Groupon Sued For Its Google AdWords

from the advertise-better dept

A San Francisco tour company is now suing Groupon because it doesn't like the company's ads that were placed on Google AdWords. As you probably know, Google AdWords involves buying up keywords for ads that will be shown when people search for those words. Part of the process is that you bid how much you're willing to pay per click, and Google sprinkles some of its magic pixie dust and ranks the ads on a combination of how much people are willing to pay... and how often such ads are clicked (i.e., how effective they are).

However, San Francisco Comprehensive Tours is claiming that Groupon put up false or misleading ads based on the types of terms it used to buy. Things like "San Francisco Tours," "Alcatraz Tours," and "Napa Wine Tours." Apparently Groupon bid a high amount, because its ads shot up the list and the tour company claimed it had to pay more itself to keep moving up the ad listing. Of course, that's just how AdWords works, so what's the problem? Well, according to the tour company, Groupon was being misleading, because most of the time it offers none of the things that were being advertised, though in a few rare instances it has offered those things.

I can certainly understand why the tour company is upset, but I'm not sure it should be legally actionable. First of all, assuming there was a legitimate competitor, and they did the exact same thing, there would be no problem. Thus, just having your ads pushed down by a competitor is not and should not be against the law. And, if that's the case, can the tour company really claim "harm" here? It could have faced the exact same issue from a competitor, or even from someone who just bought the keywords to advertise something else. So, the real issue is whether the ads were misleading. And, if that's the case, it seems like more of an issue for the FTC rather than a private company. In fact, I'm wondering if there really was that much "harm" to the tour company? After all, if someone really is looking for a Napa wine tour, and they go to Groupon and see no such tour being offered, they're likely to go back and visit the next compelling ad on the list. In other words, this seems like the sort of thing that should pretty quickly work itself out.
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Filed Under: ads, competition, false advertising
Companies: groupon, sf comprehensive tours

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  1. icon
    ForgottenVoter (profile), 24 Mar 2011 @ 8:02pm

    Trouble is..

    if you don't innovate, you die. But it seems, these days, suing anybody who is even remotely considered "competition" is litigated against until either you (the litigator) or the person your suing goes out of business.

    Fail on San Francisco Comprehensive Tours part for using anti-competitive practices.

    reply to this | link to this | view in thread ]

  2. icon
    Brian B. (profile), 24 Mar 2011 @ 8:21pm

    Of course, this company is just causing more harm to itself because it will earn a reputation of being litigious.

    reply to this | link to this | view in thread ]

  3. icon
    Chris in Utah (profile), 24 Mar 2011 @ 8:48pm

    Excuse me sir do you have any.. Ok bad pun

    reply to this | link to this | view in thread ]

  4. identicon
    Ricette, 24 Mar 2011 @ 9:39pm

    May companies does same

    For example does the same of Groupon... many companies can be sued for same cause.
    Well I think this is not legally actionable... would be a great revolution in traffic-brokerage many operator does..

    reply to this | link to this | view in thread ]

  5. icon
    Will Sizemore (profile), 24 Mar 2011 @ 10:30pm

    If you look at this as an auction, and if Groupon is simply bidding for keywords in order to raise the bid amount for the San Franciso Tour Company, then it is kinda messed up. One might think that any and all ties between Groupon and anyone who stands to gain from Google gaining revenue should be investigated.

    I think Craypion is a much more interesting topic though, in that they apparently don't develop any Android Apps, but they do come up in a search, say, for Second Life, in the Market and when you install their app, you get nothing. The general comments under their 'apps' seem to explain that they are counting the numbers of downloads/installs for certain key words and don't actually provide any real content. That is far more annoying to me than Groupon paying for seemingly irrelevant keywords that make other companies competing for ad space (See? They ARE competitors!) have to shell out a little more cash.

    reply to this | link to this | view in thread ]

  6. icon
    Tom XZander (profile), 25 Mar 2011 @ 9:59am

    Groupon Sued For Its Google AdWords

    If you can't afford to do business get out, or change your business plan and strategy.

    We really need to enter into a loser pays all civil legal system. This would drastically cut down on the frivolous litigation.

    reply to this | link to this | view in thread ]

  7. icon
    DV Henkel-Wallace (profile), 25 Mar 2011 @ 10:18am

    FTC makes more sense

    As you say, FTC makes sense: this could be considered false advertising as groupon wasn't actually offering the product (e.g. tour).

    This is different from State Farm putting an ad on "Allstate" in that when you type "Allstate" an ad saying "Check out State Farm" could show up. Not misleading.

    reply to this | link to this | view in thread ]

  8. identicon
    Willton, 25 Mar 2011 @ 11:50am

    Re: Groupon Sued For Its Google AdWords

    We really need to enter into a loser pays all civil legal system. This would drastically cut down on the frivolous litigation.

    It would also chill a lot of legitimate litigation, as it increases the cost uncertainty of bringing a case to court. Few cases that get past the pleading stage are slam dunks, so there's always a risk of losing one's case, even if the claim had merit. The risk of losing and having to pay the other side's costs would strongly discourage a potential plaintiff from filing a complaint and vindicating his/her rights.

    Besides, what you may consider frivolous may not be so considered by a judge. And in any event, we already have mechanisms for tossing frivolous lawsuits, Rule 11 sanctions being one of them. I realize that the court system is already being taxed by an influx of lawsuits. But the cure should not be worse than the disease.

    reply to this | link to this | view in thread ]

  9. identicon
    Willton, 25 Mar 2011 @ 11:53am

    Re: FTC makes more sense

    If this is false advertising, then a private action by the aggrieved party is exactly the correct course of action. The FTC should find other fish to fry if this sort of thing can be solved by private litigation.

    reply to this | link to this | view in thread ]

  10. identicon
    Rhema IS, 25 Mar 2011 @ 2:20pm

    Use of keywords is not avertising it is targeting

    Short sighted people, like the travel agency see "napa valley tours" as a destination keyword that they want to own specifically for tours.

    However Keywords in advertising are used to target your audience. People who like "this" also like "that". Groupon wants to get their advertisement in front of people who like to go on tours, because they have found that tour people use their product. The fact that they do not sell tours does not make their use of the keyword wrong.

    reply to this | link to this | view in thread ]

  11. icon
    Milton Hegraw (profile), 1 Oct 2011 @ 5:17am

    Keywords are the best tool to market the product!

    Groupon offers lot of daily deals but they offers low advertisement when compared to other daily deal sites.

    Each and every company in the online world uses advertising with Google adwords. So nothing matters to sue Groupon.

    Some of best Groupon clone softwares are also emerging out successfully with the help of Google adwords. So, these ads are only for marketing the business and not for anything else.

    reply to this | link to this | view in thread ]

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