Groupon is being accused of defrauding consumers by purchasing advertisements on Google for services the company did not offer, according to a federal lawsuit filed in San Francisco.
A Google search for "San Francisco Tours" on Feb. 24, for example, purportedly returned the following Google AdWords blurb for Groupon : "It's like San Francisco at 90 percent off."
However, a Google searcher clicking on the Groupon ad would quickly discover that the company offered no such thing.
Instead users would be routed to other Groupon offers.
Similarly, a Google search for "Napa Wine Tours" produced this
GoogleAds Groupon advertisement: "Do Napa at 50 to 90 percent off." Yet
consumers clicking on the ad would again realize no such offer exists.
The discount bundler is now being been
sued -- not by consumers who were duped -- but by a San Francisco tour company owner claims that the phony
ads are driving up costs for legitimate advertisers like himself.San Francisco Comprehensive Tours
, which filed the suit last week, claims that the pricing for Google AdWords
for the phrases "San Francisco Tours," "Alcatraz Tours," and "Napa Wine Tours" began to skyrocket in September 2010. That's the same time the Chicago-based company allegedly started to game Google's advertising platform to drive traffic to Groupon.com
, according to the lawsuit.
The San Francisco tour company did its own search, typing in the word "tours." Sure enough, it found an expired, one-day Duck Tour and a one-day Berringer Wine coupon -- offers that couldn't have benefited from the Google ads, the claim states.
This is how Groupon benefits: Each time a deceived consumer clicks on a "90 percent off" ad to the Groupon.com site, the company climbs higher in Google's advertising popularity score. As a result, it achieves the desired Google ad placement without having to pay as much as other companies, the claim states.
In February, the New York Times
uncovered a similar scheme by JC Penney. It had rigged Google-search results so that terms including, "bedding," "dresses," and "area rugs," produced JC Penny as the No. 1 result.
In that case, the secret was a vast network of ginned up Web site links Penny used to trick Google's secret algorithm into interpreting that the retailer's Web site was a high-performer.
If San Francisco Comprehensive Tours allegations are correct, Google's vaunted search-ranking program might have been gamed on the advertising side as well.
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