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  • What AOL May Not Be Telling Its Advertisers 0 comments
    May 10, 2009 11:40 PM | about stocks: KO, MCD, TWX, MDVX.OB, VCLK

     

    Recent articles here at Seeking Alpha have chronicled an ongoing battle with respect to just exactly who is the legal owner of some of the internet’s most valuable patented intellectual property related to targeted online advertising. This foundational patented technology appears to be a cornerstone of some of the Internet’s biggest household names and their ad platforms and online advertising strategies, thereby playing an integral role in the monetization process.
     
    The story has recently been the focus of speculation in both “Modavox Surges on Favorable Patent News” News by Microcap Speculator and Modavox Bringing a Gun to the Online Advertising Knife Fight” by Trader Dave, amongst others.
     
    I think they both articulated a well thought out overview with respect to Modavox (MDVX) including citing the many potential implications and ramifications to the space and players within it. However, I wonder if the authors were just a little myopic in focusing primarily on just Modavox. This isn’t just about them, it’s also about ValuClick (VCLK) as well, as both companies own important patents related to this process, with ValueClick’s having been enforced in the form of multiple settlements, while Modavox appears well on their way to enforcing theirs in the current AOL/Tacoda suit (TWX). But the story isn’t just about them; it dwarfs them. The story literally questions the entire structural integrity and value proposition of some of the Internet’s biggest names and their online advertising businesses. It strikes right to the heart of multi-billion dollar business initiatives, the revenue drivers and future of many of these companies.
     
    But this is still not where the story ends. AOL boasts some very large and recognizable brands that utilize their platform. Brands like Coke (KO), McDonalds (MCD) and Snapple are just a few of their most recognizable advertising clients. These multi-billion dollar corporations, most of them household names, are leveraging and relying on AOL’s online advertising platform to further build their own brands. But is there something AOL may not telling them?   
      
    You see, my understanding is that patent law is unique in that it allows anyone who makes, uses or sells the infringed patented system/method to be potentially liable. Thus, not only the source of the infringing system/method is liable, but potentially everyone in the distribution/use chain. Guess who is included in that distribution/use chain? In the case of Tacoda being sued by both ValuClick and Modavox, included are all of those advertisers utilizing AOL’s online advertising system. So not only must AOL’s advertisers worry about return on their ad spending but they must now also worry about this additional liability. 
     
    Author is Long TWX, MDVX and VCLK
     
     
    Stocks: KO, MCD, TWX, MDVX.OB, VCLK
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