Alibaba (NYSE:BABA) is a highly valuable organization doing business in a market that could be described as a combination of the markets addressed by eBay, Amazon, PayPal, and Google. This Chinese online and e-commerce company is a mere 15 years old. It started as Alibaba.com, a business-to-business portal to connect Chinese manufacturers with buyers all over the world. In September 2014, the conglomerate of web portals became the world’s largest IPO, valued at over US$230 billion.
Alibaba’s businesses include Taobao, Tmall, and Alipay. Taobaoisaconsumer-to-consumer portal, which similarly to eBay, allows people to sell anything to other people anywhere. Taobao features about 750 million products and is listed as one of the 20 most visited websites globally. Tmall, Alibaba’s business-to-consumer business unit, a spin off of Taobao, is estimated to have more than 50% of the Business-to-Consumer (B2C) market in China1. Finally, Alipay, an online payment escrow service, similar to PayPal, accounts for nearly half of all online payment transactions in China.
Can we understand a giant such as Alibaba by studying its patents instead of its products? IP acquisitions instead of sales figures? Can we predict where the company is going without looking at how much they have in the bank or their market share, but at how strong their IP portfolio is and which technology sectors they have better protected?
Alibaba’s Patent Portfolio
This is an interesting case of success in the Internet era. Part of the Alibaba story can be discovered when looking at their new product offerings, their investments in other companies, and partnerships. However, not all of Alibaba’s transactions are public, so we’ll examine in this paper how their patent filings may be indicative of future plans.
Let’s see what their intellectual property (IP) can tell us about their strategic intent. First, we will look at their patent portfolio and filing history in order to understand Alibaba’s IP position and priorities in relation to technology areas and geographic markets. Then, we will look into patent ownership changes or assignment changes to gain insight into Alibaba’s inorganic versus organic portfolio development: patent acquisitions and sales may give an indication of new market being pursued or markets being exited. Next, we will analyze Alibaba’s citations to get a sense of other important players that could compete or partner with Alibaba. Finally, we will use Innography’s PatentStrength™ technology to look at the relative strength of their IP portfolio compared to those of other top players. Comparing their portfolios will provide great insight to their potential as business partners.
Alibaba’s Patent Filings
Alibaba’s active patent portfolio contains more than 3,000 active grants and applications globally, only 25% of which are issued patents. In many cases we could red flag this kind of proportion, as pending applications represent a risk as they may or may not become granted patents. However, in this case, the young age of the portfolio may be the perfect explanation for the large number of pending applications. It was not until 2006 that Alibaba started filing patent applications in earnest and their portfolio shows an average of three years from file to publication with some patents taking up to six years to grant. Since 2010, the filing activity has increased even more drastically most likely due to the company getting ready for a large IPO. A company’s filing trends in many cases can give us insight to both current and future strategies and growth plans. The following chart shows Alibaba’s patent filings by jurisdiction.
In terms of jurisdictions, and as expected, Alibaba’s portfolio is dominated by Chinese patents, which account for near 45% of all their active filings. The world map visual illustrates the relative size of the sub-portfolios by country, which coincides closely with the major markets where Alibaba has a presence today: China, United States, Europe, Hong Kong, Japan, Korea, and Taiwan.
Looking further into the company’s actual patents and what technologies are represented, we can better understand their main technology areas of interest. Innography’s patent landscaping algorithms provide a great tool for this. PatentScape allows you to take a collection of patents and drill down into the title, abstract, and claims to understand both their content and their organization. The graphical representation of Alibaba’s portfolio using Innography’s PatentScape visual shows about half of their active patents relate to Databases or Search. These two categories are at the core of Alibaba’s main businesses: e-commerce and Search Engines. (Note: yellow represents applications, blue represents patent grants).
