Be Free Inc. will be granted a patent Tuesday that covers targeted online advertising, an award that could make the little-known company a toll taker in the booming online-ad business.
Patent No. 5,848,396 "covers the ability to target advertising based on user preferences," said Tom Gerace, co-founder and executive vice president of business development for Be Free. That includes preference profiles based on "what sites you visit, how often you visit, what ads you view, how often you view them, what you click, and what you buy."
In theory, the Marlborough, Massachussetts, company could extract royalties from other targeted online advertising shops, including DoubleClick (DCLK) and Engage Technologies.
Some were chagrined that the US Patent and Trademark Office granted such a broad patent to Be Free.
"If Be Free suddenly gains a stranglehold on that, the whole billion-dollar online ad industry could start choking," said Jason Catlett, president of Junkbusters.
For advertisers, one-to-one marketing is the Web's great promise.
Increasingly, technology makes it possible to serve specific ads to individual surfers based on where they've been online, what they've read, and what they've bought. A company flogging Arizona golf vacations, for example, can pitch its promo to a user in snowy Buffalo, New York, who reads golf magazines and buys his Titleists through the Net.
"This technique is the basis for most of the targeting that ad networks do," said Catlett.
Advertisers are willing to pay a premium for a spot they know will hit its mark, and that has experts predicting the Web-ad business will explode into a US$10 billion business within the next few years. That's from about $1 billion now.
Though Be Free will now have the patent, it doesn't yet have a product. Its ad-profiling and targeting solution won't be available until mid to late 1999.
Meanwhile, Be Free hasn't yet determined how it will "leverage and defend" the patent, Gerace said. It's unlikely, though, that Be Free will try to shut competitors down.
"There are, no doubt, companies that have developed technology that overlaps with the patent in one way or another," said Gerace. "We will be looking to partner with those companies."
Those companies cast a wary eye at Be Free, but said they don't feel threatened.
"On the surface, the patent sounds like it steps into our space," said Paul Schaut, president and CEO of Engage. "But we have our own patents pending, and we think that we're in good shape."
In any litigation over patent disputes, crucial evidence of "prior art" come from Engage's pending patents Schaut said. If, that is, Engage had employed the contested technology prior to the patent awarded to Be Free.
DoubleClick, too, dismissed the threat. "We're not worried about it," said David Rosenblatt, a general manager at DoubleClick. "We're already in the market with a product that does this."
The prior-art defense most likely will be effective, patent experts said. "The majority of Internet patents I've seen just aren't valid," said Gregory Aharonian, publisher of the Internet Patent News Service. That's because the speed and breadth of innovation on the Web makes it extremely difficult for the patent office to determine who came up with a technology first.
"The patent office is evaluating these patents without knowing what's out there," said Aharonian. "Trying to enforce one of them is like dueling with wet spaghetti."
