European Court ruling forces Google to mince its AdWords

September 22, 2011

The world of marketing may little note, but long find itself remembering, an obscure judgement handed down by the Court of Justice of the European Union today.

It concerns the endemic practice of buying someone else’s brand name (or, more specifically, trademark) as a search term and then having all resulting enquiries directed, heretofore quite legally, towards your own enterprise. The practice is enshrined in such services as Google AdWords.

A good example of the wheeze in action is Virgin Media. Tee’d up for a mega-marketing launch back in 2006, it was mortified to discover that its principal rival, BSkyB, had bought up all Google search references to the VM brand name and was redirecting any interest to Sky.

Marks & Spencer sought to pull off a similar stunt when it “bought” the Interflora AdWord search term in 2009, with the intention of substituting its own online flower shop every time an internet user searched for “interflora” on Google.

A bouquet of barbed wire for Google

Sadly for M&S, Interflora had a sense of humour loss and sued in the English law courts – which referred the matter to the supreme jurisdiction of the CJEU.

Well, the ruling has come in and it’s not going to be to M&S’s liking, or that of any other brand owner seeking to poach a rival’s name online. The court has decreed that buying your competitor’s name infringes trademark law on two counts: the ability to identify the origin of goods and services; and the right to preservation of a brand proprietor’s reputation. Crucially, it has ruled that proprietors of a trademark (let’s call them brand owners) can actually prevent a competitor using their name where they can prove free-riding or brand denigration is taking place. Which in practice will have a chilling effect on AdWord activity.

The ruling will cause widespread dismay, not least at Google – which has heavy investment in the practice. And all the more so because in a previous case, that of Google v Louis Vuitton (2010), the court had seemed to lean the other way. It said that Google, as intermediary, did nothing wrong in allowing AdWords to promote the practice of buying other people’s brand names, and that the existence of the service in no way infringed trademark law.

What it did not do was rule upon the legal responsibility of the search term purchaser, as opposed to the intermediary. In other words, the subsequent M&S case is a landmark judgement, which will now be handed back to the English courts for enforcement.

In the words of Kirsten Gilbert, partner at intellectual property specialist Marks & Clerk Solicitors: “Brand owners will be encouraged that their competitors no longer have a completely free rein over use of their trademark as a keyword. But, the practice of purchasing rivals’ trademarks as keywords is widespread, and marketers may now have to think of other creative ways to advertise their brands on the web.”

How two-edged the sword of justice is.


BBC gets go-ahead to build its digital “Trojan horse”

May 20, 2010

I cannot be alone in wondering why the Office of Fair Trading has given Project Canvas a clean bill of health after coming down so hard on Project Kangaroo.

Both, after all are VoD joint multichannel ventures in which the BBC would play a significant role. Ignorance of the differences is no doubt attributable to my superficial understanding of these two projects.

Here’s how Sheldon Mills, the OFT’s director of mergers, explains the case for non-intervention: “… The partners, including the BBC, do not intend to transfer an existing business into the JV…Therefore the proposals do not give rise to a merger qualifying for substantive investigation by the OFT.”

Still puzzled? Well, essentially Canvas is about platform-building – in this case through set-top boxes which bring the web to Freeview and Freesat television. As opposed to distributing pre-existing programme content through internet protocol television players on our computer screens. That’s all right then, viewers: at least we’re now fully cognisant of the important technical differences between the two projects. Hidden in the OFT small print, however, is a more compelling reason for blocking Kangaroo but waving Canvas through. Apparently, in the case of Canvas, none of the partners will have a “material influence” over the policy’s venture; clearly implying that, in the case of Kangaroo, the BBC did – a situation that would have eventually enabled it to exercise a stranglehold over UK IPTV.

Canvas, by contrast, is nothing to worry about: just some harmless cross-industry platform building in which the BBC is going to play a humdrum role. You’ll not be surprised to hear that’s not what the critics – mainly BSkyB and Virgin Media – have concluded. Earlier this year Virgin Media chief executive Neil Berkett stigmatised the Canvas Project as a BBC Trojan horse. He accused the BBC’s regulator, the Trust, of cravenly supporting the corporation’s bid to become “de facto gatekeeper of the digital world.” Manufactured hysteria, or prescient insight? We’ll know soon enough.


I-Level default sends tremors through the industry

May 6, 2010

For those in marcoms, the descent of digital agency I-Level into administration has some alarming echoes of the sovereign debt crisis being played out in Greece.

