Luxola vs Zalora: Is it Ethical To Buy Google Keyword Ads on Competitors’ Names?

Willis Wee
2:58 pm on Jun 5, 2013

luxola

Anyone in the internet industry in Asia must have heard of e-commerce sites Luxola and Zalora. Now these two companies are fighting head on in what it looks like a keyword ads battle on Google’s search results page.

Look at the screenshot above and you will find Zalora’s ads when a user searches for ‘Luxola’. That’s not all, there’s even a subdomain for Luxola (luxola.zalora.com) on the Zalora site. It feels like Zalora is playing some jackass keywords bidding tactic game to trick Luxola users to its sites.

luxola-zalora

Alexis Horowitz-Burdick, co-founder of Luxola, noticed Lazada and Zalora displaying ‘Luxola’ keywords ads around mid-April in Malaysia. And then it went on to extend to Singapore, Indonesia, Malaysia, and Thailand. Alexis emailed Zalora’s Lazada’s CMO Stein Jakob Oeie who replied:

We are not in breach of Google’s policy here as it does not cover display URL. I understand your frustration but these campaigns actually work very well for us.

Sure, Zalora didn’t breach any policy. Several Forbes’ articles also seem to suggest so too. Even though Luxola is a trademarked name, it may not win the case if both companies were to go to court.

But I can’t help but feel a sense of injustice here. Now let me highlight what Stein said, “These campaigns actually work very well for us.” That seems to suggest that Luxola isn’t the only startup that is facing keywords pressure from the Rocket Internet guys. My moral compass tells me that this isn’t right. After surveying many experienced entrepreneurs across the region (who all agree that this is a jackass move), I understand it is actually quite common. Usually a simple ceasefire email should suffice. But this isn’t the case for Zalora which continued to roll out its Adwords campaign that targets Luxola. Alexis notes that it has caused a drop in Luxola’s traffic; she tells me:

We have lost a small amount of traffic which is unfortunate […] We continue to try and educate our customers through social media that Luxola is in no way affiliated with Zalora or Lazada. We also continue an aggressive, but above board, search engine marketing (SEM) strategy for the region as we prefer to win on the merits of our platform and not the confusion or misunderstanding of potential customers.

Rocket Internet declined to comment on this matter when we reached out to them.

While I understand that this is business and competition, I do believe that the battle could be fought in many different ways, for example by focusing on better products and customer service. Tricking users who wish to go to Luxola into visiting Zalora doesn’t really make sense.

If you agree with me, please tweet a note to @ZaloraSingapore. Maybe the community’s combined voices will get Zalora to switch off its ‘Luxola’ targeted ads. And if you don’t feel that way, tell us why in the comments.

(And yes, we're serious about ethics and transparency. More information here.)

Replies
  • rere

    zalora truly jackass..

  • http://www.pinkemma.com Iwan Tantra

    I think it’s simply shameful tactics. It happened to us as well, i.e. our brand was used in the SEM ad text of those supposedly more established players. Running out of ideas, eh?

  • http://www.pinkemma.com Iwan Tantra

    Oh wait… they are still using our brand too it turned out.

  • siew char

    Typical rocket style to go about things this way. They don’t seem to care much about positive branding, rather they just wipe competitors out with their big budget marketing campaigns. Is what they do Illegal? NOPE, but is it Unethical ? YEP. Proof? Even with their big budget campaigns, you don’t hear much positive reviews from their customers anywhere on the WWW.

    The end justify the means,
    zersțren them all Рprobably rockets moto :))

  • rere

    @iwan, why don’t you do the same, take their brand and use it in your URL?

  • Mr Lee

    WOW. look wat i found ?!?!

    Guys please google tech in asia, looks like e27 is following in the footsteps of the GREAT OLIVER SAMWER EMPIRE to advertise their echelon event.

    Alle Hagel SAMWER

    • http://www.techinasia.com Steven Millward

      @Mr Lee – Yes, we’d noticed 😉 But it doesn’t matter. That’s just one way to ‘compete’.

  • http://www.linkedin.com/profile/view?id=61579230 Leon De Silva

    This is an established technique, nothing surprising nor new. “Ethics” being discussed is only due to it being Zalora’s campaign.

