[pg]

I find it downright wrong that Loopt is enriching itself at the expense of local businesses

It would be impossible for Loopt to enrich itself at the expense of the local businesses. A local business wouldn't take the deal unless they felt it was to their advantage-- unless it was a "win-win" scenario.

Let the businesses decide what's at their expense.

[kenferry]

If the the post is accurate, it definitely hurts the business.

Suppose Loopt posts some deal, like this one with the bi-rite creamery, and then bi-rite is like "heck no!" What will the user think? They will think "bi-rite sucks, what the heck, those jerks aren't honoring their commitment. Dicks."

It is waaaay too much to expect users to have a thorough understanding of what's happening here.

Put another way: For myself, I like to underpromise and over deliver. Loopt here is making the promise, and then saying "Hey, so your users now have this expectation. It's your choice whether you meet it, which may not financially tenable, or fail to meet their expectations, damaging your brand."

[potatolicious]

You do not find that the unauthorized use of trademarks to lend credibility to an (unproven) business to be unjustly enriching? Or, as another poster pointed out, using the credibility of this trademark to gather subscribers for its own product?

I want to attribute this whole thing to Hanlon's Razor, but it's hard to believe that a bunch of professionals are so brazenly callous about the use of others' trademarks.

[pg]

Do you feel it's evil for a company giving away, say, a car as a prize to disclose the brand of the car?

[potatolicious]

These aren't the same thing. When "Bob's Plumbing and Heat" run a promotion and say "Win a Toyota Camry!", no reasonable person would presume that Toyota endorses or is otherwise affiliated with Bob.

Now let's look at what the Loopt UI looked like:

1 - It's presented in a way that's extremely similar to what all of the other group-buying websites look like. Which is to say, a reasonable person can easily confuse this for a deal from an affiliate (Groupon-style)

2 - The bullet points do not do anything to dissuade this. In fact, nowhere on Mr. Agrawal's screenshot does the website mention that the merchant must approve the deal.

3 - In fact, there is nothing on the page that would indicate to a user that this isn't the standard group-buying affiliate-deal we're all used to seeing. There's not even messaging in the vein of "Tell Bi-Rite you want to see this deal!" that might defuse confusion.

So it really comes down to reasonable interpretations. When a reasonable internet user, who has heard of Groupon, LivingSocial, et al, sees this Loopt UI - would it be reasonable for him/her to perceive a affiliation or endorsement for Loopt from the merchant?

Personally, I'm leaning towards "probably". Had the user base of HN not been tipped to the business model prior to seeing the feature, I would expect much confusion even from our seasoned web-guru user base.

[sama]

3 was a major bug. We've pulled down all deals until we fix that--it should say "pending merchant approval", with an explanation, not a tip counter.

[moe]

How about this analogy (tongue in cheek):

* Sunday Super-Deal: $50000 YCombinator Seed Funding! *

Value: $50000, Discount: 5%, You save: 5% off the share that YC would normally take

Purchased: 17 of 100

Time Remaining: 2d 21h 43m 13s

[Big Green Button ->]

[pavel_lishin]

Maybe I misunderstood the article - I thought that Loopt was saying, "Get $15 worth of stuff for $10 at BusinessCo!" without actually getting BusinessCo to agree to this - in which case the analogy would be like offering to give away a brand new Nissan without actually having a Nissan, or even a car.

[illumin8]

If this is actually the Loopt business model, to offer deals that the businesses have not agreed to, you should fully expect to be sued in court for trademark infringement very soon. How could you be so short-sighted? You are driving traffic based on the brand name of another reputable company, who has not agreed to or even been asked if you could use their name.

[thurn]

It would be if the company didn't actually own the car, but instead "gave away" a car from a local auto dealer without their consent.

[rockya]

Merely publishing these deals enriches Loopt at the expense of the business -- even if none of them take it.

Loopt is building a mailing list of people using the business's brand name and causing customer service issues for them.

