Explore global online markets for the presence of potential illicit seller activities across 5 popular smart phone brands. Measure the size and distribution of the problem across brands and regions. Identify areas at significant risk of counterfeiting and/or diversion.

1. Smart Phone Market Review
Prepared by:
NewMomentum, Inc.
Q4/2011
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2. Contents
Objectives of Market Review
Methodology
Key Findings
General Market Summary
Suspect Market Summary
Conclusions
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3. Objectives of Market Review
Explore global online markets for the presence of potential
illicit seller activities across 5 popular smart phone brands.
Measure the size and distribution of the problem across
brands and regions. Identify areas at significant risk of
counterfeiting and/or diversion.
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4. Methodology
Select Process Measure
Monitor Data Results
Products
5 brands 17 online Filter, label, and Overall market
23 products marketplaces classify collected summary
Standalone phones; 1 month of data Suspect market
not phone and plan monitoring Apply risk indices summary
bundles offered based on business Breakdown by
through legitimate rules to identify manufacturer,
carriers Alibaba
eBay Potential region, suspect
Taobao
suspect sellers classification
人何任 Potential
Amazon 處無 suspect listings
mercadolibre
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5. Key Findings
• Internet monitoring revealed over 25K listings of the subject products
offered for sale by over 11K sellers
• Total available sales volume reported was over $33 billion (calculated as quantity
offered for sale X price in the listing)
• Potential sales volume was over $8 billion even after adjusting for “outliers” by
capping maximum quantity per listing at 100K units
• Significant discounts were offered by the 11K sellers
• 23% of the sellers offered products at a 31% to 45% discount
• 22% of the sellers offered products at a 46% to 60% discount
• Discounts varied largely by region
• APAC showed the highest level of discounting with 64% of the sellers offering
products at >30% discount
• EMEA showed the lowest level of discounting with only 24% of the sellers offering
products at >30% discount and 23% actually selling above list price
• APAC represented over 50% of the listings found
• Taobao was by far the biggest source of listings with more than 12K of the 25K
product offerings
• Over 8K sellers (76%) have significant risk indicators
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6. General Market Summary
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7. General Market Summary
Number of Sellers
757 Brand A
1,050
Brand B
5,101 Brand C
Total Unique* Sellers: 11,016
2,199
Brand D * Sellers can represent multiple brands
Brand E
4,657
Number of Listings
1,034 Brand A
1,835
12,706 Brand B
3,328 Brand C
Brand D
Brand E
Total Number of Listings: 25,759
6,856
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8. General Market Summary
Reported Available Sales Volume
$28,284,830 $248,571,516 Brand A
Brand B
$926,953,165
Brand C
Total Reported Available
$3,601,750,173
Brand D Sales Volume: $33.8 billion
Brand E
$29,005,406,014
Adjusted* Available Sales Volume
Brand A
$248,571,516
$28,284,830 Brand B
$759,751,075
Brand C
Brand D
Brand E
$3,912,433,001
$3,301,114,161
Total Adjusted Available
Sales Volume: $8.3 billion
* maximum quantity per listing capped
at 100K units
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9. Top Ten Products
Brand B Product 1 $2,474,519,953
Brand A Product 1 $1,313,228,391
Brand A Product 2 $875,741,300
Brand B Product 2 $826,594,208
Brand A Product 3 $766,218,837
Brand A Product 4 $551,784,024
Brand C Product 1 $448,453,683
Brand A Product 5 $245,277,898
Brand A Product 6 $160,182,552
Brand C Product 2 $131,747,130
$- $500,000,000 $1,000,000,000 $1,500,000,000 $2,000,000,000 $2,500,000,000
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10. Region Breakdown
56% # of Sellers by Region
60%
50% Americas 3,379
APAC 6,143
40%
31% EMEA 1,494
30% Total 11,016
20% 14%
10%
0%
Americas APAC EMEA
70% 62%
# of Listings by Region 60%
Americas 4,537
50%
APAC 16,012
EMEA 5,210 40%
Total 25,759 30% 20%
18%
20%
10%
0%
Americas APAC EMEA
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11. Top Ten Marketplaces Based on # of Listings
TAOBAO 12,720
FUDZILLA 4,009
AMAZON 1,663
PAIPAI 1,407
MERCADOLIBREBR 1,319
MERCADOLIBREMX 1,288
ALIEXPRESS 1,039
MERCADOLIBREAR 982
HC360 432
ALIBABA 432
- 2,000 4,000 6,000 8,000 10,000 12,000 14,000