Just a few short months ago, no one would have seriously contemplated the possibility of either event. Now, we’re beginning to worry that this portends the second leg of financial meltdown, and that a domino effect will ensue.

I don’t want to push the parallel too far, of course. I-Level’s management was always infinitely more competent than that of the Greek economy. Nonetheless, for those who had eyes to see it, this was a calamity waiting to happen. The detonator clock started ticking in February when I-Level, in alliance with Starcom MediaVest, lost out to WPP’s GroupM in a pitch for the COI’s £250m consolidated media planning/buying account. Up to that point, government digital media business accounted for £40m of I-Level’s billings, or about 40% of its revenue. Replacing a slug of income that big was never going to be easy, but the difficulty was exacerbated by I-Level’s financing mechanism. Private equity investors ECI bought a 60% chunk of the group in April 2008, as a precursor to its international expansion. The deal valued I-Level at about £46.5m, but had the effect of burdening it with debt of £32m – much of it redeemed at an unsustainable interest rate of 12%pa. Put another way, that meant the group had to earn pre-tax profits of at least £3m a year merely to cover its interest payments. Guess what? The punitive interest payments kicked in just as I-Level was beginning to lose business. And that was before the coup de grâce delivered by the COI.

Even so, its disappearance is a shock. Set up in 1999 by Andrew Walmsley and Charlie Dobres, I-Level had near-iconic status as one of the few first-wave digital agencies that surfed the dotcom bust and managed to retain its independence. Among its blue chip clients are Procter & Gamble, The Sun, Orange, Sky, Renault, Comet and Samsung. Its top brass, who are now all out of a job, include respected industry figures such as Walmsley himself, chief executive Steve Rust and chairman David Pattison. Up to 100 people are expected to be made redundant. I-Level’s demise is a warning, not merely to those who would sell out to private equity investors, but of the fragility of fortunes, even in the relatively buoyant digital sector.

UPDATE: RIP I-Level. The administrator, Zolfo Cooper, has liquidated I-Level. Media owners such as Microsoft, Yahoo and Google will be faced with multi-million pound losses. It’s the biggest and most spectacular implosion of a high-profile agency since Yellowhammer went bust in 1990. The only part of I-Level to survive is the fast-growing social media operation, Jam, which was sold to Engine yesterday. That means about 20 staff out of a total of 120 have been reprieved.

ELSEWHERE IN ADLAND, I note the champagne corks are popping – and for good reason. DDB London learned this week that it had scooped the £75m Virgin Media account, previously with RKC&R/Y&R.

Woodford: Walking tall

Its understandably chipper chief executive Stephen Woodford tells me that the agency’s proposed integrated strategy was key to winning the business. Whatever, it’s not every day an agency wins an account that instantly boosts its income by 10%. And it gets better. DDB is heavily dependent upon international business, such as VW. Virgin is almost entirely domestic. It thus provides the London office with some valuable “shop window” advertising that should in time attract other local buyers.


BSkyB loses pay TV battle but wins the war

March 31, 2010

So, BSkyB has lost the battle over what price it charges rivals Virgin Media, BT and Top Up TV to transmit Sky Sports, after the regulator Ofcom imposed a swingeing cut of nearly 24% on wholesale prices paid for Sky Sports 1 and 2.

You wouldn’t think so, though, to judge by BSkyB’s share price which, in early trading this morning, soared 3%. Now why would that be?

Most of the answer is succinctly supplied by Gavin Patterson, head of BT Retail – quoted in The Guardian:

“Ofcom should have gone much further than it did. They have dropped movie channels, which should have been included. They should have included all Sky Sports channels, not just two [and] the wholesale price for the two sports channels is higher than the regulator had previously suggested.” Deconstructed, from BSkyB’s point of view: ‘Phew! It could have been a lot worse.’

One other thing. Ofcom has given the go-ahead to BSkyB’s Picnic project, as a quid pro quo to accepting its wholesale prices ruling. Picnic, which stalled some time ago after running into trouble with the regulator, would enable BSkyB to replace its three Freeview free-to-air channels, Sky News, Sky3 and Sky Sports News, with a potentially lucrative pay TV proposition.

No wonder the City is chortling. BSkyB, however, seems less happy. It has immediately lodged an appeal against the Ofcom ruling. Which, given the lengthy legal prevarification involved, will make its rivals even more irate.

