Australia: Group buying deals so hot they can burn: is there value in advertising your business on a group buying site?

Last Updated: 18 January 2012
Article by Ashleigh Fehrenbach


  • Australian group buying sites have an estimated collective value of $400 million, and together publish 4000 deals daily, with each deal emailed into thousands of Australian inboxes.1
  • This segment of the e-commerce sector is experiencing rapid growth in Australia, estimated to be at 72% each quarter; and its collective worth grew from $73 million in the first quarter of 2011 to $123 million by June.2

In a market in which there is a new entrant almost every week, group buying sites must address the expectations of their consumers, as well as their advertisers, that is, the businesses choosing to offer discount deals via a group buying site. Among the issues faced by advertisers are choosing a group buying site, negotiating terms and conditions with the site operator, meeting consumer demand, and attracting one-off customers at the risk of alienating existing customers. At the same time, there are a growing number of media reports doubting the robustness of the group buying industry.

In a similar vein, many predict that not only will customers quickly cool towards the sector but also that advertisers' brands will be prejudiced by the bargain hunting customer audience targeted by group buying sites. Meanwhile, reports have surfaced that Nine Entertainment and Microsoft have put on hold the estimated $80 million sale of Cudo (their jointly owned group buying site and one of the largest players in the Australian market), indicating that "those with money tied up with the group buying sites still see value".3

What is group buying?

Group buying sites offer advertisers a guaranteed amount of profit (provided that the agreed amount of buyers make a purchase) and exposure to a sizeable and new audience. In essence, the business model of most group buying sites involves a discount being offered to consumers online by the group buying site on behalf of the advertiser. Group buying sites take a commission on the resulting sales of the products of the advertisers.

Buyers commit to purchasing the relevant products by providing their payment details (as they would in any other online transaction); however, the purchase is not finalised until a certain level of sales is achieved. That is, a certain number of buyers (which is usually agreed to by the group buying site and the advertiser), must commit to a purchase by providing their payment details (hence the name group buying). Once this target is reached, the purchases are finalised.

Reaching an audience

One of the strongest attractions that group buying sites have to advertisers is the customers they bring. The investments being made by, for example, Yahoo!7 in acquiring Spreets4 and a James Packer led consortium in acquiring a 40% share in Catch of the Day and Scoopon5, are to obtain access to potential customers - customers which they could offer advertisers in return for a commission.

The customer audience that group buying sites can offer advertisers is assisted by the fact that the group buying business model results in each buyer having a self interested motive to use what is still the most effective marketing tool of all - word of mouth. A buyer taking up the offer of, for example, a $39 seafood platter for two, wants their friends to take up the offer too.

Group buying sites, assisted by their customers, boast large mailing lists and significant numbers of Facebook fans, and Twitter followers. Also, most group buying sites offer advertisers targeted local audiences. For example, Spreets offers multiple Spreets Facebook pages: Spreets Sydney, Spreets Newcastle and Spreets Melbourne, amongst others.

Can your business meet the demand?

Once the deal has been finalised, the advertiser enters into agreements with customers. Like other consumer agreements, these agreements are subject to the Australian Consumer Law. There are numerous examples of advertisers who have been caught unawares and unprepared for the unexpected demand for their offered good or service after a promotion on a group buying site. The NSW Department of Fair Trading has indicated that most of the complaints relating to group buying it receives relate to the unfulfilled supply of goods and services.6

Even if your business can meet the demand, it may be unprofitable to do so. This may be the case if your business is labour and/or time intensive. For some businesses, it may even alienate their existing clientele. For example, a beauty spa advertiser offering 1 hour facials for $30 may generate so many bookings that it can no longer cater for its existing (and loyal) clients who pay more than $30 for a treatment.

While the primary target for consumer's ire over a failure to meet demand is likely to be the advertiser, the group buying site may, due its profile, be pursued.

In recognition of the difficulties, the Australian Interactive Media Association (AIMIA) and the Australian Direct Marketing Association (ADMA) jointly launched the Australian Group Buying Industry Code of Conduct in November 2011 (the Code).7

Signatories to the Code include Jumponit, Our Deal, Cudo, Spreets and Scoopon. The Code confirms the signatories' commitments to consumers with respect to, for example, misleading and deceptive conduct, privacy and spam emails. The Code also sets out a complaint mechanism, so that complaints against a group buying site are directed to and investigated by ADMA.

Being Prepared

The business of group buying sites gives rise to a myriad of legal issues. These can have detrimental consequences for both the advertiser and the group buying sites themselves, particularly where the relevant actions cause the consumer to become disgruntled and reluctant to see any of the benefits offered by group buying sites.

Set out below are legal checklists for both advertisers and group buying sites. Consideration of these issues will minimise the likelihood of adverse legal ramifications for businesses involved in the group buying sector.

