The ad industry is in a tough spot these days: It’s losing the battle against online piracy.
And it’s not the only one.
In the past year alone, the industry has seen major losses from piracy.
AdSense, a $3 billion-a-year marketplace that allows publishers to pay for the display ads in search results, shuttered last year amid the collapse of its subscription business.
The ad network’s loss was one of the most significant in the industry’s history.
“It’s a loss for the ad industry,” said Michael Turchin, who leads AdSense and recently founded AdSense.
“And it’s going to hurt a lot of publishers that have invested in ad networks and ad units.”
While the losses are huge, AdSense is still one of many major ad platforms that rely on the sale of ads to drive revenues.
That means publishers are paying for the ads themselves.
But that means publishers also have to pay the vendors that produce the ads.
The big question is how the industry will recover from those losses.
“The market is in deep trouble,” said Dan Stein, a senior analyst at the digital marketing firm Strategy Analytics.
“You have all these big ad networks that are losing money, all these ad networks in the middle of a huge, massive online advertising blitz and they have no money to buy the ads that they have.”
And those ads are the ones that will help drive the ad network to profitability.
“If you’re losing money with the ad networks, you have no incentive to go after the ad dollars that you think are really going to be the key to profitability,” Stein said.
If the ad market is going to recover, it will be through the sale or purchase of advertising.
And in that, publishers will have to be willing to pay a premium.
“Publishers need to be in the game to get advertisers to pay, but advertisers are going to have to take a hit if they don’t get the advertisers to sign up for the network,” Stein told Business Insider.
The AdSense collapse came just a year after Amazon, Google and Facebook also dropped their ad platforms.
But the industry is still recovering from the shockwaves of the recession.
Advertisers are still buying ads, but those ads have not been the dominant revenue streams for many ad agencies, which is why it’s critical for publishers to keep those ad revenues going.
And the ad business is facing other threats.
A major online marketplace for video content, Twitch, is shutting down its subscription services, and YouTube is also in the midst of a shutdown.
While streaming video has exploded over the past decade, the internet has made it possible for consumers to purchase a high-quality stream for a fraction of the cost of traditional media.
And that means many advertisers are abandoning traditional video ad revenue streams in favor of streaming.
The online ad market will be the battleground in a battle for publishers, Stein said, but publishers will be in a fight to keep their business.
“We’re going to see a lot more consolidation of the ad revenue business,” he said.
“Because you can’t get those advertisers to buy ad inventory for your website if you’re not going to pay your ad dollars for those ad dollars.”