For more on the background to the pay TV dispute, look here.


Ofcom ‘double standards’ in BT pension investigation

December 4, 2009

If I were Jeremy Darroch, chief executive of BSkyB, I would be incandescent at Ofcom giving BT a sympathetic hearing over its proposal to cane consumers with extra broadband charges so it can stuff its depleted pension fund.

Here’s why.  Ofcom appears to be operating a set of dual standards when it comes to regulatory investigation. On the one hand, it is perfectly prepared to consider lowering the wholesale prices that BSkyB charges its rivals for pay-TV programme rights. Principal beneficiaries? Virgin Media, Top Up TV and, er, BT Vision.

On the other hand, it is equally prepared to consider raising wholesale prices when such an action would benefit BT. As for example, with the line rental charged by BT wholesale subsidiary Openreach to third party broadband customers, such as TalkTalk  – and BSkyB. Ofcom says it wants to benefit the end-user of pay-TV by lowering prices; yet contradictorily it implies end-users generally may have to carry the passed-on burden of raised broadband tariff prices should BT’s pension stuffing be deemed ‘in the public interest’.

There’s more. The ostensible reason for an investigation into the pay-TV market is that BSkyB operates a complex monopoly, which may need to be moderated by introducing an independent pricing structure monitored by Ofcom. Wait a minute, though. Doesn’t BT also operate a complex monopoly – in the supply of broadband (copper-wire-based) infrastructure? And isn’t Ofcom opening itself to the charge of propping up that monopoly if it let’s BT’s proposal through?

The crux of the BT rationale is that it provides a vital public service, at a loss. In other words, it has had to run a pension deficit as a result of conditions (the regulatory framework; the rising longevity of its employees etc) beyond its reasonable control.

Yet it is far from evident that these are the only, or even the major, preconditions which have led to BT’s pension deficit. After all, isn’t this the same BT that for some years declined to pay money into its pension fund, to the more or less exclusive benefit of shareholders? And which wilfully embarked on a high-risk global expansion strategy that eventually boomeranged on all its stakeholders disastrously?

Ofcom, which has no doubt employed entirely objective criteria in investigating these separate yet related issues, nonetheless risks accusations of conflict of interest if it finds in favour of BT. All the more so because it has now become a football in the increasingly acrimonious war between HMG and Rupert Murdoch. If the NewsCorp-backed Tories get in next year, Ofcom will most likely find itself history.


Falling out of Phorm

July 9, 2009

BadgerPoor old “Badger” Lamont. The former chancellor of the exchequer must be ruing the day he lent his name to controversial behavioural targeting company Phorm as a non-executive director.

Earlier this week, Phorm brushed off its rupture with British Telecom (only the UK’s leading internet service provider, after all) as nothing more than a hiccup in a global expansion strategy that also involves, er, Korea. Now the number 2 ISP, TalkTalk, has also dissociated itself from Phorm’s proprietary Webwise service. Which leaves Virgin Media as its only prospective customer in the UK. Except that Virgin has neither tested Webwise, nor entered into any exclusive arrangement with Phorm. Which doesn’t, on the face of it, leave the company with many sizeable alternatives in the UK.

BT – targeted advertising that is – holds great promise for the advertising community. The possibility of giving the lie, once and for all, to Leverhulme’s adage about wasted ad budgets is one evident attraction. But there is also subtler potential in the way that the generic version, practised by Phorm, works. Because ISPs harvest the behavioural data, they would be able to charge advertisers for the privilege. It was hoped that part of this extra revenue stream might in some way – perhaps through government levy – be channelled into the reconstruction of our ageing broadband infrastructure. That at least was the aspiration voiced earlier this year by head of Ofcom Ed Richards.

Unfortunately for advertisers, Phorm’s notoriety as an alleged agent of “snoop culture” has preceded the widespread adoption of generic BT, placing a hand on its windpipe at birth.

The generic version – enshrined in Webwise – is, of course, not the only type of BT in use. Big portals, such as Google, Yahoo! and Amazon, all have their proprietary version of what is sometimes euphemistically referred to as “interest-based advertising”, derived from tracking the behaviour of their customers via cookies. To what extent these may be regarded as an invasion of privacy, as opposed to satisfying the customer’s needs, is a matter of debate.


%d bloggers like this: