28th March 2012
The site is under investigation by the Office of Fair Trading after it was found guilty of widespread breaches in consumer law, and has three months to make changes.
Despite soaring in popularity as an opportunity for internet-savvy shoppers to pick up bargains, it appears its deals are not always quite what they seem.
The Advertising Standards Authority was first prompted to make the referral after Groupon was found to have broken UK advertising regulations more than 50 times in less than a year.
The OFT secretly launched its own investigation into Groupon last July, and said this month that it had found widespread examples of Groupon practices "which in the OFT's view breached consumer protection regulations". It cited "specific concerns over practices involving reference pricing, advertising, refunds, unfair terms, and the diligence of its interactions with merchants."
But there's no doubt that these sites have proved staggeringly popular – and sometimes, the risk for consumers is deal overload.
As a result, there's a new kid on the block
Dealupa is another breed, and for now its version is US-based. The site says: "Nobody likes getting a dozen emails every day from a dozen different deal sites. We'll do the hard work for you by scouring the web to find deals and hand-picking the best ones to show you in a single email.
"We will start out by emailing you once a day with deals in your area that match your preferences."
The blog Techcrunch says: "Considering the slew of daily deals sites that have emerged, it's no surprise then that, in an effort to serve people with deals they actually want, a number of deal aggregators have popped up to wrangle all those discounts and offers into one place.
"The problem is that instead of giving users better choices, these aggregators often just give us more noise. With more deals comes the need for better filtering – for better recommendation engines."
Dealing in algorithms
Founded by two former Google engineers, Dealupa is a deal aggregator taking a page out of their former employer's book. It has created its own "Dealrank" technology (patent pending) that is designed not just to serve more relevant results to each user, but to serve deals that are of a higher quality.
The algorithm is Google's PageRank. This is the ranking and sorting algorithm behind Google search results; by way of link analysis, the technology aims to surface pages (or content) that is most relevant to your keyword search.
How does this work?
The Dealrank algorithm considers, among other factors, how many people are sharing and liking a deal on Twitter and Facebook, as well as how many people are buying the deal – alongside the Yelp rating of the merchant offering the deal.
So users hopefully get recommendations of quality deals that are tuned into their personal preferences.
Techcrunch concludes: "…there are still some kinks to work out, but if Dealupa can offer better inventory and quality of deals through Dealrank, it will be interesting to see if users buy in."
Whether a similar site in the UK will be launched remains to be seen – but it appears likely.
But what about the rise and fall of Groupon?
Groupon is a Chicago-based company which emails millions of subscribers around the world with a ‘daily deal' on local goods and services. Yet the company is still in its infancy.
It is just three years since the site sold its first deal – a coupon for two-for-one pizzas at the restaurant below its Chicago offices. But word soon spread.
It now has a staggering number of subscribers who have bought one of its coupons offering discounts, while the merchant hopes for a new way of persuading customers through its doors.
And last year saw a whacky stock market flotation that made headlines – The biggest by a US internet company since Google.
While the flotation was a lot less than the $20bn initially talked about, at $12.8bn, it doesn't make it any less hefty given the age of the company and that it has Google on its tail.
Only six months ago, Groupon was the Internet's next great thing. Business media christened it the fastest growing company ever, while entrepreneurs created scored of copycats and spin-offs. Meanwhile, invsestors salivated over the prospect of Groupon's IPO. However, it has since been plagued by problems.
Groupon faces concerns about the viability of its daily deals business model, and is the novelty of online coupons is wearing off? Some merchants are complaining that they are losing money – and customers, on the deals – but they continue to be offered, and competitors are swarming the marketplace.
Mindful Money asks, who'll be next?
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