Invalid coupons suck. Shopzilla's Robot Oatmeal uses crowdsourcing to solve this problem

By Michael Carney , written on May 24, 2013

From The News Desk

Over its nearly two decades in business, Shopzilla has touched seemingly every area of the ecommerce value chain, including business ratings, product discovery, marketplace, business analytics, display advertising, audience targeting, and publishing. Surprisingly, the one area it never touched was that of coupons, although the company managed to collect a serious amount of data around their use through its Bizrate Insights survey and feedback product.

That changed today with the public launch of a crowdsourced coupon verification and rating platform that allows consumers to view the last time a code was used in real-time, as well as its frequency of use.

The online coupons category is one of the most fragmented and dis-satisfying customer experiences in all of ecommerce. The central problem is that while the Web is flooded with discount codes, it is unnecessarily difficult to find coupons that are currently valid and that offer the best deal available.

With data around the real-time use of millions of coupons and also information about customer satisfaction in those transactions, Shopzilla was in a better position than most to solve this problem.

“We are in the business of connecting buyers and sellers, and see Robot Oatmeal as another vehicle to address a consumer need and drive sales for retailers,” Shopzilla CEO Bill Glass says. “We are seeing unprecedented conversion rates, high quality clicks to retailers, and significant gross merchandise sales from this new venture out of the gate.”

For retailers, traditional coupon aggregators are a major source of frustration as they often get credit for delivering consumers that were already on the merchant’s site. For example, a consumer buying a TV from Best Buy is likely to complete the entire shopping process and then at checkout, with the item already in their shopping cart, turn to Google to search for “Best Buy Coupons.” Best Buy pays the referrer a customer acquisition fee despite already having acquired the customer themselves – in some cases through a search ad or another paid leadgen product.

Despite its effectiveness, Shopzilla has chosen to make Robot Oatmeal free to both consumers and merchants – rather than charging retailers affiliate commissions or pay-per-click advertising – at this time. The company benefits by gathering additional consumer behavior data and by offering value to retailers which are customers of its other paid products.

In another retailer friendly move, Shopzilla surveyed its merchants to ask their frustrations with existing couponing sites. One common answer was the proliferation of coupons that are meant for a limited audience. With this feedback, the company built coupon verification technology into Robot Oatmeal to ensure that the site would only list approved, widely distributed codes. But while this will make its merchant partners happy, it could put Robot Oatmeal at a disadvantage to other sites that are more willing to post the juiciest coupons, even when not favorable to retailers.

Robot Oatmeal is not the only site to offer coupon verification. Several startups, like ZenDeals and others, have built technology to programmatically test and verify coupon effectiveness. The thing that these competitors are not able to offer is the data on each code’s frequency of use. Whether this is an appealing enough point of differentiation remains to be seen.

Few if any other coupon platforms have an existing relationship with 40 million shoppers per month and 100 million products across tens of thousands of retailers as Shopzilla does over its portfolio of online properties including, Bizrate, Beso, Retrevo, PrixMoinsCher, SparDeinGeld, and Shopzilla itself. Expect to see the company take advantage of this reach to further strengthen its couponing data and to deploy that data in a multitude of new ways.

In a recent consumer survey, Shopzilla determined that price influenced the shopping behavior of 75 percent of online consumers and that 33 percent of consumers used coupons in their transactions. Humans are hardwired to seek out the best deal possible, whether that’s measure in savings or convenience. It’s a crowded category, but Robot Oatmeal is well positioned to deliver on both these consumer desires.

After its initial sale to E.W. Scripts in 2005 for $560 million, Los Angeles-based Shopzilla was again acquired in 2011 for an undisclosed sum by private equity firm Symphony Technology Group.