Crosshead or Pullout:
Some marketing organizations who are not intimately involved in the authentication business have taken these numbers and extrapolated extraordinary claims for the potential size of the authentication market.

When Market Numbers Aren’t

The American writer Mark Twain credited Benjamin Disraeli, the 19th century British Prime Minister, with having coined the phrase ‘Lies, damn lies, and statistics.’ There is some disagreement among scholars as to whether Disraeli actually said this, but most agree with the observable human tendency to attempt to bolster weak arguments with lovely statistics, graphs, and pie charts. Numerous other writers have written about our tendency toward becoming statistics’ enthusiasts, such as Charles Makay in Extraordinary Popular Delusions and the Madness of Crowds. It is probably time to update this book to add to the list of popular delusions RFID, the early internet craze, and - sadly - the market for anti-counterfeiting technologies.

The report from the US Government Accountability Office (see page 1) describes many of the problems involved when attempting to quantify the problem of counterfeiting. Some marketing organizations who are not intimately involved in the authentication business have taken the numbers from such attempts and extrapolated extraordinary claims for the potential size of the authentication market.

Who Believes $79 Billion?

As anyone who is intimate with the authentication business knows, a market number of $79 billion is completely absurd. The reports often combine the technologies for track and trace, authentication, and tamper evidence. Although these technologies are often mutually supportive, each also provides specific solutions. Supportive does not equal synonymous. Track and trace is primarily for developing supply chain transparency within legitimate channels. Tamper evidence shows if a container has been opened. Neither of these technologies is considered authentication by most industry experts, users, or standards developing groups. But the writers of some of the recent market reports consider them to be anti-counterfeiting. Why? Well it makes a good story. $79 billion according to a report from Markets and Markets. That is impressive - just like the suspect number of $456 billion for the total counterfeiting problem referred to in the GAO report.

Reconnaissance International works with a number of brand owners, authentication suppliers, and government agencies. A potential market of $79 billion isn’t reflected in the current ratio of spending among most brand owners. In most cases the spend for authentication technologies is a tiny fraction of total sales.

The markets for pharmaceutical products and food are the two largest packaging markets in the world. Tamper evident packaging is frequently used and helps assure product safety for years. Yes, genuine products have tamper evident packaging, but this does not make it an authentication technology. True, the package should provide evidence of authenticity and should be difficult to counterfeit, but usually authentication technologies are added features to provide extra protection beyond the standard functioning of the package. Good authentication technologies work with packaging to provide additional protection against counterfeiting. Sophisticated, attractive printing can and should aid in authentication, but for a market estimate to have meaning, the normal established practices of tamper evidence should not be lumped into a market estimate just to pump up the size of the number, any more than the cost of packaging with distinctive marks should be.

Track and trace has a great deal to offer in helping to detect and prevent product fraud. Alone it is useful for providing transparency of the legitimate supply chain. Without features which secure the barcode or matrix code to the product or features which prevent the cloning of the code, it has little value for detecting or preventing counterfeiting or diversion. Traceability has a number of applications. One is of which is to complement authentication. To add the entire market for traceability into the market for authentication is misleading and grossly inflates the market numbers. Some market reports seem to equate the US FDA’s e-pedigree program with authentication.

The current spend on authentication for food and pharmaceuticals not including tamper evidence and track and trace does not currently sustain more than a small handful of authentication technology suppliers. That is, no more than a handful of companies devote over 50% of their business to food and pharmaceutical authentication. Not one of these companies has a food or pharmaceutical division with over $10 million in sales. Many hope that the market will grow, but none of the current suppliers expect $79 billion as a total market.

Statistical Lies

These statistical lies are dangerous to the authentication business because they spark and fuel ‘extraordinary popular delusions.’ These delusions may cause venture capitalists and others to invest money into companies which claim to have the next best solution or ‘silver bullet’ for the counterfeit problem, $456 billion and growing. It looks like easy money.

The delusion of ‘the silver bullet’ is already causing brand owners a certain degree of technology burnout as numerous providers try to gain their attention. Sometimes technologies are implemented without adequate program design and fail to deliver. Sometimes brand owners don’t fully understand the problem and implement the wrong solution. Sometimes the clutter of suppliers creates confusion for the brand owner.

As the venture capitalists get burned and find out the money wasn’t easy – as they always do – the money dries up and some of the good solutions may not make it to the real problems, and in this case unlike the internet or RFID or tulip bulbs, people may die.

Thus the nature of hype and delusions. In a free society with incomplete information little can be done to prevent these occasional market bubbles. Authentication News calls on consultants and publishers to be responsible and accountable for the market information they report and to not be an accomplice in creating delusions.

But Bubbles Can Lead to Solid Businesses

Sustainable businesses often materialize after the collapse of bubble delusions. The internet is alive and well, despite the bursting of the dotcom bubble. RFID appears to have found a place in supply chain management, even though it remains too expensive (including infrastructure) to realise the FDA’s dream. And authentication is sustainable and growing. Unfortunately many companies have entered the authentication market and died or left because it did not meet their expectations. In this market as well as well as others, it is very important to talk with people involved in the business, study the problems and check assumptions. While enthusiasm feels good it is important to align expectations with reality.

Authentication is a legitimate market and business. The real global market for specific authentication products or systems is probably less than a billion dollars but growing. This guess is based on observations of actual spend, includes some packaging and traceability technologies that are aligned with authentication programs, and some products which might serve dual purposes as for marketing as well as authentication. Entry into the market is easy, but creating a sustainable business requires persistence, high customer intimacy, and patience. It is best to listen to customers that have a problem, ignore market reports written by industry outsiders, and proceed cautiously.