In May 2015 Mary Meeker, KPBC’s expert on internet trends, released her annual “big slide presentation” on the state of the internet.1 In her presentation, Mary pointed out that there is a huge gap in the spending on internet mobile ads in relation to the amount of time people actually spent using their mobile devices. She noted daily consumer interaction with mobile devices was the only medium in 2014 which increased. An increase of some 4 percentage points to 24%, compared to time spent on other traditional media such as TV, radio, newspapers, and other means of internet consumption, which all declined in their user participation rates2.
This is a critical statistic: the spending on advertising directed at applications running on mobile devices has not increased in proportion to advances in user interaction with them. This has created the potential for an increase of $25 Billion dollars in new ad spending if it aligns with other traditional media, ad spending versus consumption rates.
Such potential spending begs the question: who will be the big winners in this windfall? As of 2014 the top ten companies in the mobile advertising business based upon revenue and user install base, are as follows:
Here’s the really interesting thing: when you do a search on the intellectual property these companies have regarding technology in the mobile advertising space, with the exception of Google and Yahoo, none of these companies even come close to being the top patent holders in this sector.
Below is a chart of the top 25 companies holding patents that pertain to mobile advertising. ipCapital Group compiled the data based upon semantic and keyword search criteria relating to mobile advertising verbiage. Results were limited by filing year 2005 to present, US patents and applications, and searching within the title, claims and abstract of the patent disclosures.
As seen in the chart, there are some major worldwide corporations that are acquiring large patent portfolios in the mobile adverting space, and some of them are not even competing in that market (yet!)
This brings up some serious business issues for companies that are making their bread and butter in this sector, unfortunately none of them very pleasant.
The software and platforms that smaller companies have created may be at risk of violating other much larger companies’ patents. It is possible that simply because they aren’t competing in the industry, the larger companies haven’t asserted their rights (yet!)
Even if a small, active company dodges the litigation bullet, there still is another negative consequence to not having patent protection. Just looking at the above chart shows that there are many large companies that may want to get in to the mobile advertising business essentially overnight. It is possible but unlikely that they will put together internal teams and create mobile advertising platforms from scratch. Instead they will likely acquire a company that has already created the technology they think will best fit their needs. Indeed this acquisition strategy has already been shown as the trend in 2014 with such companies such as SponsorPay being bought by RNTS and Flurry being bought by Yahoo.
Now, if you’re a player in this sector with a good platform and a decent install base, but without patents or other IP protection, the valuation of your company will be likely be based on short-term benefit to the acquirer. On the other hand if you have IP protection that contributes to a sustainable advantage, you increase the medium- and long-term value of your business substantially. At the very least, having a patent portfolio, even if you don’t intend to sell your business, can mitigate a potentially crippling infringement suit from a larger player.
So what does a company with little or no IP backing up their product do? One consideration is to look at creating IP and doing so with your end goal in mind. Is your goal protection, acquisition, other? Here are just a few suggestions:
In conclusion, the mobile advertising sector is ripe for merger and acquisition and/or an unfortunate flurry of litigation as companies look to gobble up a piece of a multi-billion dollar pie. It will be advised for firms to develop a robust IP strategy. Contact us today to discuss improving your competitive advantage with a robust IP strategy.
2 Mary Meeker: “Internet Trends 2015 Code Conference” May 27th 2015 Kleiner Perkins Caufield & Byers, Slide # 16 http://www.kpcb.com/internet-trends?
3 Matt Marshall: “Mobile Advertising Index” March 27th 2015, Venture Beat