Brand Protection Industry Trend

The brand protection industry has been buzzing with new startups and M&A activity for the past five years. Change is afoot, and it's creating opportunities. Lately, I find myself talking with customers, investors, and career professionals trying to make sense of it all.

Here is a point of view that I hope will serve as some evergreen advice-- or advice for the next five years, which is about as evergreen as it gets these days. If you like what you see or would like to discuss, you can contact me as always over LinkedIn.

A Quick Explainer

What Brand Protection is

If you're new to the space, it's good to define this industry by the problem it solves rather than any specific technology or solution.

Brand Protection is the business of protecting intellectual property from illegal exploitation. That illegal exploitation comes in the form of multiple threats:

• Counterfeiting of a brand's products for distribution both online and offline
• Piracy of a brand's digital products and media such as movies, music, software, books, and games
• Brand Impersonation through domain squatting, social media profiles, and fake ads
• Fraud through schemes like phishing, job scams, and charity scams

How the Brand Protection Industry is Organized

The industry has divided itself into a few key segments to protect rights holders against these threats:

• Supply Chain Security provides solutions that help companies ensure product traceability and authenticity so they can quickly identify fakes and their origin. This includes product serialization, tagging, and labels to identify their source.
• Domain Management provides a solution for companies to manage the thousands of domains that represent their brands and monitor for domain squatters
• Online Anti-Counterfeit Enforcement provides solutions that monitors online marketplaces, social media, and search listings for counterfeit sales and removes them
• Brand or Reputation Monitoring monitors just for impersonators for brands in order to eliminate any damage to the brand from fraudsters
• Online Anti-Piracy Enforcement provides solutions that monitor video streaming sites, social media, P2P networks, and platforms to remove or disrupt piracy
• Anti-Fraud crosses over into cybersecurity, where brand face threats from attacks on consumer data and privacy from scams like phishing

Adjacent Markets

For anyone watching the market, there are several adjacent spaces to follow:

• Trademark Services provide the service of helping brands research and clear trademarks, which has become a large scale operation for trademarks these days. Though it does not fall into the protection market, the services often dovetail each other.
• Trust and Safety is not necessarily a market, but the field employs thousands of people at tech platforms and employs similar tech and skills. Trends in this field impact the need and effectiveness for external brand protection solutions.
• Digital Product Security provides encryption and protection for digital products like digital licensing and encryption
• Ad Integrity ensures the integrity of digital ad platforms. Digital advertising has its own unique risks of bad faith ad placement, traffic fraud from bots, and malvertising. Technology solutions helping brands with this problem often market themselves as "brand protection" too.

The Investment Profile

Brand Protection Market Size

The brand protection industry employees more than 10,000 people across both customers and vendors.

Most industry experts put the online brand protection market size at just south of $1 BN. The Supply Chain Integrity brings the market to $2 BN. My colleague Charlie Abrahams provided a similar estimate in his recent post, and I agree with his assessment.

But how large are the different areas of brand protection? Public numbers are hard to come by, but harvesting insights from Crunchbase, LinkedIn, and some basic market intelligence we can see some clear trends. Here is the relative size of investment based on organizational size:

* Domain Registrar only attempts to cover the main pure play enterprise registrars. Given the overlap between retail and enterprise, this can be viewed a lot of different ways.

** Trademark Services is included for comparison and because it has been added into a few top brand protection player's offerings. Similarly, this space includes many, many overlapping firms, including law firms and other umbrella services.

Largest Brand Protection Markets

Supply Chain and Online Anti-counterfeit Solutions lead the market. This has always made sense. Companies make more physical goods than digital goods, so this will be the trend for years to come.

Supply Chain Integrity solutions carry a far larger share of customer budgets than Online Anti-Counterfeit. Customers validate this. University of Michigan's ACAPP program runs several anti-counterfeit industry symposiums. Customer polls from their programs indicate customers put a greater share of their budget into internal security than online enforcement.

