The types of marketing offers (we refer to them more descriptively as scams) that have plagued ecommerce sites like Intelius are now facing U.S. government scrutiny. These scams are kissing cousins to the Scamville social gaming offers that we’ve written about recently.
Next week the U.S. Senate Committee on Commerce, Science, and Transportation will hold a full committee hearing on Aggressive Sales Tactics on the Internet and their Impact on American Consumers. This expands on a committee investigation into the marketing practices of a number of firms that supply these offers to partners.
They could sell tickets to this thing. I’d pay good money to be there.
Last week sixteen companies that conduct sales over the Internet were sent letters requesting information about their relationships with the three marketing companies being investigated by the panel – Vertrue, Webloyalty and Affinion.
The companies that received letters: 1-800-FLOWERS.com, AirTran Holdings Inc. (AAI), Classmates Online Inc., Continental Airlines Inc. ( CAL), FTD, Fandango Inc., Hotwire Inc., Intelius Inc., MovieTickets.com Inc., Orbitz, Pizza Hut, priceline.com, Redcats USA, Shutterfly Inc. (SFLY), US Airways Group Inc. (LCC) and Vistaprint USA Inc.
Adaptive Marketing, which works with Intelius, is a subsidiary of Vertrue. We outlined how these offers mislead consumers into agreeing to unwanted credit card subscriptions here.
Immediately after an ecommerce transaction takes place, buyers are presented with an offer to take a survey and/or get a partial rebate on their purchase. If they click yes, their credit card information is transferred to the ecommerce company and the user begins a difficult-to-terminate subscription to a worthless service.
Ecommerce sites that use these types of offers can get CPMs for the ads ranging from $2,000 – $2,500, say experts we’ve spoken with, and they make up a material percentage of revenue.
Update: Here’s what these offers look like. Users are tricked into clicking yes and get nothing of value in return.
Uh oh…going to be a lot of job losses after this goes down
yeah, I was thinking that too. You think they will get a bailout? I mean just look at some of the names on here. Pizza Hut (I personally like Papa Johns), 1800 flowers (personally like Pro flowers)… there are freakin airlines on here and Vistaprint, a company i just started using. They had that ad after I bought the “free” business cards
Vistaprint showed me this offer for cashback or something like that and I just ignored it… only to be shown it again as if it somehow is related or is a way to complete my purchase… still ignored it (trying to teach my god daughter to ignore them too)
I wish this could be addressed globally. With the internet, mobile phones, computers the planet is fast becoming flat. Aggressive marketing (scams) and privacy is becoming a major concern globally. Hope you’d update us on it. Thanks.
I got burned by this exact thing at movietickets.com a couple of years ago. I’m glad they’re being called on it, nice to see my Tax dollars at work.
self regulate, or get regulated.
doesn’t this stance go against your liberterian philosophy? (I think you said you were one)
where is the alternative successful site that doesn’t spam their users with these offers? The problem is that the companies that use the scam methods make a ton more money and can then use that money to trounce the honest competition.
no. the problem here is that these offers are like pollution – someone else (the users) have to pay the price. We need regulation here for the same reason we stop companies from dumping toxic waste into rivers.
I agree with you, but think there are some important things to keep in mind if endorsing more govt regulation:
1) Do politicians really understand the problem and can they be trusted to regulate fairly and without bias (no protections of powerful special interests)?
2) How sure can we be that this wont set a precedent for allowing other govt interference of internet commerce?
Sometimes the best solutions come from individuals or groups raising awareness of an issue (as you have done), not growing regulation (which more often than not has unintended consequences and paves the way for more future intervention).
If the pizza guy was at my door, took my money and then said “oh by the way, here is a $10 off coupon, it will cost you $10 a month”, no person in their right mind would take that offer. That is the free market.
In these situations, the consumer grants permission to one trusted party for $x to purchase a product. That trust is then exploited and a third-party is allowed to take advantage to charge a further $y.
These systems work because the people holding your money have no vested interest in protecting you. Banks, merchants, retailers, Visa, Mastercard, cell phone companies etc. all profit from these situations, and they are all lined up against the interest of the consumer.
It’s called a racket, and the government created this mess so it is on them to clean it up.
Libertarianism, republicanism, liberalism, socialism, capitalism, communism, ism, ism, ism: it’s all rather meaningless in defining a *practical* system. The US’s laws and culture are a hodgepodge of various modes of thought. Nothing fits into a single process.
