored sites offer media to the public for free, they are willing to sell advertising at lower rates to the same accounts reaching the same audience as the licensed sites.

Fast forward to earlier this year, and you will see the negative effects on the legitimate market reported by Spotify’s Will Page, who echoed the statement attributed to Google’s UK policy manager:

“Copyright infringing websites are big businesses … 2/3 of piracy sites have advertising, and 1/3 also include credit card logons. This competition is real: consider how ad pricing is distorted by those unlicensed sites who offer more scale and no content costs.”

So creators are harmed twice:  First when their works are used as a honeypot by the unlicensed site to induce users who are duped by the presence of legitimate advertising.  This is not lost on the Serious Organised Crime Agency:

[I]llicit website[s], underpinned by the theft of [creators’ works]…used the income stream from online advertising space as its sole source of revenue.  This revenue support[s] the criminal activitiy of the site.  Ultimately this revenue was acquired from brands whose advertising appeared on [unlicensed].  By incorporating the advertising of recognised brands the website[s]…[attempt] to make the site appear legitimate.  Conversely, the implied association between the site and legitimate brands may be damaging to the latter’s brand reputation.

But second when legitimate licensed services like Spotify have to compete with unlicensed sites in a race to the bottom on advertising pricing—a race that is a cynical attempt on the part of all in the advertising chain to profit from human misery by duping consumers.  The artist’s share of gross revenue is inevitably smaller because the gross is lower, or the service asks the artist to take a lower royalty because advertising prices are driven down by unlicensed sites offering the artist’s music with no royalty cost.

The Internet Advertising Bureau had an opportunity to produce a set of “best practices” that would have actually protected Internet advertisers and consumers alike.  Suggestions are not hard to find—Professor Ben Edelman of the Harvard Business School has a very well thought out “advertiser’s bill of rights” that would have worked just fine.

If your goal was to stop crime.  That was certainly a popular view when Professor Edelman presented his ideas at the summer meeting of the National Association of Attorneys General.

Instead—as I hope to demonstrate—the IAB did the opposite.

They produced a way to keep the party going.

For them.

 Next: The Jihad Will Be Monetized:  Google Dupes the White House on its Drug Prosecution

2 thoughts on “How the New Boss Duped the White House (Again) to Protect Intermediaries and Brand Sponsored Piracy

  1. Unfortunately, what’s been created is a situation where innocent mid-level workers are caught up in a practice that in some instances goes against their own authenticity and integrity. Whether it be the ad agency or even the advertiser who pushes off the blame to someone else they have employed to make the actual buys or the search companies that allow it to happen.

    Thank you for your always thorough research and the inclusion of Professor Ben Edelman’s “advertiser’s bill of rights” which cuts so effortlessly to the heart of the matter.

    People unaware of this situation, where Fortune 500 Companies are so highly visible as advertisers on known pirate sites, are stunned when informed of the practice.


  2. Thanks Chris.
    The fact that these criminals get away with their crimes –day after day– year after year– just goes to show which congressmen are in their pocket, and/or are blissfully-paid-to-be-ignorant…
    You can bet that if you stole someone’s purse on a street corner, you’d be thrown in jail.
    If you steal enough money, though, in a slightly complex way… you can get away with it until the cows come home


Comments are closed.