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Modavox…Bringing a Gun to the Behavioral Targeting and Marketing Knife Fight 

There’s a fierce battle taking place in the Behavioral Targeting and Marketing arena and it involves some of America’s biggest Internet corporate giants, all fighting for the survival of their online advertising initiatives. Microsoft (MSFT), Google (GOOG), AOL (TWX) and Yahoo (YHOO) amongst others are all now trying to monetize their large online audiences composed of numerous acquisitions costing billions of dollars. The question remains, is there a gun that could put an end to the proverbial knife fight? That gun just may be a company named Modavox, recently written about here by Microcap Speculator in his article “Modavox Surges on Favorable Patent News”

eMarketer estimates the online advertising industry is predicted to generate 28 billion in revenues in 2009 and 32 billion in 2010. The key is that there exist patents that cover the core monetization and targeting technology to this entire space and guess who owns them?  

The original Modavox patent issued in 2002 has a priority date of October 1999 and that predates Microsoft, Google, AOL’s and Yahoo’s targeted advertising initiatives. The company subsequently had a new patent issued in 2007. Both patents are in force through 2018 and two Continuation filings have been filed along with one Divisional filing leaving open the door to additional inventions and claims stemming from the original.

The distribution process owned by Modavox allows any webpage to provide users with customized content. The process provides for the targeting widely utilized in advertising delivery space and also covers the targeting systems allegedly even used by ecommerce sites such as Amazon and Ebay.  The Modavox IP provides the ability to own and license the delivery of targeted advertising the behavioral subset, and other targeting such as geographic targeted advertising.  By owning Modavox’s IP, the eventual purchaser of Modavox would assume ownership and dominance of this key technical space.  

Modavox’s is already two years into a patent infringement suit against Tacoda, founded and sold by David Morgan to AOL for $275 Million. They recently added AOL, TWX and Platform A to the infrigment list. ValuClick (VCLK) has also filed suit against AOL’s Tacoda, again for patent infringement.  Yahoo recently indicated they may be going after AOL for the $375 million purchase of Quigo alleging possible patent infringement.

The Modavox IP portfolio would seemingly provide its eventual owner with protection against these lawsuits and could be used to counter Behavioral patents and other patents that emerge from the backend, data collection, or other related IP that ultimately uses the Modavox system to distribute and monetize advertising or customized content to end users.  Obviously the eventual owner of Modavox’s IP would see these cases either fortified or undermined depending on the purchaser.

AOL’s Platform A has seen $1.5 billion of collective investment. Tacoda and Quigo account for roughly $640 million of that investment and both of their respective technologies are foundational to online advertising audience monetization. To undermine AOL’s ability to leverage these technologies undermines Platform A and AOL’s complete online advertising strategy.

Any other major player in the space owning Modavox’s patented IP puts them squarely in the position of being able to bring the proverbial “gun to the knife fight.” Yahoo owning Modavox’s IP would also appear to make them more attractive to a Microsoft if rumored recent advertising partnerships between the two are accurate. Modavox’s recent Cease and Desist letter to Yahoo indicating they believe Blue Lithium, purchased by Yahoo for $300 million and representing the core of their targeting technologies, is infringing on Modavox’s technology, probably doesn’t help Steve Ballmer’s comfort level.    

The Modavox IP also includes the Augme Mobile platform and offers additional value to anyone of the big players in that it further enhances their position in the mobile space and provides again key ownership of sought after targeting within the technical space. The Global mobile targeting initiative just launched by Google would be an example of a technology system that would appear to be suspect of infringement on Modavox patents with respect to targeting within the mobile space.  

In summary, anyone of these or another large company buying Modavox will materially enhance their intellectual property portfolio while likely fortifying the foundation of their own existing proprietary technology.  It will enable a next generation of mobile and Internet targeting that can be deployed to support and further enhance revenue generation capability.  Importantly, the significant progress evidenced in the recent Markman ruling in the case versus Tacoda has the potential for another player to see its investment in Modavox recouped with a subsequent settlement, license or judgment. Modavox’s favorable disposition in the current case could clearly be favorably leveraged.

So there’s the gun…it will be interesting to see which one of these companies CEO’s are quickest on the draw…

Author has no position in any stocks mentioned.