  • Ev

    @Mr Lee
    It’s worth noting that the same ad appears if you google for “tech”. So it’s highly likely they are appearing for all queries containing “tech”. I would hardly call that following in Zalora’s footsteps.

  • Chong

    Get government out of business. Patents and intellectual right create more barriers for an already challenging business environment. The last thing we need is another fat-ass government official, who has a big fat pension , regulating the internet. As it is, the US has already passed sales tax on every online sale. How long might it take it to reach elsewhere? Your thought that customers cannot think for themselves is also not justified. That’s exactly how government regulators think.

  • anon

    It happened to my brand too in Indonesia, not a rocket internet company but another big budget giant internet company buying google keyword against my startup.

    But business is business and you just have to suck it up. Look at the positive side, it’s a good story to tell potential investors (You are a big competitor to them), a very good PR (such as this article) good for luxola and making rocket internet look bad to the public, and my favorite of all, getting all of your team riled up to beat the evil enemy/competition!.

  • Ryan

    This is a pretty common tactic in PPC advertising. In my opinion bidding on competitor keywords is okay, but don’t be an ass about it and try to trick users into clicking. That’s is what Zalora is doing by using a luxola subdomain.

    Also, based on the screenshot above Zalora did a pretty good job following Adwords trademark policy https://support.google.com/adwordspolicy/answer/6118?hl=en# so that their ads are still compliant.

    Luxola’s only consolation is that Zalora must be spending a boatload of advertising money for their ads to show for unrelated keywords.

  • http://www.pinkemma.com Iwan Tantra

    @rere naaah… we’re not that desperate just yet.

  • Alec

    For those whom are familiar with how Google works, Its only a matter of time before unethical strategy such as this will be stopped and considered blackhat. The only reason it is not yet considered a blacklist online marketing strategy, is because its a paid service to Google. Soon they will realize such good marketing methods is being exploited by those with big budget, just like rocket.

    Just imagine that if a user searched for cooking recipes, and the first result says cooking recipes but the content is totally non related, visitors will not be happy. This is something Google doesn’t like to see and has been pushing hard to penalized these sites manipulating traffic. The methods used by Rocket here follows the same concept, miss leading traffic but on a PPC platform.

    Offline, Related Gov agencies are already cracking down those that mislead customers with their advertising campaigns, ie, Travel to ABC only at ONLY SGD9 (with hidden cost of SGD XXX which is not explained). Pretty sure the same will happen to miss leading traffic strategies in the internet.

    Bravo Rocket. You have reached a new level of LOW when creating a sub domain just to compete with your competitors. I wonder whether do you have other sub domains of other competitors as well.

  • John butcher

    Luxola is going to fail so whats the point of such a sissy article…they were trying to sell their website some time ago and got some lucky funding but probably struggling to make any money because their founder doesn’t know much about e-commerce. Rather than complaining they should focus on cheap channels such as SEO…
    Business is business…..wake up guys.

  • http://pamperland.net Thea

    First, I’d like to say that I’m a customer who doesn’t know anything about business. And the opinions below are from that point of view.

    I dare say that I feel the injustice. People would say “business is business”. That’s true, and Zalora/Lazada made it clear that they didn’t violate any rules for the ad. So I don’t think there’s anything that we could do about that.

    All I can say is that Luxola would need to keep on telling people that they are not affiliated in anyway, and I believe customers (who are just customers, really. Who wouldn’t think any more deeper into the business part) would find it wrong for Lazada/Zalora to do so. I know I do. Once they feel that way, it’s likely that they won’t shop from said website anymore.

    That said, I know that they both are very different in terms of what they sell. I find Lazada/Zalora to be confusing (waaaay lots of stuff there, ranging from electronics to clothes to beauty), not pleasing to the eyes and targets at middle class. While Luxola is the opposite because they have a more focused target (they only sell beauty products; skin/bodycare & makeup) and the products are more of a mid-high & higher class.

    Just my opinion 😉

  • Rubert McClane

    Yeah agree, business is business. Heck if there’s any place on earth where murder is legal, I would go there and make a business out of it… It’s just business guys, and it’s legal. Moral is only for sissies.

