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Brian Buss Doug Bania

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© 2015 National Association of Certified Valuators and Analysts (NACVA) 3

A Financial and Economic Perspective on Internet & Social Media IPIntroduction

Internet & Social Analysis

Intellectual Property Analysis

Bringing Them

Together


Analysis of Internet & Social Media Activity

Internet & Social Analysis


Old World v. New World InfringementInternet Misuse Can be Accurately Measured and Quantified

Old MisuseTraditional Media

New MisuseSearch & Social

Obvious misuse in television and Print

Internet misuse can be hidden in metadata and keywords

The number of people witnessing the misuse is geographically

constrained

Worldwide audience and the potential of misuse going viral

How many customers actually took action is not accurate

Data regarding how many customers took action

is very accurate


The ToolsThree Tools to Improve Valuation and Damages Analyses

Search Optimization

• Comparing actual use to SEO best practice• Factors that contribute to better organic search results

Site Traffic Sources

• Using Site Analytics data to identify source of site traffic• Timing and volume of site traffic• User behaviors at the Site

Internet & Social Media Advertising

• Paying to achieve Impressions, Reactions and Click-through• Costs avoided when using IP to drive organic Impressions and Click-

through


Key Concepts of Internet Use: Business Owner

Search Appear on first page organic

search results for defined keywords

OptimizationStrategically leverage keywords for first page search results in Search and Social

Media

Social MediaBuild a following,

Create shareable content, Go viral

AnalyticsMeasure and refine optimization

tactics to create more website traffic

The Internet is the new corner store, and foot traffic is Search & Social


Key Concepts of Internet Analysis

SearchWhat is your organic ranking for

specific keywords?How did you get there?

OptimizationKeywords, tags, metadata vs. visible content

How, where & why IP is used?

Social MediaWhat is your handle?What is your topic of

conversation?

AnalyticsIdentify & Quantify

site trafficImpact of key words

Search + Social + Optimization + Analytics = Defensible Analysis


Educating the AudienceEducate first in order to set the stage for your calculations

Valuation and damages experts must educate their audience regarding the basics of search & social prior to approaching an analysis or calculation


Educating the AudienceAny Analysis or Valuation Using Internet & Social Tools Starts Here

Growing importance of the Internet for businessesThe Internet is a huge place to promote business

Search and How it WorksInternet is a huge library with billions of books, search engines are the tools to find information

Importance of First Page Search ResultsFirst page is worth the fight

Use of Metadata and OptimizationFirst page search results are not an accident

Use and Leverage of Google AnalyticsGoogle provides tools and tactics


Case Study: Educating the Trier of Fact

Two competing construction supply

companies had operated in non-overlapping

geographies

Both businesses evolved into online retail &

distribution of construction supplies and design

concepts

Therefore businesses begin to overlap and compete for

customers outside their home geography

Defendant used the Plaintiff’s TM-protected company name in search optimization and social media


Educating: Importance of Search & Social

First page of organic search results

Plaintiff: First organic result

Defendant: Second and Third organic search result

Of the 9 organic search results, over 50% are for the Defendant

Defendant: Social Media sites

Plaintiff’s paid result

Plaintiff: Ninth organic result


Educating: Analyzing Code to Determine SEO

Tactic Use at SampleCompany.com Likely Result

Use key terms in Title Tag

<title>The Company, Sales and Structure Designs</title>

The title tag “The Company” alerts both the search engines and the user as to the topic of that particular page

Use key terms in the URL

http://www.sample.com/about-the-company This URL contains the keywords “The Company” which provides users and search engines more information about the page

Use key terms in the Description

meta name="description" content=”;TheCompany has been selling since 1972. Click here to find out more about sales, structure and The Company." />

The description meta tag provides the search engines a summary of what the page is about

Use key terms in the Keywords

<meta name="keywords" content=”sales, structure, the company, green supplies, The Company, Sample Company, samplecompanuy" />

If a search engine finds specific key terms throughout the content of the website and in the keyword meta tags, that website will likely be ranked higher in search results

The site’s code can be “read” to investigate SEO strategies


IP Valuation & Damages for the Internet

Intellectual Property Analysis


Valuation & Damages Methodologies

Important to base new analyses on accepted methodologies

Standard Methodologies Internet IP Methodologies

Cost Approach

Cost to replace or replicate • Relief from pay per click• Value of impressions

Income Approach

Present Value (PV) of future benefits• Discounted cash flows (DCF) • Relief from Royalty• Lost Profits / Unjust Enrichment

PV of• Additional Site Visits / Traffic• Additional online transaction or

customer inquiries

Market Approach

Study of transactions• Guideline companies • Guideline transactions• Industry benchmarks

• Comparable Pay Per Click• Hypothetical license/transaction

Analysis of the financial / economic impact of IP Assets on the Internet will employ one or more of these methodologies


Drivers of ValueIP depends on other assets and resources in order to generate economic benefits

Business Value > Value of IP Assets owned by the Business

Apportionment: Identify the portion of future benefits derived from use of the IP Assets

Present Value of Expected

Future Benefits

Value of Business

Intangible Assets

Tangible Assets

Copyrights

Patents

Intangible Assets

Tangible Assets

Trademark


Internet Analytics as an Apportionment Tool

• Website Analytics• Social Media Analysis• Comparable licensing transactions

(“CUT”) • Excess profits (“CPM”)• Feature count and comparison• Marketing Mix Analysis• Promotional Use Analysis• Surveys / Interviews /Focus Groups

Tools to Apportion Economic BenefitsApportionment Framework

What is the value of this box?

