March 24, 2003 1:10 PM PST

Amazon makes bid for Web-ad patent

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Online retailer Amazon.com has filed for a patent on a method for auctioning Web advertisements, a move that raises questions about the company's interest in the ad market.

The e-commerce giant, which sells limited advertising space on its Web site, recently filed with the United States Patent and Trademark office for a patent that deals with Internet ads. The application was updated Friday.

Specifically, the company is seeking a patent for "a method in a computer system for allocating display space on a Web page, the method comprising: receiving multiple bids indicating a bid amount and an advertisement," according to the application. The system continues with "receiving a request to provide the Web page to a user; selecting, based at least in part on review of bid amounts, a received bid; and adding the advertisement of the selected bid to the Web page."

Amazon spokesman Bill Curry declined to comment on the application or if the company already offers such a Web advertising system on its site.

Internet media executives say Amazon has not presented such an offering to the ad-buying community. Instead, they say, the proposed method takes a page from cost-per-click advertising with search engines such as Overture and Google. One of the hottest segments in the industry, cost-per-click advertising lets marketers bid for placement in search results related to specific keywords; those results are displayed on a network of popular sites such as Yahoo and MSN.

"Amazon is clearly following the pay-per-click search model--the problem with that is that with search, people are bidding on specific terms, and there's a finite number of those terms," said Jerry Quinn, media director for Agency.com's iTraffic, a San Francisco-based interactive agency. "Amazon's not a media Web site, so I wonder how it would package inventory" to create relevancy and demand.

The e-commerce giant has long been aggressive about Internet business patents for ideas or technology in use or from which it expects to profit. In February, it received a patent for an online retailing chat technology. Last year, it filed two patent applications related to its Honor System, an online payment system that lets Web sites accept small, charitable donations and to charge for content. In addition, it has received patents on its 1-Click purchasing process, its affiliates program and its recommendation service.

Patent attorneys say that such business method patents are common within the computer industry, dating back to 1998. At that time, in the case of State Street Bank & Trust Co. v. Signature Financial Group, the courts held that an abstract idea may constitute patentable subject matter if it can be reduced to a practical application that produces a useful and concrete result, according to Jason Epstein, business technology lawyer with Baker Donelson Bearman & Caldwell. After that, a flood of computer-related patents were granted, including Amazon's 1-Click patent for quick checkout on an e-commerce site. Epstein said, though, that the patent office has been curtailing its grants of various business methods patents because of criticism that the patented ideas were overbroad and obvious.

Advertising analysts question Amazon's motives and the underpinnings of the idea, which has been tested before. During the Internet boom several companies, including AdAuction.com and One Media Marketplace, sold advertising inventory on Web sites by auctioning the space to the highest bidder. But the business was unstable because a glut of ad inventory on Web sites failed to create enough demand. Like many dot-coms, AdAuction and others went belly up.

"The question is would anyone want to buy advertising that way?" said Jim Nail, ad analyst with Forrester Research. "In order to have an auction, you need to have a standardized product so that advertisers would want it. There are subtle differences in advertising audiences that make it virtually impossible to get a whole lot of buyers who want the same placement at the same time."

According to Amazon's patent application, it plans to cover similar ad targeting. "The bid may also include various criteria that specify the Web pages on which the advertisement may be placed, the users to whom the advertisement may be presented and the time when the advertisement may be placed," according to the patent application, which lists Amazon CEO Jeff Bezos as one of the inventors.

David Halprin, an Internet analyst and consultant based in Belmont, Mass., speculated that Amazon may aim to enter the advertising auction market for business-to-business customers. Or the company may aim to profit from the patent later when and if other companies begin to offer such a service.

"Now when people come up with new ideas, they're more apt to try to create a patent and wait for things to evolve," Halprin said. "It may be something that they want to do or (that they want to) sell later."

 

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