  • John McClane

    Yep Business is Business I agree. But Moral does have to be in there. Ecommerce business such as what Zalora and Luxola is doing requires people to trust their brand. Doing this will have an effect on customers perceived value. Its a similar concept to red ocean VS blue ocean. Clearly business that focus only on profit and nothing else such as rocket (their marketing campaigns are unethical, numerous customer complains on Google and if u have a chat with their Ex employees, you will clearly understand that these guys don’t care much bout people, in general …even their own staff)…

    In short, Pity Luxola to have Zalora as a competitor. Its a capitalist world, the rich gets richer.. the poor.. well… all the best!

  • Ron

    This is competition . (DOT)

  • Ron McClane

    Come on guys, give rocket some space. They lost 70 mio last year and they are trying not to lose the latest 100 mio or so new injection. At least not lose it all in a year.

  • Valdy

    that was a cheap play by zalora and lazada

  • Anne O’nimus

    Ex employee here.

    We actually noticed competitors doing this to us in the early days of Rocket in another continent. This generated quite a lengthy internal debate as to the ethics of doing this, and the potential legal implications. It was not just one company, but with a few refreshes we could see it was open season on our branded keywords and those of the rest of the industry. My favorite: Asos “free shipping to [your country]” campaigns. No wonder Asos is globally known despite having only a British warehouse!

    Considering how widespread the practice is, I wouldn’t call it unethical and I’m glad the Zalora marketing team has finally decided to join the rest. (By the way guys, if you are reading this: Luxola is a COSMETICS company, you might want to put up a COSMETICS landing page…) It’s telling to see Luxola complaining – just indicates their CMO has a bit of a learning curve to go.

    Finally, regarding consumer benefits: the consumer who looks up Luxola is presumably aware that it exists already. If Luxola was providing a better service than Zalora, it wouldn’t lose traffic to it (and it shouldn’t: Luxola delivers cosmetics, and Zalora is predominantly a shoe and fashion store with a couple popular cosmetics on the side). Why is it ok when it’s McDonalds vs Burger King, or Coke vs Pepsi, but somehow “unethical” when two companies doing the same thing in the same space bid for the same ads?

    Considering how much of a pain it is to operate a physical delivery business in SEA, I suspect the cause of the dropping traffic is probably operational problems, high return rates, crappy products, unresponsive customer service and all the other things we had to iron out at great expense (by the way, enjoy that DHL delivery infrastructure… $$$$). You can lose money in marketing, but that’s the least of your worries, especially on branded keywords that cost you almost nothing per order.

    At the end of the day, this game is zero sum and there can only be one winner. The best funded, best operated, lowest long term cost, highest quality business will win over the next 3-10 years, just like Amazon has won the online publishing industry market in the West. I’ll take the chances of the $100m+ funded, PE executive led business with own infrastructure and a year of (expensive) learning curve already done any day.

  • Ryan

    @Anne,

    “Considering how widespread the practice is, I wouldn’t call it unethical”
    – Widespread doesn’t equals ethical. It’s like saying I’ll smoke because all my friends are smoking.

    The problem with Zalora’s ad is that it has “luxola” clearly displayed in its landing page URL. We all know what it’s for, but I can’t say the same for less savvy internet users.

  • Spok

    @Anne O’nimus

    From the way you write your tale, you are definitely young, (probably have masters degree) and either hold an intern position or a management position when you were(or currently still :) ) in rocket. Your words make sense to people who don’t have much experience on the field because that’s exactly what you are like too.

    You just take in whatever BS the highers ups feeds to you.

    So much of these people in Rocket.. young, academically bright, but way too low practical experience. In short, A perfect lackey!

    toodles!

  • Anne O’nimus

    My dear Vulcan,

    Please feel free to counter my arguments with the facts you know better, thanks to your wealth of experience, than try the ad hominem and handwavey generalist “things that sound good” approach which is the last resort of those who have nothing better to add :)

  • http://fotodeka.com Fotodeka

    dyaaarrr kabeh do frustasi toh? bhahaha… apalagi yang UKM he’eh? sudah-sudah… sabar aja…

  • Solyn

    Agree with the comment above that Luxola management doesn’t know what it is doing

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