Though libertarianism is especially useless in describing any realistic mode of thought. After all, laws and regulations are the very pillars of a functioning system. That includes extremely strong consumer protection. What might not be deceptive/damaging to the few people who have the wherewithal to read pages-upon-pages of legalese can still be overtly deceptive/damaging to the general public.
What’s funny about your statement is that people in business, whether self trained or formally educated, know this.
I mean they REALLY know this. You can’t be in business without knowing this.
And yet…
Hey Michael, I didn’t know all of those other companies like Orbitz, Continental Airlines, Pizza Hut, Priceline, and US Airways were also displaying similar advertisements to Intelius. Those are some fairly large brands and household names. Why are your stories always focused on Intelius instead of the other hundreds of sites displaying these ads?
Sue
so odd that your IP address is showing a location very close to Intelius HQ.
yeah, hasn’t she heard of tor?
OK well hopefully my IP wont be close to their HQ. I’ve totally supported all yo attacks on em. Genuinely curious if you plan similar ones against the well-known brands? Seems like if those brands stop giving the fishy cos business, the fishy cos would go away.
Nice to see you’re defending a company with known deceptive practices. I wonder why you’re doing that?
Hmm…could it just be that you’re from Intelius? *Shock*
michael – i’m proud of you for taking a stance on this widespread cancer in our online industry.
i’m proud that the Senate is taking some time away from spending all our money to look into this.
i concur. and kudos to your efforts in flushing this out.
i’ve seen this persist for a decade now, so i was wondering when and who would have the power to make a change.
bravo, sir.
TY for posting this. 1800flowers is just a middleman and is always up to some type of tom foolery. Did you know when you send a $100 floral order via 1800flowers, your recipient only gets about $70 worth of flowers? (I’m not including the delivery or tax fee either) – lol at people who use middlemen, when you can just call the florist direct.
you get even less than that as a florist if you add the cost for being a Member of the wire services.
72% of the value of the floral arrangement, minimum of $300.00 on Membership fees, ad fees, wire fees etc, makes most florists cringe because they make no money. Consumers need to start calling the florist direct, look on the website of the wire services but call the Florist direct, We can then fill the order and still have some money for our shop. And the sender does not pay the service fees and all the other charges that show up for month on your credit card statement because of a scam. check out http://www.Flowercomplaint.com and you will shake your head and never use a wire service again
If you florists are going to spam message boards, at least do on topics that are relevant to the points you’re making.
Without wire services and intermediaries, you would have no business at all. Stop biting the hand that feeds you.
That said, I have been a very happy customer of 1-800-Flowers (they do a nice job of weeding out dishonest and worthless florists, which is worth the extra price to me), but I admit I will be happy when they remove the misleading and fraudulent “Save $15 by clicking here” from their site. If it takes an act of Congress to do that, so be it.
Mike, if the Senate ends up doing something how do they enforce it? It’s like the new FTC rule on “sponsored conversations” from my POV. And doesn’t the EU have to be involved since the world is now flat? What about other worldwide governing bodies?
Finally, I was surprised to find out that Rich Karlgaard was on Intelius’ board. I also saw that Bill Owens was Chair, met him from the days when Teledesic was a client (don’t say a word). Pam
the easy way to enforce this is to simply pass a law forbidding companies from passing credit card information to other companies. I can’t think of any legitimate reasons they need to do this, but i’m sure there are some exceptions that have to be made. But that’s the big problem here, people think they are safe because they aren’t entering in their credit card info.
Have you seen buy.com’s privacy policy?
“we reserve the right to use or disclose your personally identifiable information for business reasons in whatever manner desired”
http://www.buy....cy_complete.asp
fuck that.
Re: passing credit card information to other companies .. I can’t think of any legitimate reasons they need to do this
It’s quite common that organizations are made up from several companies (eg following take-overs) in which case they need to share customer details within the group.
Nothing like the situation with these scammers, but probably covered by the same law.
Wow – they just made my black list. Thanks for pointing this out!
Mike, I admire your naivete and blind faith in our elected officials… Reality keeps showing us that the “Senate Hearings” are no different than a meeting of greedy clowns [yes, the circus type.]
What these clowns are doing is putting the word out there so large, deep-pocket Internet companies send their lobbyists with more cash to Capitol Hill so they can look the other way, do absolutely nothing, etc.