A checklist for group buying sites:

  • Are you meeting the commitments in the Code? Even if you are not a signatory, the Code is likely to be seen as setting the standards that the sector as a whole is expected to meet. Have you reviewed your site to ensure compliance with these standards, some of which are listed below?
  • Do you have a clear policy to deal with advertisers who fail to deliver? While the contract for the sale of the product is typically between your client (that is, the advertiser) and the customer, the Code not only places an obligation upon a group buying site to have a clear and unambiguous refund policy, but also specifies that this policy must include an example of what happens in each of the following situations:
  • the advertiser goes into liquidation;
  • the advertiser fails to provide the goods or services; and
  • the goods or services supplied to the customer are not as advertised.
  • Think about your brand. Your clients (the advertisers) and their products are what consumers will associate your group buying site with. Choose the advertisers (and their products) wisely.
  • Are you indemnified against third party intellectual property (IP) claims? An advertiser's product which seems like an imitation of a branded product can be offered through your site to buyers at a cheap price; however, it also exposes you to the prospect of claims of intellectual property infringement, misleading and deceptive conduct and passing off. Any agreement between a group buying site and an advertiser should contain relevant indemnities
  • What claims are being made by your advertisers? Despite any argument that a group buying site is an intermediary (or an agent) which means that the advertiser is primarily liable for any claims made, there exists a real risk that a group buying site will be held liable in respect of claims made in any promotional material relating to a deal. This is particularly the case where, for example, your group buying site employs copywriters to create promotional material and this material bears your site's name and logo.
  • Do you have processes in place to ensure that the products you have agreed to sell are suitable for sale through a group buying site? For example, the Cosmetics Physicians Society of Australia was recently concerned that the sale of discounted Botox treatments on group buying sites may be in contravention of laws relating to the supply of therapeutic goods/services. The Code sets out a list of statutes which include prohibitions on the sale of certain categories of goods.
  • Do you have a marketing strategy? Your business is selling your clients' products to your consumer base - how are you building and maintaining your consumer base?
  • Be aware of your obligations under the Spam Act with respect to your communications with customers. These obligations are briefly set out in the Code.
  • Keep your best advertisers coming back. Group buying sites compete in a highly saturated market and it is likely that many of your advertisers are also receiving daily deals from your competitors. How do you retain your best performing advertisers?
  • Do you have a clear and easy to read privacy policy? This is another Code requirement.
  • Do you have training programs in place to ensure your staff are aware of areas of potential liability?

A checklist for advertisers:

  • See how the group buying sector works. If you have not done so already, sign up to a few group buying sites and take note of the offers and the advertisers. Look at what customers are saying on social media websites like Facebook and Twitter.
  • Do the maths, for the best and worse case scenarios - are both profitable? Neither scenario may be likely but keep in mind that, as a business offering goods and services, you have obligations under the Australian Consumer Law.
  • Shop around. There are lesser known group buying sites which specialise in the sale of a particular category of products and services and offer advertisers a more targeted customer audience than others. (For example, there is a group buying site which exclusively sells restaurant deals.) As an advertiser using a specialised group buying site suited for your products, you would have the benefit of a more targeted - but possibly smaller - customer audience.
  • You may be in a position to negotiate better terms with some sites which are more favourable to your business than the standard terms generally proposed.
  • How are your competitors advertising? You may get a competitive edge using an advertising medium they have not yet used. Alternatively, your competitors might be avoiding group buying sites for good reason, for example, where unsuited for the relevant category of products.
  • Is the product you want to offer suitable for sale through a group buying site? As mentioned above, the sale of Botox treatments using a group buying site may be in contravention of the law.
  • Does the product you want to advertise through a group buying site infringe a third party's IP? Group buying sites may allow you to market a popular product to thousands of consumers in a very short space of time; however, if this product infringes another party's IP in the country where the group buying site's customers are located, that third party may bring court proceedings to stop the unauthorised use and claim damages or an account of profits.
  • Do you have control over the promotional material the group buying site will publish to promote your good or service? These promotional materials are often created by the group buying site; however in the event of any misleading and deceptive conduct or passing off claims, it is likely that you will also be considered responsible for the content of this material.
  • Consider the Code. It will give you an idea of the level of service to which the industry leaders are prepared to commit.

The assistance of Jessica Azzi, Solicitor, of Addisons in the preparation of this article is noted and greatly appreciated.


1 Nina Hendy, "Group buying sites miss the market", The Sydney Morning Herald, 7 October 2011:

2 Ibid.

3 Supratim Adhikari, "TECH DEALS: Cudo holds the line", Technology Spectator, 10 October 2011:

4 James Chessell, "Yahoo!7 buys daily deal site Spreets for $40m", The Australian, 21 January 2011:

5 Ben Grubb, "Online jackpot: slicing up Packer's millions", The Sydney Morning Herald, 23 May 2011:

6 See for example: Alexandra Smith, "Going for a thong... but little to show as group buying site caught short", The Sydney Morning Herald, 3 October 2011:


The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.