Confidential

Smart Phone Market Review

Prepared by:

NewMomentum, Inc.

Q4/2011

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Confidential

Contents

Objectives of Market Review

Methodology

Key Findings

General Market Summary

Suspect Market Summary

Conclusions

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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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Confidential

MonitorProcess

DataMeasureResults

Methodology

SelectProducts

� 5 brands� 23 products

�Standalone phones; not phone and plan bundles offered through legitimate carriers

� 17 online marketplaces

� 1 month of monitoring

� Filter, label, and classify collected data

� Apply risk indices based on business rules to identify� Potential

suspect sellers� Potential

suspect listings

� Overall market summary

� Suspect market summary

� Breakdown by manufacturer, region, suspect classification

eBayAlibaba任何人 無處Amazon

Taobao

mercadolibre

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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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General Market Summary

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General Market Summary

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5,101

4,657

2,199

1,050 757

Number of Sellers

Brand A

Brand B

Brand C

Brand D

Brand E

Total Unique* Sellers: 11,016

* Sellers can represent multiple brands

Total Number of Listings: 25,759

12,706

6,856

3,328

1,835 1,034

Number of Listings

Brand A

Brand B

Brand C

Brand D

Brand E

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General Market Summary

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Total Reported Available

Sales Volume: $33.8 billion

$29,005,406,014

$3,601,750,173

$926,953,165

$28,284,830 $248,571,516

Reported Available Sales VolumeBrand A

Brand B

Brand C

Brand D

Brand E

$3,912,433,001

$3,301,114,161

$759,751,075

$28,284,830 $248,571,516

Adjusted* Available Sales Volume

Brand A

Brand B

Brand C

Brand D

Brand E

Total Adjusted Available

Sales Volume: $8.3 billion

* maximum quantity per listing capped

at 100K units

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Top Ten Products

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$- $500,000,000 $1,000,000,000 $1,500,000,000 $2,000,000,000 $2,500,000,000

Brand C Product 2

Brand A Product 6

Brand A Product 5

Brand C Product 1

Brand A Product 4

Brand A Product 3

Brand B Product 2

Brand A Product 2

Brand A Product 1

Brand B Product 1

$131,747,130

$160,182,552

$245,277,898

$448,453,683

$551,784,024

$766,218,837

$826,594,208

$875,741,300

$1,313,228,391

$2,474,519,953

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Region Breakdown

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0%

10%

20%

30%

40%

50%

60%

Americas APAC EMEA

31%

56%

14%

0%

10%

20%

30%

40%

50%

60%

70%

Americas APAC EMEA

18%

62%

20%

Americas 3,379

APAC 6,143

EMEA 1,494

Total 11,016

# of Sellers by Region

Americas 4,537

APAC 16,012

EMEA 5,210

Total 25,759

# of Listings by Region

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Top Ten Marketplaces Based on # of Listings

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432

432

982

1,039

1,288

1,319

1,407

1,663

4,009

12,720

- 2,000 4,000 6,000 8,000 10,000 12,000 14,000

ALIBABA

HC360

MERCADOLIBREAR

ALIEXPRESS

MERCADOLIBREMX

MERCADOLIBREBR

PAIPAI

AMAZON

FUDZILLA

TAOBAO

Number of Listings

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Discount Levels

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Discounts offered by the 11,016 monitored sellers

1,013

sellers

1,152

sellers

1,908

sellers

2,519

sellers

2,441

sellers

1,251

sellers

732

sellers

0%

5%

10%

15%

20%

25%

Selling abovelist

Discount < 15% Discount 15% -30%

Discount 31% -45%

Discount 46%to 60%

Discount > 60% No priceavailable

9%

10%

17%

23%22%

11%

7%

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Suspect Market Summary

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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

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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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

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-

2,000

4,000

6,000

8,000

10,000

12,000

0 - 5 6 - 10 11-15 16-20 Over 20

10,081 10,705

2,738

1,699

536

Nu

mb

er

of

Lis

tin

gs

Listing Score Range

# of Listings

Suspect Listings Summary

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Higher ranked listings are

more likely illicit

Distribution of 25,759

collected listings by

listing score

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

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Higher ranked sellers pose

greater potential risk

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

Suspect Sellers Summary

Distribution of 11,016

unique sellers by SRI

score

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

0 - 10 11 - 25 26 - 50 51 - 75 76 - 100 Over 100

4,741

2,455 2,591

886

167 176

Nu

mb

er

of

Sellers

SRI Score Range

# of Sellers

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0

50

100

150

200

250

300

350

400

450

500

0 - 10 11 - 25 26 - 50 51 - 75 76 - 100 Over100

Brand A Product 2 / Sales Volume Rank #3

0

100

200

300

400

500

600

700

0 - 10 11 - 25 26 - 50 51 - 75 76 - 100 Over100

Brand A Product 1 / Sales Volume Rank #2

Suspects by Product

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These Brand A products carry the greatest risk for illicit sales

0

100

200

300

400

500

600

700

800

0 - 10 11 - 25 26 - 50 51 - 75 76 - 100 Over 100

Brand B Product 1 / Sales Volume Rank #1

0

200

400

600

800

1000

1200

1400

1600

0 - 10 11 - 25 26 - 50 51 - 75 76 - 100 Over100

Brand B Product 2 / Sales Volume Rank #4

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Top 10 Suspects for Brand A

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Highest-Ranked Seller Info

Seller Detail

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Top 10 Listings

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Listing Detail

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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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Confidential

Contact Information

Pam Passaretti

CEO

(415) 710-4466

ppassaretti@newmo.com

Holger Hoppe

CTO

(707) 349-5515

hhoppe@newmo.com

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