Affle India takes on the big guns with 15 new AI patents | Mint

Affle India takes on the big guns with 15 new AI patents

Affle is investing heavily in AI innovation.
Affle is investing heavily in AI innovation.

Summary

  • The adtech company’s focus on patents isn’t just about protection, but a strategic move to lead in AI innovation.

Affle India has filed for 15 more patents relating to artificial intelligence, taking its total patent count to 36, a remarkable feat in the adtech industry.

But before we get into that, let’s begin with what the company does to understand how these patents can boost the business.

Affle is not your typical mobile marketing and adtech firm. It uses technology–AI tools such as machine learning to deliver personalised ads to users. Affle is akin to a middleman operating between the advertiser and the mobile app user.

So when you use apps on your phone, Affle is the player behind the scenes making sure ads get to you, using smart technology to figure what kind of ads might interest you. Most of this is based on your app usage, making this a highly data-driven business model.

The primary goal is to help advertisers (Affle’s clients) effectively identify, engage with, and drive transactions with their users.

For this, Affle charges its clients every time a conversion happens (cost per converted user). The higher the conversions, the higher the revenues for Affle. All of which culminate in higher returns for advertisers. It’s a win-win.

The company caters to an array of businesses, from gaming and edtech to e-commerce and consumer goods companies. Its customer base includes some of the biggest names in the industry–Samsung, Tata Neu, McDonald’s, Apollo, Byju’s, Max, and Swiggy.

A fine balance

The mobile adtech industry is a crowded space, including not only tech giants such as Google and Facebook but also a growing number of smaller competitors. While many of these players target developed markets, Affle enjoys a strong foothold in emerging markets, positioning it well to capture a larger share of this pie.

Affle’s business has done well, with sales registering a 4-year compound annual growth rate of 55% between FY19 and FY23. In the first half of FY24, revenue growth improved 19% year-on-year to Rs837 crore.

Like with many tech companies, a lot of this growth has come on the back of acquisitions. Despite its aggressive growth strategy, Affle has successfully maintained a balance between rapid expansion and consistent profitability.

Profits have followed a similar trajectory, improving at a 4-year CAGR of 49%. Profit for the first half of FY24 reflects a 16% year-on-year growth.

But it’s not as easy as it seems. Over the years, Affle has painstakingly developed multiple processes and platforms to get its business and technology right. Now, to protect its intellectual property and prevent unauthorised use, Affle India is seeking patent protection for its proprietary technologies.

The company already holds 21 patents, granted across the US, India and Singapore.

It has applied for 15 more in the same jurisdictions. These are related to innovative futuristic use cases such as automated AI agents, personalised recommendations, predictive analysis, privacymanagement, enhanced fraud detection, and security.

Staying ahead of competition and risks

Simply put, it means Affle is investing heavily in AI innovation and is getting really good at it.

The company’s focus on patents isn’t just about protection; it is a strategic move to lead in AI innovation.

These patents will help the company strengthen its negotiating position and stay ahead in the dynamic world of digital advertising. Importantly, the patents will enable Affle to adapt to changes and challenges in the data-driven industry, helping it gain an edge over the less-prepared competition.

Affle’s reliance on user data for its business makes data privacy laws a big risk to the business. However, the adtech giant enjoys a solid track record of navigating such challenges and implementing a proven business model.

Back in 2021, Apple released an update for iPhones, offering users an option to prevent advertisers from using a device ID. This made targeting users for advertising purposes very difficult.

Even Meta, Facebook’s parent company, warned that adoptions of the features had hit “critical mass" and made its ads less effective at targeting lucrative potential customers.

However, Affle emerged triumphant, thanks to its acquisition of Jampp, a Japanese company that came up with an innovative solution. This highlights the need for Affle to strengthen its patent portfolio with such technologies.

It also explains why, despite uncertainties surrounding the constantly evolving data privacy landscape, Affle is unfazed.

An expansion phase

The company continues to expand and build its patent portfolio. Affle’s in-house data management platform has a reach of more than 2.5 billion devices. Recently, the company developed a groundbreaking tool that enables advertisers to tap into diverse language markets.

Investing in innovative tools, expanding inorganically, and securing a strong patent portfolio can be costly. However, Affle's well-funded balance sheet and minimal debt mitigate these concerns.

Recently, Affle secured an investment of Rs749 crores from the Singapore government. Following the issuance of preferred shares, Gamnat Pte., a subsidiary of the Singapore government, will hold a 4.92% stake in Affle.

This values the company at 15,200 crore. For perspective, Affle’s current market capitalization is 15,926 crore. According to Bloomberg data, the stock currently trades at 42.6 times estimated earnings for FY25.

Affle is currently in a phase of expansion, post which the pace of growth and returns may slow. While the company has shown resilience, intensifying competition and an evolving regulatory landscape raise concerns about whether the current valuation is justified over the long-term.

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