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Calculating the Return on Investment of Online Brand Protection Projects

In the early days of Online Brand Protection (OBP), before it was commonly understood how damaging to revenue infringements could be, this was an extremely popular topic. I remember delivering webinars on the subject then and even running a couple of half-day in-person workshops for brand owners at major conferences.

Just recently, I have seen some stated ROI numbers from projects but no explanation as to how they were produced and so I thought it would be worthwhile to revisit the thinking and see how it has stood up to the test of time. The most important point is to understand that there are two very different and separate categories of return you can expect from an OBP project—“hard” benefits (compensation, seized assets, substitute sales) and"soft” benefits (brand integrity, reputation, etc.).

Depending on a rights owner’s attitude to the whole topic, and indeed their business sector, these may have different levels of importance. I recall interviewing a panel of fashion brands at a conference who unanimously stated that “brand integrity” was their main motivation, way above any financial gain, while some other clients would calculate quite sophisticated measurements of the tangible returns from their project.

It is therefore very important to establish the priorities of an OBP project upfront and not allow these two categories to become intermingled—what is quantifiable lives in one set of data and what is not, but may also be very important, needs to be considered separately.

Quantifiable Returns

There are several areas that are measurable, some more easily than others:

Restitution or seized assets

“Restitution” or damages come when a rights owner finds and an infringement such as the sale of counterfeit goods and takes, or considers, legal action resulting in some form of compensation.

In the early days of OBP, this was actually quite lucrative—we worked with a UK sportswear client who funded their entire program out of monies generated through this sort of activity. Essentially, they would track down the infringer, mainly selling on eBay at this time, and make contact informing them that they would be sued unless a “without prejudice” fee were paid. As fraudsters have become better at hiding their identities and the majority are, anyway, now overseas and harder to track, this has become less easy to carry out successfully.

Similarly, there was a phase of litigating in some US courts against websites selling counterfeit merchandise and whose registrants were offshore. When they did not respond to the court (as most of their contact details were fake), the complainants were awarded not just massive damages (that never got paid), but the internet assets of the infringers i.e., domains and associated payment accounts, some of which contained significant sums. One of the ground-breaking cases is discussed here.

For some brand owners, these cases generated significant sums that entirely funded their programs, and certain US law firms even provided the complete service on a contingency basis, where proceeds were shared between them and the rights owner. These were especially popular in the apparel sector, and many brands enjoyed effectively “free” brand protection programs in terms of website monitoring and enforcement for some years.

Over time, of course, the infringing website owners identified that their assets were at risk of being seized and learned to move funds out of their payment accounts more frequently, such that this funding stream has largely expired today.

Suffice to say that restitution is the most measurable and definite form of ROI, but the window has narrowed over time from which to benefit from this.

Reclamation of diverted traffic

Another very measurable area of benefit from an OBP program is traffic recovery—most eCommerce starts with a search, and each time that a consumer is directed to a paid or organic search listing that offers a fraudulent item or service, the rights owner loses a potential sale.

This is incredibly important both for consumer goods and services companies in sectors such as travel or finance, pretty much all of which are purchased online these days. We actually found a use case for OBP solutions that involved finding and eliminating what could be called “keyword arbitrage,” where a travel company’s authorised agents were breaching their contractual terms to steal the rights’ owners traffic and then sell bookings back to them based on the commission structure they had in place. This was costing our client over $1m/year and was easily recoverable by identifying the cases and enforcing their agents’ contractual terms.

In terms of calculating the ROI in these scenarios, fortunately, the data provided by search engines and eCommerce software is rich, so it is easy to see how many visits an illegal listing has been getting and what the conversion rate and average transaction value are on the genuine destination site. Once we have these data points, it is easy to work out what the value is of eliminating that infringing search result and reclaiming the traffic.

Another aspect of that return is the reduction in the cost of paid search, which is a sophisticated online market where the highest bidder gets the number one slot, and so, by removing illegal listings, you effectively reduce competition and thereby spend to get your genuine ads up the ranking.

Such is the nature of eCommerce today that these are typically extremely big numbers. One London-based consumer goods client believed that by enforcing in this area combined with effective SEO optimisation they were able to double their website traffic whilst simultaneously reducing their paid search spend by 42%. That is huge ROI.

Reduced legal fees and in-house effort

For companies that have been carrying out IP enforcement using external counsel or their own legal team, there is usually a significant saving where volume is involved—searching and sending enforcement notices manually is very time-consuming and costly if using external resources.

One client that we worked with came from a position of paying $1-2,000 per paid search enforcement sent via their law firm with additional fees for follow-up. Clearly, automating the process even with some degree of manual review is going to provide a significant saving on that. Where in-house staff undertake the role, unless they are dedicated to the process entirely, it becomes very distracting and can often take them away from the roles they were originally hired to perform.

This area is clearly one where it is easy to work out the costs saved, and the contribution to ROI is simple to calculate.

Substitute Sales

Probably the most challenging to calculate the quantifiable benefits is substitute sales, i.e., if we remove 100 listings for counterfeit items, how much genuine product would be sold to replace that, or if we successfully blocked illegal access to movie or sports content, how many more people would buy a subscription?

Answering that is quite complex and requires work to collect data about how much volume was going through a given site or marketplace listing, and we then need to determine a “substitution factor.” This means how often would someone buying a fake item have bought the real thing if they had found it first. This very much depends on the type of item—clearly, buyers of a $50 knock-off watch would be unlikely to have bought the $10,000 real thing, but a person buying a $1.50 fake battery probably would have preferred a $2.50 genuine item, especially as it would actually work!