Yes, I live and work in Washington DC and rhis kind of political posturing is a daily nauseating thing here…
Hey Mike, travel sites have to pass on the credit card info to airlines as they use it throughout their back end systems and use it for refunds, etc. That said those situations could be carved out.
I think travel sites have to do this. When I buy airline tix on Travelocity, I believe the charge is directly from the airline.
One of the top 2 affiliate adnetworks is also a subsiduary of vertrue.
Neverblueads.com
Way to transition from social gaming to traditional ecommerce! There are scams everywhere sadly and how this one has been allowed to go on for so long is insane.
If they sell tickets to the hearing remember to avoid the $10 cash back offer like the plague, no matter how tempting, at the end of the transaction!
It’s about time.
Pizza Hut and the rest of these scummy companies need to get taken to the cleaners (and, better yet, that people stop buying from them forever).
I ordered from Pizza Hut online a year or so ago. After ordering they had a coupon for $5 or $10 off or whatever directly on their site, running one of these scam offers. All the was required was entering your name & address — as they had the credit card on file from ordering pizza — and you’d get the coupon … oh, BUT WAIT, THERE’S MORE — you’d be signed up with some $10/month hidden bullshit that would probably be a bitch to remove (that is, after failing to notice it for however many years).
Luckily, I was well aware of these scams and read the fine print. However, most people aren’t aware. They trust a big name like PIZZA HUT to not screw them. I was shocked to see Pizza Hut willing to take advantage of people for quick money. Their brand is dead to me.
The terms are stated explicitly on the offer and states your credit card details will be passed. Most people realized they will be billed they just think they can remember to cancel and make use of the $10 beforehand. Obviously its stupid to buy this here, and I have skipped over these type deals many times, but should we be protecting people from stupidity? I understand deception, but to me the terms are clearly stated even though the value of paying $10 is not clear.
Most marketing companies now know that you can get in big FTC or state AG trouble (there have been many big fines and settlements with lead gen companies in recent years) in the U.S. without clearly stating what consumers are paying for as the user is submitting payment details. The brands displaying these offers suffer if they present upsells that upset users, so it is self regulating to a degree IMO, ie people stop visiting their sites.
CALL SKOOP.
Man, these sneaky monthly membership fees get ya every time.
These types of scams def. need to be looked at. On another note, I’m still surprised by the number of people who sign up for these types of scams…given the amount of real estate dedicated to fine print, terms, policies and legal jargon. Just look at the sample included in the article! It screams of scam.
You should do a piece on educating consumers.
interesting that the principals of the three co’s being investigated (Vertrue, Webloyalty and Affinion) all have ties to CUC International (Cendant). Seems like there is a clique of these guys that figured something out (innovative “reverse billing”)….
Wow… not 1800 Flowers. I like them (I like Pro flowers better though)
I hate to tell you this, but ProFlowers is 100x worse with their “Easy Savers” program. While 1-800-Flowers is misleading, ProFlowers is downright fraudulent. Just search Google for “Easy Savers” and “ProFlowers”. It’s just the luck of the draw for them that they weren’t being investigated too.
I’m not getting this. I’m not for spam sites but there’s such a thing of freedom of the press. Your decision of what might be spam might differ from others who in fact get the clicks because the masses find it of value. The scams obviously should be stopped but I sense that there is something else here driving you, and I’m trying to see what it’s about.
Does this sort of advertising some how get in the way of you getting eyeballs to your sites and the sites of companies you invest in to get your ads clicked on? Or? what is it really?
…right, because there are just so many people out there clamoring to be billed $10/month for absolutely nothing.
If you’re not getting it, it’s because you don’t realize how pervasive and deceptive these things are to the general public — especially when big brands that people trust get in bed with this scum to turn a buck of the backs of their customer base. And you also must not realize the level of outrage and people falling victim to it. You have a basic computer user shopping at a big place like Movietickets or Pizza Hut. He/she goes through the shopping cart, checks out, and is then directly presented with a coupon — most people (and rightly so) assume there’s no catch. We’re all used to getting pizza coupons with no strings attached offline, are we not? So they trust the brand and don’t even think that their credit data is handed over to some 3rd party. The whole thing goes along with the flow of checking out. Then bam, sometimes just a click or two or some info, and they’re signed up to some scum-of-the-earth subscription fees. It’s as bad as those ring tone commercials hooking in kids, racking up stealth charges on their parents’ bill.
Most of these are simply exploiting poor usability practices to trick users.
I stopped using the online movie ticket sites because it is a complete waste of my time to see these pages.