Online Anti-Counterfeit solutions are still seeing rapid growth because of the role e-commerce is playing in brand growth. Many smaller players focus exclusively on online enforcement.

Market Concentration

Supply Chain Integrity and Domain Management are the least concentrated markets, where the top 4 firms top out at less than 50% of the workforce. The top players in Supply Chain integrity all represent huge investments or a long history of organic growth. Domain Management has seen the emergence of more players targeting the mid market as smaller companies see more and more of a need to professionally manage their domain portfolio.

All the online market segments are highly concentrated. This is good and bad. Some of the incumbents have stagnated under their current holding companies. Brand Protection is a dynamic market with ever evolving threats. Customers who can't solve their problems with the market incumbents will quickly switch if they don't keep up.

What are the Opportunities?

Customer Brand Equity in the Digital World is Growing Exponentially

We have known e-commerce and digital media were growing exponentially for some time. The new decade marks a new pivot in the growth of the industry. E-commerce and digital streaming platforms are more successful and more mainstream than ever. All brands, big and small, are looking for services to grow and protect their brand on these platforms.

Customer Brands are Looking Expanding BRIC Economies to Grow

Today's companies ignore the global market at their peril. However, the emerging middle class economies of the world are where counterfeits and piracy most impact sales and consumer willingness to pay. Brand protection is key to moving the needle in these markets.

Vendor Technology is Taking a Step Function Forward

In the supply chain world, block chain and the ubiquity of smart phones in BRIC economies have opened up new opportunities to secure products and authenticate them with distributors and consumers. This has brought a wave of innovation in the space and renewed focus on updating supply chain security.

In the online world, Machine Learning and AI were a novelty in the late 2000s when the first brand protection companies defined the market. Today, data scientists and machine learning as a service are ubiquitous, and their techniques are much more accepted as a solution to the problem. This has lowered the bar for getting into the market. Every vendor can recognize logos and audiovisual content. However, it has raised the bar for more strategic solutions that used to require armies of analysts.

The Global Legal Environment is Changing

People often ask me: What will be the impact of new rules and regs for tech platforms?

Brand protection has long been just a mitigation effort relying on laws written in the 1990s. The reach of these outdated laws, online and offline, is limited and far from complete. The goal of brand protection programs is to connect attainable consumers with your brand. Rogue platforms and jurisdictions outside the reach of the law are considered a lost cause.

In this legal environment, measuring brand protection ROI is like measuring marketing ROI. Everyone knows there is an impact, but it can be difficult to quantify. Executives in some kinds of businesses can be reluctant to spend when this is the outcome.

The lawlessness of tech platforms is gaining attention in every walk of life. Even Tech Platform Executives are looking for some rules to the road. Most players in this ecosystem believe new regulation is coming and are just looking to balance the scales.

A whole slate of tech platform policy initiatives have recently passed or are up for legislation this year:

• The EU Digital Markets Act
• Section 230 Reform in the US
• The US CASE Act
• Reforms to improve compliance and transparency around domain name abuse at ICANN, the body governing Internet domain registries
• Major digital policy updates in key markets around the globe

But, people ask, is there a scenario where Google, Facebook, Amazon, and others just wave a wand and wipe brand infringements off their platforms?

Most rights holders believe there is more the tech platforms can do. Tech platforms have made their case to not over regulate.

However, few companies believe every tech platform will know and care for their brand the way the brand's owner will. It is impossible to know ever trademark, every copyright, and every licensee. Whatever the solution, most people believe there will always be a need for managed services outside the platforms to help brands with this problem.

What are the Trends for Investors?

Brand Protection is increasingly important for every enterprise, and even more so as the Internet as created an equal opportunity for every brand abuser.

Counterfeit product and digital piracy operations used to be small cottage industries for select criminals with the means to pursue them and evade the law. Today, the Internet has created an equal access opportunity for a wider range of threat actors. At the same time, the growth of dark money industries has amplified the growth of side businesses that circulate and launder illegal earnings.

In another article, I take a look at brand protection from the point of view of investors.