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