The Internet continues to provide unparalleled global opportunities for many brand and trademark owners. The ‘shop window’ that targets a truly global audience, the online channel to market is now firmly established as part of most brands’ strategies and is firmly ingrained in consumer buying habits.
However, the Internet also poses significant challenges and risks to brand and trademark owners from a strategic and regulatory perspective. Online environments, and subsequent consumer habits which react to the fluid change in trends, are extremely fast moving and present ever-evolving choices for brand owners. Some organisations have struggled to engage with online audiences, failing to understand the importance of the power that social media and smartphone adoption has brought, and thus do not have the capacity or expertise to ensure that their brands and trademarks are appropriately represented online. This generates a significant business risk which, when coupled with the potential loss in revenue-boosting opportunities, should be sufficiently visible to feature in strategic business decision-making processes.
This chapter examines some of the existing and new online environments where these challenges are now manifesting themselves. It focuses on the fast-moving world of marketplaces, mobile apps and social media.
Marketplace sites – consolidation and growth
The challenges that brand and trademark owners face in understanding online marketplaces and how to exploit these channels effectively have been a key battleground on the Internet over the past decade. Initially seen as a hotbed of nefarious activity, where the distribution of counterfeit goods flourished and the enforcement of trademark rights was patchy at best, many of these marketplace platforms have now become leading e-commerce success stories. While there are still concerns about significant infringing activity, some of these businesses have striven to legitimise their activities, understanding the importance that trust brings to online engagement with consumers and suppliers alike.
The most visible of these marketplace platforms is undoubtedly the Alibaba Group. When Alibaba completed its initial public offering on the New York Stock Exchange on September 19 2014, with a valuation of $231 billion, many believed that the next great step in internet evolution had been completed, bringing a non-US e-commerce company to the top table of global megabrands. Started by a school teacher in a flat in Hangzhou, China in 1999, the group has grown into one of the world’s biggest online companies.
Looking back only a few years, only a brave analyst would have predicted that Jack Ma would succeed in taking his company to such heights. Ma’s empire now encompasses business-to-business, business-to-consumer and consumer-to-consumer (C2C) trading platforms, offering all things to all people. China has a population of more than 1.35 billion and they are hungry for Western consumer goods, buying them on a vast scale.
The figures speak for themselves. Take the example of taobao.com, Alibaba’s C2C platform, targeted at internal Chinese consumers and, according to Alexa Rankings, currently the 10th most visited site in the world – higher than LinkedIn, eBay and Bing. According to an Alibaba Group press release, in June 2013 the site had more than 5 million registered users and hosted more than 80 million product listings. Online shopping in China has burst any notional bubble of emerging markets being unwilling or unable to embrace the e-commerce phenomenon. Real examples of this extended success are arising every day. On November 11 2014 – the newly promoted ‘singles day’ in China, when consumers who are not in a relationship are encouraged to go out and treat themselves – the Alibaba Group took more than $2 billion in sales in the first hour of trading and over $9 billion by the close of business.
Not long ago, many – particularly fashion and retail – brands saw the Alibaba Group as an annoyance based in a territory that felt far removed from key Western markets. Ignore it and it might go away, went the thinking. Engage with it, but only on a trademark enforcement level. This was the internet Wild West, where anything went and there was little to be gained. Enforce your trademark rights on a reactive basis if you have those rights registered in China, and engage only when necessary.
The emergence of the Alibaba Group as a global commercial superpower has changed that. Strategically, certain decisions need to be taken by all organisations which sell their goods and services online. The following are clear and present reasons why brand and trademark owners must engage with Alibaba and other online marketplaces like it:
- There is a clear opportunity to engage with 1.3 billion (and rising) Chinese consumers using platforms provided by the Alibaba Group.
- Others are certainly using these platforms to sell your products, whether legitimate or counterfeit.
- You can make a difference to brand and trademark infringement by trying to control this channel to market.
Success is more likely where brand owners align their online strategy with their offline business objectives. More forward-thinking companies ensure that when they are entering a new territory, they launch their country-specific website at the same time as their new high-street stores. Combining online and offline activity is extremely powerful, and there are strong examples of this already happening, with great success. In addition, in regard to China, the power of the Alibaba Group cannot be ignored. It is a phenomenon that brand owners can recognise and make part of their strategy.