Number of Listings
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12. Discount Levels
25%
23%
22%
20%
17%
15%
11%
10%
9%
10%
7%
5%
0%
Selling above Discount < 15% Discount 15% - Discount 31% - Discount 46% Discount > 60% No price
list 30% 45% to 60% available
1,013 1,152 1,908 2,519 2,441 1,251 732
sellers sellers sellers sellers sellers sellers sellers
Discounts offered by the 11,016 monitored sellers
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13. Suspect Market Summary
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14. Suspect Indicators
Suspect Listings: Listings Risk Index (LRI)
• Points awarded to each listing for potentially negative indicators
• Higher score equals higher probability of illicit listing
Indicator Points Awarded
Quantity Available = 1,000 to 10,000 units 5
Quantity Available >= 10,000 units 8
Product Offered at Discount > 40% 10
Listing on Known High Risk Marketplace 8
Listing Indicates Phone is “Unlocked” 5
Seller Claims to Be a Manufacturer 5
High Risk Selling Location or Port 5
Listing Indicates Product Copy or Replica 9
Suspect Sellers: Seller Risk Index (SRI)
• The sum of the LRI scores for all listings for a specific seller
• Higher score equals higher probability of suspect seller
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15. Suspect Listings Summary
Indicator Points Awarded # of Listings # of Sellers
Quantity Available = 1,000 to 10,000 units 5 2,627 1,248
Quantity Available >= 10,000 units 8 410 221
Product Offered at Discount > 40% 10 4,318 2,885
Listing on Known High Risk Marketplace 8 12,720 5,085
Listing Indicates Phone is “Unlocked” 5 2,039 1,088
Seller Claims to Be a Manufacturer 5 297 85
High Risk Selling Location or Port 5 507 187
Listing Indicates Product Copy or Replica 9 65 29
# of Listings
12,000 10,705
10,081
10,000 Distribution of 25,759
Number of Listings
8,000
collected listings by
listing score
6,000
4,000 2,738
1,699
2,000 536 Higher ranked listings are
- more likely illicit
0-5 6 - 10 11-15 16-20 Over 20
Listing Score Range
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16. Suspect Sellers Summary
Suspect Sellers: Seller Risk Index (SRI)
• The sum of the LRI scores for all listings for a specific seller
• Higher score equals higher probability of suspect seller
# of Sellers
5,000 4,741
4,500
4,000
Distribution of 11,016
Number of Sellers
3,500
3,000 2,591
unique sellers by SRI
2,455
2,500 score
2,000
1,500
886
1,000
Higher ranked sellers pose
500 167 176
-
greater potential risk
0 - 10 11 - 25 26 - 50 51 - 75 76 - 100 Over 100
SRI Score Range
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17. Suspects by Product
700
800 600
700 500
600
400
500
400 300
300 200
200
100
100
0 0
0 - 10 11 - 25 26 - 50 51 - 75 76 - 100 Over 100 0 - 10 11 - 25 26 - 50 51 - 75 76 - 100 Over
100
Brand B Product 1 / Sales Volume Rank #1
Brand A Product 1 / Sales Volume Rank #2
500 1600
450 1400
400
1200
350
300 1000
250 800
200 600
150
400
100
200
50
0 0
0 - 10 11 - 25 26 - 50 51 - 75 76 - 100 Over 0 - 10 11 - 25 26 - 50 51 - 75 76 - 100 Over
100 100
Brand A Product 2 / Sales Volume Rank #3 Brand B Product 2 / Sales Volume Rank #4
These Brand A products carry the greatest risk for illicit sales
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18. Top 10 Suspects for Brand A
Confidential

19. Highest-Ranked Seller Info
Seller Detail
Top 10 Listings
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20. Listing Detail
Confidential

21. Conclusions
• Illicit activity in the smartphone arena is very high
• Crosses regions, marketplaces, and brands
• Recommend each brand enacts a proactive program to protect their IP
• Online monitoring to provide a view into counterfeit, gray market and
reseller infraction activity
• Authentication tools to verify whether the products listed for sale are yours
• Track and trace tools to know where your product exited authorized
channels
• Continued monitoring to measure the impact of authentication solutions
and identify enforcement needs
• Recommend each brand enacts a program of ongoing investigation
and enforcement actions
• Test buys, seller company profiling, raids
• Cease and desist letters and DMCA letters to unauthorized sellers or others
infringing on your brand
• Auction site de-listings, ISP take down notices, ad de-listings
• Engagement of IP counsel for criminal and civil litigation
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22. Contact Information
Pam Passaretti
CEO
(415) 710-4466
ppassaretti@newmo.com
Holger Hoppe
CTO
(707) 349-5515
hhoppe@newmo.com
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