Follow the Money: Online Piracy and Self-Regulation in the Advertising Industry

Abstract

We study the effects of a self-regulation effort, orchestrated by the European Commission in 2016 and finalized in 2018, that aims to reduce advertising revenues for publishers of copyright infringing content. Data on the third-party HTTP requests made by a large number of piracy websites lets us observe the relations of the piracy and advertising industry over time.

We compare these dynamics to a control group of non-advertising services which are not subject to the self-regulation. Our results suggest that the effort is limited in its effectiveness.

On average, the number of piracy websites that make requests to EU-based advertising services does not change significantly. Only when we allow for heterogeneity in the popularity of third-party services, we find that the number of piracy websites that interact with the most popular EU-based advertising services decreases by 42%. We do not find evidence that non-EU-based advertising services react to the self-regulation. This implies that only a small share of the firms in the market comply with self-regulation in a way that is visible in our data. We also do not find evidence that the demand for piracy websites decreases due to this ``follow the money'' initiative.

Keywords: Piracy, Copyright Enforcement, Online Advertising

JEL Classification: K4, L5, L8