In discussions with brand owners, there is no doubt that that a three-stage approach has borne fruit for them and has significantly enhanced their commercial opportunities, as well as defending their trademark rights. This approach can be summarised as follows:
- Understand the landscape – engage with third parties to help you to see the opportunities and risks specific to China, and to understand how these can be integrated into an overall strategy for the territory.
- Decide on a strategy for maximising the revenue opportunity for your brand – set up legitimate stores on the relevant trading platforms and engage with these platforms either directly or through third parties.
- Defend your brand and trademarks – there are mechanisms in place to mitigate risks. Use these by combining ongoing monitoring of the platforms and by engaging with an experienced third party to help.
It is also apparent that there is a requirement to keep significant pressure on marketplaces to ensure that they continue to take rights holders’ needs into account.
According to some industry commentators, mobile apps are on course to reach $70 billion in annual revenue by 2017. As with the growth in use of online marketplace platforms, the numbers illustrating the adoption of mobile technology are staggering. According to ComScore, in the first quarter of 2014 mobile internet access outstripped fixed internet access for the first time.
For brand and trademark owners, this means that the challenges faced are not just about the type of online environment where consumers engage with brands, but also about the ways in which they access these environments.
ComScore also states that 52% of traffic to retail websites in the United Kingdom comes from mobile devices. Consumers increasingly spend time engaging with online content from mobile devices through the use of smartphone apps. Apps provide the perfect opportunity for brand and trademark owners to engage with consumers and direct them to online content through a controlled environment. However, many brands that struggle with online engagement with their customers are also struggling with engaging through the world of mobile apps.
Some industries have led the way in app engagement, and with good reason. Financial services have a clear requirement to continue to attract customers into the online space, but also to ensure that the online space is protected and optimised to prevent fraud. Mobile apps are an ideal way of doing this, provided that the customer is using the legitimate mobile app and not one developed and released by a fraudster.
Unfortunately, such infringing apps are all too common. In a similar fashion to online marketplaces such as taobao.com, mobile app marketplaces are relatively unregulated. Any developer can release any app, within reason, and again the onus is on the brand owner to use its own resources or third-party partners to detect infringements and initiate enforcement action. Rights holders programmes do exist on many marketplaces, but – in what will be a familiar story to many brand owners – the marketplaces themselves do not police their own environments.
Brand owners clearly need to decide on a strategic approach to mobile apps. This should be considered as part of an overall online policy and should dovetail with wider business requirements and objectives. For example, if your principal business objective is to sell products online, enabling the mobile market through an app is advisable to drive quality traffic to your e-commerce content.
The development of social media platforms continues unabated. For example, in the second quarter of 2014 Facebook reported a user base of 1.35 billion active monthly users. The scale and penetration of these user bases represent an unparalleled opportunity for brand owners to engage with consumers across the globe. Sales, marketing and public relations all engage with social media platforms on an ongoing basis, and brand owners can learn from positive and negative media reports in equal measure.
Much like experiences with the mobile app and marketplace environments, the sheer scale and ongoing evolution of social media platforms present brand owners with significant challenges. The alignment of social media policies with business objectives can differ in scope from that on the aforementioned platforms. Two important considerations are involved in brand protection on social media platforms: the misuse of intellectual property and the establishment and protection of company reputation. Common concerns manifest themselves as:
- use of content to distribute counterfeit goods;
- fake profiles used to impersonate legitimate brands;
- use of copyright images to promote third-party services;
- misrepresentation of official company communications;
- malicious or libellous third-party posts; and
- leak of sensitive information by employees.
If detected in a timely manner, IP infringements can be addressed using the site’s own processes, aligned with rights holders’ requirements. Some are more responsive than others, but most platforms will show a sensitivity to brand owners’ needs.
Reputation management is another concern. Hard-won reputations can be enhanced – or significantly damaged – in a matter of hours. Brand and trademark owners must be vigilant and establish and maintain a robust social media monitoring and enforcement policy.
The Internet has provided unrivalled opportunities for brand owners to operate their businesses on a global scale without the need for significant investment in infrastructure. Businesses that did not exist 10 years ago are now some of the biggest and most respected brands in the world, thanks to their adoption of e-commerce as a core part of their strategy. However, the risks that present themselves on a daily basis will not simply go away. Brand owners must have clear objectives and an online strategy that both exploits the opportunities offered by the Internet and mitigates the risks.
This article first appeared in World Trademark Review. For further information please visit www.worldtrademarkreview.com.