Daily-Deal Sites: Worth the Bargain?

By Features FOXBusiness

The proliferation of daily deals sites offering as much as 80% off items such as gym memberships, spa treatments and vacation getaways, has made the process of getting a bargain as simple as a click.

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But with some bargain sites altering their privacy policies and demanding more information from users, experts are cautioning consumers that theres no such thing as a free lunch.

Honestly, its not clear how they are going to use the data, only they know, says Michael Fertik, CEO of Repuation.com. Groupons original privacy policy said they werent going to use their customers data, and now they are.

Last week, Groupon announced that it will share consumers' purchasing data, as well as geological-location information with its partners, which Groupon says is simply a step toward offering consumers more deals targeted to their interests and location.

In an e-mail dated July 10, sent to customers notifying them of the changes, Groupon wrote:

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We want to let you know that we've updated both our Privacy Statement and our Terms of Use. These new terms, which affect all Groupon users, accommodate our new products and services that allow us to offer you more relevant deals&[and] address how we are partnering with companies to offer users new deal categories&

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According to Fertik, companies are facing pressure to share more information with their marketing partners to make themselves more attractive to investors.

Groupon filed papers for an initial public offering in early June and Living Social appears to be not far behind. Networking site  LinkedIn (LNKD) went public in May and its shares more than doubled in their debut.

Based on all the feedback weve been seeing in the media, there is enormous pressure [on Groupon] to collect as much info as possible and then sell it. From what weve heard about an IPO looming, there may be some pressure around their business model to try and figure out all means of making a profit, says Fertik.

Fertik adds that while no one wants to think of their personal information getting sold, its hard to finger coupon sites as bad guys, because selling customer data may not have been their intent from the beginning. 

We dont know if we got the 'bait and switch' and selling our data was the intent from the beginning, or if theres been a shift in the company and the changes in the policy are a reflection of external pressures.

In an e-mail to FOX Business Network, Groupon wrote that the change in policy means customers will receive deals better targeted to their interests.

Customers have the opportunity to provide more information about themselves and enable us to deliver more relevant offers. It's their choice, the e-mail said. For example, the Groupon app will ask for your location to provide the closest relevant deals. Consumers may not realize that they can ultimately control that data sharing by managing their settings on their phone.

But Fertik says that the real question is not so much whether or not users personal information gets distributed, but to whom it gets distributed.

Who gets to decide what a relevant offer is? Do we want cupcakes?...Who decides? says Fertik.

Regardless, Fertik says consumers have no way of knowing where their purchasing history and user information with a site will end up. But coupon sites are hardly the only problem. [The Internet] is really good at getting people to use things for free and then collecting their data, he says.

According to Fertik, the worst-case scenario with information from sites like Groupon being shared is that our digital DNA, which consists of our previously-visited Web sites and purchasing history, can become a road block for other things in life.

If you're talking about telling Nike that I bought Reeboks that's one thing. If you're talking about telling a health insurer that I like pizza and cupcakes, that's another, Fertik says.

Although there is no evidence that insurance companies are purchasing information from sites like Groupon, Fertik says that insurers could potentially buy the information to see how much to charge for premiums, or whether to insure someone at all.

If Im buying a coupon for cupcakes for my sister I dont want to get denied a job because I have a history of buying unhealthy food, Fertik says.

At coupon site LivingSocial, spokesperson Brendan Lewis says the company does keep data on what type of items people purchase, but the company has never been approached to sell the data to a third party. Lewis says the data the company keeps is anonymous, and although LivingSocial keeps a record of how many coupons are purchased, it doesnt keep a record of who purchased them.

We keep data on what people are buying, but not as it relates to a specific person, says Lewis.

Like Groupon, LivingSocial has also altered its privacy policy since its launch, but Lewis says that is only because the company expanded to territories not covered under the original policy.

Some coupon-buying sites may assume that because business is good, consumers are OK with distributing their personal information, Fertik says.

They may think that because they have a public privacy policy published online that users dont care, thinking that if users cared, they would stop using the service. But thats not the case, says Fertik. Users dont have another choice, and Ive never read a privacy policy you didnt need a PhD to decipher. How many people really digest it? On top of that, theyre all disclosing the minimum required by law.

So whats a consumer to do?

Read the policy and know that if your information is shared with a third party, that third party is going to share it again,  Fertik advises.

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