Potential substitution sales rate from luxury goods to everyday items

This also often boils down to the intentions of the buyer—are they someone looking for a real product at a discounted price, or are they searching for a cheap, pirated version. In the latter case, no matter how much we block access or remove listings, it may not result in genuine, full-price sales. In studies that have been carried out, it was found that around 20% of “well-intentioned” online buyers would end up being offered a non-genuine experience, and it is these sales that the brand owner would hope to gain if they can remove the fake offer.

In general, well-intentioned buyers shop on the first page of search listings and on the first couple of pages of a marketplace, so if you focus on removing and measuring the health of those areas in terms of good versus fake listings, you can have real impact on ROI. We worked with a desktop software client who, at the start of the project, discovered that for every genuine copy of their product sold in the USA, fifteen illicit copies were acquired. This meant that they could generate real and significant revenue by reducing the visibility of illegal product and promoting links to genuine copies in the search rankings. In that company, the anti-piracy team became a revenue source rather than a cost centre.

Customer service costs

Another area of a business that suffers significant impact from counterfeit goods is customer service or returns—be it electronics failing or handles breaking on bags. There are sundry reasons why substandard product results in time-consuming calls to customer service teams and returns. The well-intentioned buyer, who believed they had purchased a genuine item, inevitably contacts the brand owner and expects a resolution.

In my experience, this is of real importance to senior executives as they can see that not only is considerable resource wasted, but the reputation of the product is severely tarnished. The cost is easily tracked as most companies are now using contact management systems that will show the trend in calls/emails, and as a project to remove fakes progresses, it is possible to measure the reduction in calls and returns along with the attendant costs very precisely.

Intangible benefits

There are several areas where an OBP project delivers value that are impossible to measure but may actually be even more important in the eyes of the brand owner:

Health and Safety of Consumers

One of the verticals most active in OBP is the pharmaceutical sector for obvious reasons—given how reticent people are to discuss some health topics with their doctor and the cost of drugs in certain economies, the temptation is high to scour the internet for alternative sources and of course fall victim to ineffective or even toxic counterfeits.

This represents a significant risk for both consumers and drug companies, and so they tend to be highly active in trying to remove sites and listings irrespective of financial return. Similarly, the Automotive Anti-Counterfeiting Council (A2C2) and its member companies have been effective in working to remove counterfeit airbags and other spare parts from online sales and make use of some shocking videos to demonstrate the seriousness of the issue.

Clearly, the impact of fake products in sectors such as these is high in terms of customer safety, but there are also plenty of well-documented stories of home electronics that have burnt hair, started fires, etc., when QA procedures are absent from the counterfeiters’ manufacturing process.

Brand Integrity

This is a term that essentially represents the reputation of the brand—when consumers buy what they believe is a branded item and it turns out to be of poor quality or defective, their first recourse is often to the name on the product rather than questioning where they purchased it. As discussed above, this can lead to wasted service or returns department time but also does a lot of damage to the product reputation as buyers associate the negative experience with that brand.

Equally, when fake versions of a luxury item abound, it damages the “cache” of owning what is normally a high-priced item. This has been well documented in the case of sundry watch, bag, sunglass and other designer accessory items—if large volumes of fake versions are in circulation, it is much less obvious that a purchaser of the genuine item has actually spent a significant sum which, for some people, is the main reason for choosing it.

Related to this topic is what is sometimes termed brand “clutter” or “confusion” and refers to the issue when a search engine or marketplace results set contains a high proportion of fake items at mixed price levels. Essentially, it is deemed bad for the brand as potential customers with heightened awareness of the risk of fakes, feel unclear about what is genuine and so move on to competitive products or services.

Partner relationships

Many businesses go to market via partners, be that distributors of products such as technology, fashion and automotive parts or broadcast partners in the case of digital content and live sports. In many cases, those partners pay a premium for some degree of exclusivity within a region or segment of the market, and they correctly complain to the rights owner if that is breached by cross-border or illicit distribution.

In the case of digital content, especially where the broadcast rights have been sold for huge sums, the pressure brought by broadcasters is extremely influential in encouraging anti-piracy programs, which seldom succeed in completely eliminating illicit distribution. In the UK, as a great example, the Premier League spends very large amounts both in terms of in-house and vendor-delivered efforts to combat piracy. However, it still remains relatively easy for consumers to access live streams of games via illicit sources. Clearly, the objective here is to make a statement and support broadcast partners despite the lack of success in eliminating the problem.

Public Relations

Similarly, it can be important for a brand or rights owner to demonstrate that they are taking action to protect their customers and indeed to show potential infringers that they are not an easy target.

In fact, quite a significant motivation can be to move the problem to another rights owner—if a counterfeiter works out that each time they try to sell a consignment of brand X, they are met with extreme resistance, have listings removed and their websites litigated against, they may well determine that their ROI is better served by counterfeiting brand Y in future. They, too, have businesses to run.

This opportunity to tag your brand as a “hard target” is itself a key outcome from a well-run program, and while ten years ago, brands were very reticent to admit they had a counterfeit problem to deal with, increasingly today, forward-thinking companies highlight the problem and talk openly about what they are doing to avoid their consumers being duped and even provide tools by which suspected sites and listings can be reported via their own website.

Summary

As can be seen from the above, there is no shortage of areas where one can find both quantifiable and intangible returns from an Online Brand Protection project.

What matters to any given organisation can vary enormously in my experience, from businesses that want to calculate a detailed set of quantifiable results to others that are more focused on customer safety or the integrity of the brand. Whichever is true for you, it is essential to document what the expectations are prior to making the investment and then review the project against these at regular intervals to ensure they are being met.

I hope this overview of the topic has been beneficial—for more detailed or specific advice on ROI or other topics related to Online Brand Protection feel free to reach out or visit www.charlieabrahams.world.

By Charlie Abrahams, Advisor and Commentator on the Brand Protection and Domain Management Sectors

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