I've forward to this to some friends in the payments space. This might be considered credit card fraud because they are also taking people's credit card numbers in conjunction with a service they can't commit to delivering.

[sama]

If we have a lot of users sign up for deals that don't go through, that hurts us a lot. That's the reason we pre-set the discounts at levels that make sense for each category of business, and why we're reaching out to businesses early in the process.

We're taking credit card numbers in the same way Priceline does for name-your-own price deals and Groupon used to when deals might not tip. Please let me know what your friends say, though.

[rockya]

I'm well aware of the Priceline model. I've booked hundreds of room nights using Priceline -- in fact, I'm staying at a hotel I Pricelined right now.

The difference between Priceline and what you're doing is that Priceline has already established relationships with hotels. They have the ability to fill demand that meets certain criteria.

You don't have the ability to fill demand for the product you're advertising. Now, if Loopt were willing to pay the difference out of its own pockets (as some daily deal vendors do), that's another story.

Even then, you've got a trademark infringement issue.

[rockya]

From a payments expert: "I have never seen anything get so close to full on fraud in the open."

[pg]

Merely publishing these deals enriches Loopt at the expense of the business -- even if none of them take it.

That's not true. Unless this is genuinely valuable to enough businesses, it won't be sustainable. If too few businesses accept the offers made to them by buyers, the buyers will find the service useless and won't recommend it to their friends, and traffic will dry up.

[potatolicious]

> "That's not true. Unless this is genuinely valuable to enough businesses, it won't be sustainable."

I agree it's unsustainable, but this seems to miss the point: while the business model of the idea in question does not revolve around win-lose deals and trademark infringement, something ethically questionable has happened here.

This is reminiscent of the AirBNB brouhaha - while the service itself may be valuable, the means by which the company chose to market and launch itself was sketchy to the extreme. If AirBnb's core offering was not compelling, spamming people on Craigslist would've been unsustainable, as it would be here - but the fact that the product doesn't suck is not justification for questionable behavior such as this.

Some material harm (thankfully it would seem, not much) has come to at least one business involved, and had it continued in that format (i.e., vague text that doesn't seek to distance Loopt from these unaffiliated merchants) it would certainly have caused more damage.

[rockya]

Publishing results in: - Loopt getting subscribers to its list. That seems like a benefit to me. - Merchant getting perceived as a discount brand. For many merchants, that's a negative. - Merchant having to deal with customer inquiries about a deal they know nothing about. That's a negative.

It should also be noted that Loopt picked really high profile businesses like Bi-Rite and Ritual Coffee. These places usually have lines and don't have much need to run large discounts.

If Loopt had picked obscure businesses, it would make it easier to claim they weren't trying to benefit from the business's good name.

[pg]

Loopt getting subscribers to its list. That seems like a benefit to me.

But not a net benefit. Unless this is sustainable, it will have been a very expensive way to collect email addresses.

[rockya]

This whole model is going to collapse for a lot of reasons. I wrote about that here:

http://redesignmobile.com/2011/06/22/loopts-u-deals-offer-an...

[hammock]

Merely publishing these deals enriches Loopt at the expense of the business -- even if none of them take it.

How on earth is that? This is not an AdWords/web traffic model - Loopt does not make any money unless they can close a deal with a business. If Loopt really is what you say it is then it will go under as soon as they run out of cash, and you don't really need to worry about it so much, as it's just like any other bad startup idea.

[forensic]

Since this is exploiting someone's brand to boost your own brand, I sure hope that the courts eventually rule it as trademark infringement.

Having said that, some businesses will likely go for this, and the legal penalties will probably be lower than your profits, so kudos!

[hammock]

Thank you, Paul. I'm having a hard time reconciling the Loopt-haters with mere common sense. We have to remember this is the business world where (barring twisted government intervention) there is no profit without value created. Sam said it as well:

Obviously, it doesn't work for us unless it works for both of those groups [consumers and businesses]