Brandjacking Index®Special Edition

Luxury Goods

Contents

Executive Summary .................................................................................... 3

Key Findings ............................................................................................... 3

How Fraudsters Drive Traffic ....................................................................... 5

Rogues Gallery ........................................................................................... 7

Summary .................................................................................................... 9

Methodology & Background ....................................................................... 9

Glossary ..................................................................................................... 10

Special Edition - Luxury Goods

Brandjacking Index®

E-commerce site selling suspicious bags generates more than five millionvisits annually

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Brandjacking Index®: 2010 - Special Edition

Executive Summary

Everyone wants a bargain, but when it comes to buying luxury handbags and other premium goods online, the deals are often too good to be true. Given the lure of these brands, however, it is no surprise that web-savvy purveyors of suspicious goods lure online shoppers to their sites. What is surprising, however, is the amount of online traffic generated by these scammers: visits to suspicious sites number nearly half the traffic generated by the legitimate dot com sites.

In this special edition of the Brandjacking Index®, we look at online brand abuses in the luxury consumer goods sector. It isn’t a pretty picture, despite the smooth buttery leather exterior that many of the real handbags offer. To complete our analysis, we examined ecommerce sites, business-to-business (B2B) trading sites and paid search advertising for five specific luxury goods brands from major European design houses.

Key Findings

We found that purveyors of suspected counterfeit goods are very visible across the Internet, and they are also very good at generating traffic. Through various search engine marketing techniques, the bad guys attract at least 120 million visitors annually to their ecommerce sites. This figure represents almost half the traffic attracted by the legitimate dot com sites for those brands.

As with other industries that we have examined, we found that cybersquatting—the misleading practice of including a brand name within the domain name it-self—is popular in the luxury sector. We identified more than 1,200 websites that contain one of the five luxury brands in our study. None of those websites had any rights to that brand, and, thus, had no right to use the brand in the domain name.

There are thousands more domain names that don’t contain any brand names but purport to be legitimate online locations selling real goods. However, these sites, too, are stocked full of suspicious goods. One site, handbagcom.com, sells nothing but handbags of suspicious provenance.

“ ”Sellers of suspected fakes are adept atdriving web traffic.

Suspicious goods online, study of five luxury brands

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Brandjacking Index®: 2010 - Special Edition

Search engine advertising is another important investment that generates traffic to these sites and the advertisers don’t always ‘play by the rules’. We identi-fied more than 50 different vendors who purchased keywords involving the five brand names in our study. Using branded keywords to drive traffic to sites offering counterfeit or pirated goods is against the rules at each of the ‘big three’ search engines. However, the search engines do not prevent or monitor this type of be-havior. Instead, the brand must initiate action with the search engines to remove the offending ads.

Questionable quality isn’t limited to the retail sector, either. When it comes to the wholesale supply chain, we found almost 4,000 sellers of suspicious goods on business-to-business (B2B) exchange sites for just these five brand names. These sellers generated almost 12,000 listings for suspicious goods on 12 B2B exchanges and often advertise the ability to supply up to thousands—and some-times millions—of pieces per year. The average selling price on the B2B exchang-es for these goods is a little more than $100, or on average 80% below the retail prices of genuine merchandise.

In addition to the e-commerce sites and B2B exchanges, we identified more than 1,400 suspect counterfeit sellers on 10 business-to-consumer (B2C) exchanges, including auction sites and classified ad sites. These sellers generated almost 3,600 additional listings. The distribution of these sellers is truly global as well, with 55% of the sellers located in North America, 29% in Asia Pacific and 16% throughout Europe. The average selling price for these goods across all B2C sites is a little more than $300, or on average, 45% below the retail prices of the real merchandise.

A summary of our findings is shown below.

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Suspicious sites generated almost half the traffic of legitimate sites.

Common ways customers find brands via search

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Suspected counter-feiters siphonactual prospects away from ‘the real deal’.

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Brandjacking Index®: 2010 - Special Edition

How Fraudsters Drive Traffic

The operators of these sites are sophisticated, and use the same promotional methods that legitimate online marketers use to attract visitors. Three of the most common methods used to find web sites are:

• Direct navigation, typing the domain name into the browser.

• Organic search, selecting a site from the natural search results or search engine results page (SERP); search engine optimization (SEO) is a key technique used by legitimate sites to increase their placement on the SERP.

• Paid search ads, selecting a site from a sponsored ad shown on the SERP as a result of the advertiser purchasing keywords to generate relevant ads.

How fraudsters steal search traffic

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Legitimate luxury marketers are com-peting with suspect-ed counterfeiters for web traffic.

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Brandjacking Index®: 2010 - Special Edition

Fraudsters exploit these methods by taking advantage of legitimate brand names and interactive marketing techniques to steal traffic:

• Cybersquatting, the practice of abusing trademarks within the domain name system. Scammers register domain names that include well-known brands, such as “guccioutlet.com”, and intercept traffic searching for the legitimate brand.

