Explainer: What SOPA Means for the Online Ad Industry

What is it: The Stop Online Piracy Act (SOPA), also known as H.R.3261, was introduced in the United States House of Representatives on Oct. 26 by Rep. Lamar Smith (R-TX) and a group of 12 Democratic and Republican sponsors. The aim of the bill, according to its proponents, is to help U.S. law enforcement fight the online use of restricted intellectual property. The bill would help “modernize [United States] criminal and civil statutes to meet new IP enforcement challenges and protect American jobs.” In doing so, it extends the government’s power to disconnect the supply chain that enables or facilitates copyright infringement and prevent sites deemed to be piracy-affiliated from being viewed in the U.S.

How it Works: Under SOPA, the government would be able to prosecute companies deemed to be enabling or facilitating copyright infringement in any way and have the power to enforce the blocking of offending websites at the DNS level. SOPA, while requiring court approval beforehand, would allow the government to take legal action against those enabling sites that are blacklisted by the government as piracy sites. Of particular alarm to the ad world, third parties like ad technology providers that are affiliated in any way with the offending websites, whether the sites are overseas or domestic, would also be subject to prosecution if they fail to comply with the SOPA. The good news is that complying is rather easy for them, since they would just need to shut off blacklisted sites. The goal is to choke off these sites’ source of revenue. The act demands that ad technology companies create the position of an agent that is available via phone and email to the public, to receive the names of suspected piracy-related sites from copyright holders that may be affiliated with their companies. Companies are then required to notify the suspected pirate websites and submit the copyright holder’s complaint to the Attorney General’s Office. Although the act states that the companies don’t have a duty to monitor all of their network affiliations and investigate suspicious alliances, companies are required to pass along information on possible piracy sites to the government.
Who are the Players: The U.S. Chamber of Commerce, the Motion Picture Association of America, the Recording Industry Association of America, Macmillan Publishers, Netflix, Viacom, among others. In a nutshell, the entertainment industry is pushing this, which puts them in stark opposition to the tech world, which has united against it. Proponents of SOPA say that in order to combat piracy, the supply chain that funnels money into the websites, based on viewership, has to be stopped at the page level. Opponents of the bill include Google, Yahoo, Facebook, Twitter, Reddit, AOL, LinkedIn, eBay, Mozilla Corporation, and Wikimedia Foundation, as the Electronic Frontier Foundation and Human Rights Watch. Google’s Eric Schmidt memorably called it draconian and tantamount to “censorship” in a recent speech.
Why it Matters: Ad networks, DSPs and ad exchanges are all at risk if they help advertisers reach audiences that are using what the government deems piracy sites. Although SOPA specifically notes that third parties have no duty to monitor their connections, companies do have a duty to comply immediately with the government’s directives. This would add uncertainty to the market and increase costs on ad tech firms. But the risks for ad providers are quite a bit less than those for publishers, which could easily find themselves shut down over the use of copyrighted photos or videos.
Assessment: SOPA certainly has far-reaching consequences for a swath of digital media. Yet advertisers, networks and tech providers do not appear to have onerous burdens under the act, at least in comparison to others. The requirement that online advertising services create a position of an agent dedicated to fielding piracy complaints from copyright holders will require an extra layer of infrastructure that will be a burden for startups. But so long as they comply promptly in cutting off blacklisted sites, there’s little reason to believe the law would substantially hamper the industry’s growth.

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