Did the transaction of my movie ticket purchase complete or not…. why am I being dumped into this ridiculous page that has nothing to do with the shopping cart or purchase transaction….?
Most of these are simply exploiting poor usability practices to trick users.
I stopped using the online movie ticket sites because it is a complete waste of my time to see these pages.
Did the transaction of my movie ticket purchase complete or not…. why am I being dumped into this ridiculous page that has nothing to do with the shopping cart or purchase transaction….?
Average users just click the big button trying to “finish” the original transaction. These companies prey on these people…. out of a million people, some percent are going to go through not realizing what they’ve done.
Someone should commission a study with comScore. What is the average time people spend on the page before continuing with the misleading offer? Is the average far less than any human could possibly read all the fine print that is a lower font size?
We read your recent post previewing next week’s Senate Commerce Committee hearings, as well as your comment that “people think they are safe because they aren’t entering in their credit card info.”
I wanted to share with you that Webloyalty takes its responsibility to consumers very seriously. We act on this responsibility by: 1. offering subscription services to consumers that enable them to save hundred of dollars per year on shopping, entertainment and dining out; and 2. seeking ways to improve how we communicate both the value and terms of our memberships programs, such as advising on our offer page about benefits, membership costs (five times) and referencing our cancellation policy.
The e-commerce industry is dynamic and we are evolving with it, and continually looking for better ways to communicate effectively with consumers. We want our members and all consumers to know what they are buying and how they are paying for it.
To that end, in August 2009, Webloyalty has implemented a significant change to our enrollment process that addresses the precise issue you identified: entering credit card information. Webloyalty now requires consumers joining our membership programs to enter the last four digits of the credit or debit card used to complete their initial purchase – a step we refer to as “CC4”.
I have taken the liberty of providing you a recent and complete offer page and would ask that you use it to replace the abbreviated version of the enrollment page currently on your site. “CC4” sets an important new standard that we hope others in our industry will adopt.
We recognize there will always be room for improvement, and as we have demonstrated through our actions, we will evolve in order to address consumer concerns. Ultimately, it is the experience of our members that will allow us to continue to grow.
We will continue to work with the Senate Commerce Committee, the BBB and our partners to make certain that we are providing the best possible experiences to consumers who consider enrolling in our programs.
Mr. Fernandes, have you no shame?
You see, I used to work for a company that worked with sleazy companies like yours.
I know that your business model is to take the brand equity and goodwill of a successful Internet retailer and to co-opt it for your greedy gains. Because of the size of the check you waved in front of our executives’ hands, they couldn’t say no, even though it meant throwing their own customers under a bus.
I know that your company tells companies like mine to deliberately make the language on our Web site vague like “Click here to claim your $10 reward”, so that it looks like the offer is coming from us, not you. Oh, you’ll “permit” us to add qualifiers like “Click here to claim a $10 reward from one of our valued partners”, but if we do so, you’ll slash the price of the check we get.
I know that you deliberately make the “YES” button huge, knowing that most customers will click it without reading the fine print, because they trust the company whose site they think they’re on and don’t suspect that their personal information is all being passed to you. I also know that you know that it takes most people months to realize their credit card is being charged, and some poor grandmothers don’t even realize and end up paying you an annuity for the rest of their lives.
I know that the “programs” you offer are worthless to customers. They cost you no money and add no value.
I know that when customers call you to cancel, you first give them a sleek sales pitch with offers of free incentives (which end up costing them more) and then only if they press and press do you let them cancel.
You see, I’ve been in the meetings. I’ve coded the Web pages. I’ve been excoriated by my management when I’ve tried to speak up on behalf of our customers to tell them to stop this practice, because they spit back to me your sleek presentations convincing them that customers are satisfied, using data taken way out of context. Shame on them for having the stupidity to fall for your snake oil techniques, but shame on you for being worthless companies that make money off deceit and ignorance.
I hope the Federal Government lays down the law. You and your fellow scammer companies’ “settlements” and payoffs of local states attorneys general may have worked for a few years, but I hope the Fed puts an end to companies like yours for good. You add nothing to our society and our country and should be ashamed of taking advantage of the masses for your greedy gain.
What a sleazeball!
I am glad this is all coming to light. These businesses are nasty. I am shocked that Vertrue is still in business….they are secretive and deceptive and don’t know how to manage their margins properly so they pick-pocket their consumers. Good riddance I hope!