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Drug Brandjackers Spend Millions on Search, Cybersquatting at All-Time High

Online brandjackers are increasingly abusing top-ranked pharmaceutical brands, putting deal-seeking consumers at risk of buying questionable prescription drugs on illegal online pharmacies and exchange sites, according to the Summer 2008 Brandjacking Index from MarkMonitor, MarketingCharts reports.

The Index, which tracks 30 leading brands across industries, found that online sales of fake, expired or gray-market drugs continue to grow as traffic to questionable sites has tripled and marketing tactics become increasingly aggressive.

Cybersquatting - the registration of domain names containing a brand, slogan or trademark to which the registrant has no right - of leading brands was up 38 percent and reached an all-time high this summer, according to MarkMonitor.

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Phishers - those who attempt to acquire personal information online by posing as a trustworthy source - are targeting an increased number of diverse organizations for the first time. The total number of organizations phished is up 20 percent since last year.

Millions Spent on Brandjacking

  • MarkMonitor estimates brandjackers spend $26 million annually for search advertising using only six drug-brand keywords.
  • Of the 2,986 online pharmacies studied, only two are Verified Internet Pharmacy Practice Sites (VIPPS), the industry credential that assures consumers of legitimate online pharmacy operations.
  • More than one-third of the online pharmacies in the study generate enough traffic to merit an Alexa ranking. Each of these sites sees an average of 99,000 daily visitors, more than triple 2007 numbers. MarkMonitor estimates that this traffic converts to $12 billion in annual sales for the six drug brands studied, an increase from the 2007 estimate of $4 billion.
  • Representative sampling of pricing for one popular drug brand shows an 85 percent average price discount at illicit pharmacies compared with certified pharmacies.
  • 64 percent of these 2,986 pharmacies do not secure customer data, putting consumers' identity information at risk. This number has grown from last year's 50 percent.
  • 49 percent of the 2,986 pharmacies were hosted in the US, followed by the UK, which hosted 12 percent, and Germany, which hosted 9 percent. The majority of brandjacking traffic overall originated in the US.

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  • Exchange sites that sell pharmaceuticals in bulk quantities by the pill as well as sell active pharmaceutical ingredients (APIs) risk corrupting the overall drug supply chain.
  • Analysis of just 40 listings on exchange and trade sites shows a $30 million wholesale market for the six brands studied.
  • 60 percent of pharmacies identified in 2007 are still operating, and 59 percent of online exchange listings identified in 2007 remain active.

This year-over-year trend data shows a grave situation, according to MarkMonitor. "The number of people looking to save money by buying pharmaceuticals over the Web is growing rapidly while scammers are more aggressively exploiting loose controls over online sales of drugs," said Irfan Salim, president and CEO of MarkMonitor. "As consumers increasingly turn to the Internet to buy medications, brandholders must ensure these customers are not faced with the potentially life-threatening risk of buying fake or sub-standard medications."

Cybersquatting on the Rise

  • Cybersquatting of drug brands rose 35 percent for the year and e-commerce sites for these drug brands rose 66 percent.
  • Cybersquatting of mainstream brands continued its position as the brandjacker's tool of choice with 428,617 instances during the second quarter of 2008. This growing trend in cybersquatting shows a 38 percent increase compared with the previous year.
  • The media and automotive industries continue to be the most frequently targeted by brandjackers. The media industry experienced 41,797 instances of brandjacking in Q2, a 17 percent increase since Q2 of 2007. The automotive industry experienced 27,600 instances of brandjacking in Q2, a 60 percent increase from Q2 of 2007.
  • Brandjacking of the apparel industry grew 68 percent over the year, the greatest annual increase of any category.
  • The luxury industry grew at the greatest rate for the quarter at 30 percent.
  • Three out of four brandjacking sites are hosted in the US, a 55 percent increase from Q1 of this year. Germany continued in the No. 2 spot with 5 percent of brandjacking sites, while China moved from the seventh position to the third.

First-Time Phishing is Up

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  • Phishers alternate their quarterly focus between auction and financial institutions; 81 percent of all phishing URLs target a small number of companies.
  • 35 percent of the 485 organizations phished in Q2 were phished for the first time. The total number of organizations phished this quarter increased 19.5 percent since last quarter and 20 percent since last year.
  • Phishing attacks against financial sites increased 66 percent in Q2 from Q1, while phishing attacks against auction sites decreased 50 percent, demonstrating a cyclical change of focus by phishers.
  • 35 percent of phishing sites were hosted in the US in Q2 compared with 67 percent in Q2 of 2007. The US continued its significant lead among hosting countries; China followed in second place with 8 percent of phishing sites.

About the research: The quarterly MarkMonitor Brandjacking Index measures the effect of online threats to brands and investigates trends, including drilled-down analysis of how the most popular brands are abused online. The research uses proprietary algorithms to search approximately 134 million public records daily for brand abuse in domain data as well as US and international patent and trademark office data. In addition to ongoing tracking of 30 leading brands as identified by Interbrand, the report examines online abuses of pharmaceutical brands and suspicious online pharmacies.

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