Patent Purchases and Sales
Next, let’s look at patents transactions and reassignments. Changes in assignee may provide insights on company’s strategy and IP moves. For example, Alibaba’s total portfolio includes 41 patents in which original assignee is not Alibaba but IBM, which has been reported by analysts as a strategic acquisition.2 Of these 41 documents, 25 are active assets and 14 of those have a PatentStrength™ score greater than 703, which is considered strong, as 70 and higher captures 98% of litigated patents in the US. The acquired patents are in diverse areas of technology including online payment processing, e-commerce security, Internet searching, content delivery, and file sharing. Most of these represent key current business areas for Alibaba. Content delivery is thought-provoking as Alibaba has been investing on a large scale in content and video streaming partnerships and may soon dominate video on demand services in China.
Of note, 1,205 active patents were have been assigned to Alibaba at different points in time. With Chinese patents, it is not uncommon for there to be delays in updates of assignment records.
Unfortunately, the patents that Alibaba reportedly acquired from Yahoo in 2013 have not been publicly disclosed and assignments have not been recorded. It will be intriguing when we can take a look at this important new part of their portfolio, which in all likelihood will strengthen their US patent portfolio.
No “out assignments” (meaning patents originally owned by the company and now assigned to a different entity) have been found in the Alibaba portfolio. This is not uncommon for a young organization in growth mode. As the organization matures, Alibaba may consider licensing as a revenue stream.
A great way to understand how influential a company is and whom they follow in a given marketplace, is by looking at their citations. Forward citations refer to patents that have cited the portfolio of interest and suggest companies following the lead of Alibaba. Backward citations help identify inventions or technology areas that others began and Alibaba is building upon. If we exclude self-cites, we can identify potential competitors and partners.
The table below lists the top 10 organizations citing Alibaba and the top 10 cited by Alibaba. It’s striking that many of the same names are in both columns, and in almost the same order. Key competitors definitely include Google, Amazon, Yahoo, and eBay. But are any of these also candidates for acquisition or partnerships?
A good way to understand a competitive landscape and to get a sense of the value of a given portfolio is to compare competitor portfolios side by side. Looking at the active patents and applications by Google, Yahoo, eBay, Amazon, and Alibaba, some interesting pieces of information can be obtained.
1. Google is a clear patent application leader based on their US and EP patent However, Alibaba leads the pack when looking at their portfolios in China, Hong Kong, and Taiwan.
2. The strength of Google is again evident when looking at the The other players considered: Amazon, eBay, and Yahoo, could eventually be strong business partners for Alibaba in these competitive markets.
The image below presents the distribution of Alibaba’s patents on a patent strength scale using Innography’s PatentStrength™ metric. A large concentration of patents is found in the mid-range in terms of strength. It is also worth noting more patents are in the top percentiles than in the low range, suggesting a strong portfolio as a whole.
Not surprisingly, the strongest patents in Alibaba’s portfolio are in a variety of technology areas including databases, search, mobility, content delivery, and security.
In comparing Alibaba to the US leaders, in the company comparison chart we see Alibaba’s patents (yellow) compared to eBay (blue). The relative high number of low PatentStrength™ scores represents Alibaba’s large number of pending applications.
Patent application filing trends can be great indicators of strategic direction. By looking at Alibaba’s filing trends you could have predicted expansion into new geographical markets outside China, expansion/ emphasis on specific technology markets such as Search, and a major strategic event: their 2014 IPO.
Assignment changes provide another side of the story. Acquisitions of patent portfolios are usually strategic moves to strengthen a portfolio in specific technology or geographic areas. In the case of Alibaba, the acquisition of valuable US patents is clearly a move toward a more international portfolio, especially useful in the face of a US IPO.
Citation analysis is useful to identify competitors and other key players in the market space. Once key players are isolated, competitive analysis provides valuable insights regarding the company and its position compared to others in the market. By comparing IP portfolios, leaders and followers can be identified, as well as potential strategic partnerships or acquisitions.
Alibaba is certainly growing its patent portfolio quickly and does not show plans to slow down. Its intentions to conquer more markets, in particular the US, are clear. It would not be a surprise to see more acquisitions of western IP, as well as companies to strengthen their product offerings and their ability to compete. Some acquisitions relating to viewing and streaming media online could be a natural next step.