Always best to use multiple tools

Present Value of Expected

Future Benefits

Value of Business

Intangible Assets

Tangible Assets

Copyrights

Patents

Intangible Assets

Tangible Assets

Trademark


Understanding the IP AssetsTypes of IP assets often misused through Internet-based mechanism each have unique

implications for valuation and damages analysis

Assets

Misuse boils down to infringement or defamation

Analytical Considerations

Trademark & Brand

• Is the TM used in unseen components of the website?• Is the TM used to drive search results• What was the exposure to defamatory comments or posts?

Copyright • Did the protected content drive traffic?• Was the image or content a contributor to a sale or transaction?

Name & Likeness • Did the use drive traffic?• Was the use akin to an endorsement?

Domain Names• Is there a website and how much direct traffic does site receive?• How many monthly searches occur using this term?


Internet Damages MatrixRegardless of the asset type, the claims made in Internet cases typically occur through one or more mechanisms and the economic results can typically be

measured in 4 ways

Mechanisms

Paid Search

Organic Search

Social Media

Squatting

Infringement

Defamation

Claims Economic Result

Unjust Enrichment: Incremental profits achieved by Defendant due to the misuse

Lost Profits: Incremental profits not achieved by Plaintiff due to the misuse

Pay-per-click relief: Value of cost, effort avoided due to misuse

Decrease in Value of an IP Asset: Impact on value due to misuse


Google Analytics to Support Unjust EnrichmentUnjust Enrichment Profits: Traffic at Defendant’s Website

Explain the mechanism, then quantify the impact

Monthly visits due to searches using TM 25,000

Ratio: Visitors who purchased 25%

TM search purchases 6,250

Average e-commerce purchase $250

Incremental revenue 1,562,500

Ratio: Incremental profit margin 15%

Incremental profit per month 234,375


Social Media Analytics to Support Lost Profits

Use Accepted MethodologyLost Profits damages = But-for less As-is

Use of Social Media Data• “Reactions” to defamatory posts and tweets• Language from posts seen in customer emails


Google Analytics in Name & Likeness Claim

Monthly Pageviews at Defendant’s Website

Search Term Analysis

Top 50 search terms do not include Celebrity’s name

Top 50 search terms yielded 49% of total site visits during the Damages Period

Search terms using Celebrity’s name resulted in a total of 45 visits during the Damages Period, less than (0.004%) Website traffic declined during the

Damages Period


Social Media Data in a Relief from Pay Per ClickValue of Facebook Impressions

FacebookReactions are Likes, Comments and Shares

A Reaction is an “active” response to the Celebrity’s post, and is more valuable than a View

Calculated the costs avoided when using a celebrity endorser

Facebook Charges for Celebrity’s Page RateImpression Price ($/Impression) CPM $0.00016 Click Price ($/Click) CPC $0.75

Reactions to Posts Involving the Products Likes Comments Shares Visit www.product.com make sure to like! 28,921 7,432 657 CELEBRITY Presents PRODUCT 17,528 1,425 412 CELEBRITY in Vegas Introducing PRODUCT 18,256 312 514 Total 64,705 9,169 1,583

Value of Activity Count Cost Value ($) Net Page Likes 34,649,887 $0.00016 5,544 Post “Likes” 64,705 $0.75 48,529 Other Reactions (Comments + Shares) 10,752 $0.75 8,064

Value of Facebook Impressions 62,137


Bringing Them Together

Bringing Them

Together


Concluding Comments

What’s known about Search & Optimization • “It’s Google’s algorithm” there are multiple versions of best practices and no practitioner

knows exactly how search engines actually select and place websites

Understand the Context of the Calculation• Just because a number was calculated, doesn’t mean the number is relevant

• Replacement cost based on pay per click can indicate the value of time and effort replaced, but not necessarily the value of brand or TM

• The IP Asset may not be the most important asset for apportionment

• Don’t fall for: using a 10% industry royalty the TM is worth more than the entire business

• Visits due to a TM-based search indicates number of visits, not necessarily profits

The Data is available, but it may not always support the claims

Challenges for the Expert


Concluding CommentsOur Top Takeaways

• The Internet and Social Media marketing world requires educating your audience before proceeding to the quantitative analysis;

• The Internet Marketing World is less understood, but offers many advantages for financial and economic analysis (there is defensible evidence if you know where to look, and how to explain it)

• Using the analytical advantages available from Internet & Social Media marketing allows compelling Valuation and Expert Analysis (the proof is available)

• Be aware of the limits of your calculations

Internet and social media data analysis provides additional tools for the Art & Science of Valuation


Thank You

Brian Buss and Doug Bania

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