Coupon Wars: Groupon Gets Ripped Off

ADVERTISEMENT

Groupon has played a big role in making coupon collecting cool again, but recently, the site has experienced some drama.

Unlike the vast majority of coupon Web sites out there which offer a long laundry list of deals on everyday items, Groupon focuses on bargains for fun activities. Each day, Groupon members in 30 different cities nationwide get one great deal e-mailed to them. In New York, today’s deal is half off a Bollywood dance course, in Los Angeles, the current deal is for half off a set of three gym classes. Besides these, they’ve also offered discounts on ski trips and places to dine out with friends. So far, more than 1.6 million coupons have been purchased since the site launched in late 2008.

The secret to Groupon’s formula is the idea of collective buying. The deals only go into effect once a certain number of people have signed up to pay for them.  This way, users will feel compelled to get friends and family to sign up for the deals as well. In turn, Groupon partners with these businesses and is able to guarantee them a certain amount of cash up front. It’s a win-win strategy for businesses and customers, but there has been one downside for Groupon. The success of their site has spawned a fair share of imitators and, as far as Groupon is concerned, blatant rip offs.

The most recent example of this is SocialBuy. Like Groupon, SocialBuy partners primarily with hospitality businesses to offer deals on a ticking clock and is founded on the notion of collective buying. This might not seem so egregious if the layout of the site itself did not also appear to be an exact replica of Groupon (judge for yourself.) When we brought this site to the attention of Groupon’s CEO and founder, Andrew Mason, he did not seem pleased.

“We have a patent on all of this so everything they are doing is illegal,” he said. Mason told us other sites had blatantly ripped off Groupon’s look and formula in the past, including a little known site called Nopuorg.com, which is actually Groupon spelled backwards. But while Nopuorg seems to be a mostly playful and probably defunct site (we e-mailed their contact and the message bounced back,) SocialBuy is really looking to make a name for itself.

“We are trying to bring back the good times,” said Eli Natan, the Marketing Director of SocialBuy. “This site is intended to compliment Groupon, not to replace it.” But Natan and his company may have a fight on their hands down the road.

When we asked Mason if Groupon would take legal action against SocialBuy, he said he had no comment. But that didn’t stop him from taking a jab at the site. “We don’t spend a lot of time worrying about people whose primary competency is their ability to carbon copy something,” he said. He then went on to compare SocialBuy to imitation “Chinese ipods.”

Natan, who is only 24 and worked a bit in social media before this, admits that Groupon was a big influence on his site. He and some partners originally brainstormed the idea for SocialBuy over drinks after coming across Groupon. “The business model for our site is the same [as Groupon] in terms of the way we are conducting our transactions,” he said. “But we feel we are positioned differently, that our branding is different and our niche focus is different.” In particular, Natan notes that Groupon mainly offers deals in big cities, whereas SocialBuy is focusing more on “hyper-local” bargains in neighborhoods. (So far, they only offer deals in California.)

Mason doesn’t buy this explanation though. “When we started marketing ourselves, we said that we weren’t local, that we were in cities, so now other sites are saying the reverse,” he said. But as Mason points out, Groupon already offers local neighborhood deals in D.C. and Los Angeles.

When we asked Mason to elaborate on future plans for Groupon, he declined, saying he doesn’t want sites like these to steal more of his ideas. Meanwhile, SocialBuy has no plans of going away and told us they plan to expand to San Diego and Phoenix and hopefully more places after that.

Whichever way this cat fight turns out, for the time being, coupon collectors have plenty of options.

—For a comprehensive credit report, visit the BankingMyWay.com Credit Center.

Show Comments

Back to Top