• Black hat SEO, a collection of techniques, including cybersquatting, to increase site rankings. Additional techniques include using the actual brand in page titles and meta tags as well as having a large number of inbound links. These techniques are designed to trick the search engines into thinking sites are legitimate at the expense of the actual branded site.

• Paid search scams, the practice of buying branded keywords to generate ads for sites offering suspected counterfeit goods. This practice intercepts traffic meant for the legitimate sites and drives up the cost for purchasing branded keywords for the rightful brand or affiliated resellers.

Cybersquatted site sells competitive brands, too

Paid search scam exploiting a popular luxury brand

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Brandjacking Index®: 2010 - Special Edition

A search for seasonal sales of a leading luxury brand generated a clear example of a paid search scam, with the following ad on the SERP. The ad in turn led to a cybersquatted site selling suspected counterfeit goods.

Rogues Gallery

These sites appear professionally produced and generate appreciable traffic. This example of a site with acybersquatted name sells suspicious quality goods from a wide variety of luxury labels. The site generates visits in excess of 400,000 per year.

Black hat SEO techniques drive substantial traffic at the expense of the legitimate brand

Bulk manufacturers of suspicious goods use B2B exchange sites to promote their business

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Brandjacking Index®: 2010 - Special Edition

In this example, black hat SEO techniques drive significant traffic, with the site attracting 3.3 million visits annually. This site uses a combination of techniques—cybersquatting, including the brand name in the meta tags and page title, as well as large numbers of inbound links. These techniques propel the site to a number one position in organic search for the term ‘Louis Vuitton on sale’.

Bulk manufacturers of questionable-quality branded goods are similarly adept at showcasing their capabilities. This B2B exchange site listing claims the manufacturer can supply more than 52,000 units annually for $10 to $15 per item in lots of up to a thousand pieces.

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Brandjacking Index®: 2010 - Special Edition

Summary

The amount of traffic flowing to sites offering suspicious luxury goods is startling and speaks as much to consumer demand as it does to the interactive marketing savvy of site operators. While it’s debatable that the person who purchases a $100 fake handbag is an actual customer for the real item, the fact that suspicious sites promoting these five luxury brands generate more than 120 million visits annually indicates that actual prospects are being siphoned away from ‘the real deal’ by suspected counterfeiters.

If even 10% of those visits represent valid customer prospects for luxury products, then 12 million visits per year are being led away from their desired destination —and interactive marketers in the luxury segment are paying the price in lost sales. To make matters worse, the legitimate luxury marketers are competing against counterfeiters to purchase their own brands as keywords, driving up the costs of legitimate online marketing campaigns and impact-ing campaign metrics and ROI.

As the luxury segment—and luxury buyers—continue to embrace the Internet, it’s vital that the industry takes aim at online counterfeiters, paid search scams and other forms of online brand abuse in order to reap the fullest return from their precious brands and carefully cultivated images.

Methodology and Background

The Brandjacking Index is produced by MarkMonitor® and analyzes trends and statistics about brand abuse online as well as anecdotal information about the business and technical methods used by brandjackers. The cornerstone of the Brandjacking Index is the volume of public data analyzed by MarkMonitor using the company’s proprietary algorithms. None of this data contains proprietary customer information.

This special edition of the Brandjacking Index drew conclusions based on data from major search engines, online marketplaces, Whois records and Alexa traffic estimates.

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Brandjacking Index®: 2010 - Special Edition

Glossary

Brandjacking – To hijack a brand to deceive or divert attention; often used in abusive or fraudulent activities devised for gain at the expense of the goodwill, brand equity and customer trust of actual brand owners.

Black Hat SEO – The use of brands, slogans or trademarks located in visible text, hidden text, meta tags and title in order to manipulate search engine rankings so that the brandjacker’s site can gain a more favorable search engine placement.

Cybersquatting – The practice of abusing trademarks within the domain name system.

Domain Kiting – The process whereby domains are registered and dropped within the five-day ICANN grace period, and then registered again for another five days. Kiting a domain lets the registrant gain the benefit of ownership without ever paying for the domain.

eCommerce Content – Websites containing a specified brand that appears in visible text, hidden text, meta tags or title in conjunction with other site content that indicates online sales are being transacted on the site.

False Association – The practice of using a specified brand or trademark in web content to imply a relationship with a company or brand where none exists.

Offensive Content – Websites containing a specified brand that appears in visible text, hidden text, meta tags or title in conjunction with pornographic, online gaming or hate content.

Paid Search Scams – Occur when a brand is used without permission, within a paid search scenario to drive web traffic to a competitive or illicit site.

Phishing – Criminal use of email to divert traffic to websites in order to fraudulently acquire usernames, passwords, credit card details and other personal information. The email and websites used in these operations employ “social engineering” techniques to trick users into believing they are interacting with a business or organization that they trust.

Rock Phishing – A method of phishing first implemented by the ‘rock’ phish gang that utilizes multiple layers of redundant infrastructure to increase the difficulty of shutting down the attack. Other phishers are now using these tactics as well.

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