Dirt: The economics of illegal streaming
How 123Movies and Putlocker use sketchy ad networks to stay online.
Dirt is a daily email about entertainment.
Hayden Betts investigates the business side of those sketchy, glitchy illegal streaming sites that come up when you search for a free alternative to Hulu or HBO. Betts is a software engineer at Spotify.
When you Google a free way to watch some new prestige streaming show, you’re likely to arrive at a website that looks something like this:
Tech platforms that seem simple can be very hard to run. Netflix’s core business is hosting, streaming, and recommending video files. Netflix pays a few thousand software engineers $400,000 salaries to do this. When you have 204 million subscribers, a lot of difficulties come up that have to be solved.
Much like Netflix, the most popular pirate streaming sites serve movies at extreme scale. In 2018, the MPAA estimated that one of those sites, 123Movies, served 98 million users per month. But unlike Netflix, the big pirate sites do not need to deliver HD video instantly; medium quality 30 seconds from now is fine. They do not hire PhDs to personalize your queue. They do not need to build analytics dashboards for rights holders. Each of these tolerances removes staggering amounts of complexity.
Also unlike Netflix, the people who operate these sites are on the run from authorities since what they are doing is illegal. They can’t lean on blue-chip hosting providers like Amazon and Google to help them handle the traffic. They can’t put up job posts on LinkedIn.
Running a pirate site that serves 100 million monthly users, like 123Movies or Putlocker, might seem easier than running Netflix, but I think most people who have built businesses online would agree that it must be very hard. You need a lot of technical and legal expertise. You have to pay for a lot of bandwidth and storage and computation. You need capital and recurring revenue. How do these sites monetize? Put another way, how do they continue to exist?
Pursuing that question opens up weird holes in an internet that feels more and more like it is run by the billionaires who own five websites. Out of the cracks spill massive Cypriot ad networks and French cloud services companies slow to respond to abuse reports. The streaming-era internet is weirder than it seems.
I visited one Putlocker clone, audience size unknown, screenshot below. It is full of advertisements, the messy, chaotic kind that you might recognize from an earlier era of the internet: “Your mac may be in danger,” “Click to protect your mac,” and “Wayfair - Shop Now.” There are pop-ups and pop-unders and automatically downloaded files that Chrome warns are dangerous. Clicking anywhere opens new tabs with more ads.
These malicious ads are not built into the website; they are delivered dynamically. In the same way that big digital media companies monetize impressions with Google Ad Sense, pirate sites monetize by allowing networks to place ads on their sites. This particular site is making a lot of calls back to servers associated with the Cyprus-based company PropellerAds.
Propeller operates in public, with a customer support contact and ex-employees who list it on their resumes. But it also appears on the US Trade Representative’s Review of Notorious Markets "for its role in funding piracy websites." Propeller does not need to be overtly malicious, it just needs to be less proactive about screening publishers than other companies and based somewhere where rule of law is weak. The USTR says the company serves 100 million desktop and mobile users per day.
In the IndieHackers community, people celebrate the financial success of their websites with screenshots of their Stripe dashboards. In pirate streaming communities, people post screenshots of their PropellerAds dashboards to show off how much money they’re making.
Besides direct placement, unscrupulous ad networks facilitate ad fraud. This is why clicking anywhere opens up new tabs with more ads. You are driving impressions to sites that you didn’t mean to visit, “originat[ing] traffic out of thin air,” as Buzzfeed reported. The original publisher, the pirate streaming site, gets a kickback, of course. This is a big market too, driving hundreds of billions of fake impressions every month.
The Putlocker clone also partners with pay-per-install ad networks. Where Propeller is gray market, these are fully underground. They pay publishers based on the number of times visitors to a site install an application delivered by the network. That is, the number of people who ignore Chrome’s warning that this “download may be dangerous.” A paper by security researcher Kevin Stevens shows that a publisher might make $180 per 1000 US-based installations.
Any criminal venture that reaches scale is complicated and often resembles its legal counterparts. There are ancillary services to provide as well as internal and external stakeholders. Evan Ratliff’s book The Mastermind, about the owner of an illegal pharmaceuticals website, is a portrait of this. The scale of the shadow infrastructure required to facilitate piracy is evidence against the idea that a few American companies own the internet — and proof that networked computers are still pretty chaotic. — By Hayden Betts