Remember “Casper the Friendly Ghost”? In this haunting tale, Casper is a highly successful online mattress company that at first befriends, then sues a highly popular online mattress blogger.
Writer David Zax weaves an incredible story for “Fast Company” about the “little-known and hugely lucrative annex of e-commerce.”
Zax’s interest in mattress bloggers and companies began after he received a free mattress from a friend of a friend named Kenny Kline. Kline and a business partner, Joe Auer, owned two online mattress review sites, and he was eager to offload the free mattresses they received.
It was through Kline that Zax learned that the mattress company Casper (a “bed-in-a-box disruptor”) had filed federal lawsuits against three blogging sites for the unfavorable reviews they had posted about their products.
In particular, Zax dug into the lawsuit against the site Sleepopolis.com. He contacted the site’s proprietor, Derek Hales, and learned the surprising background to the suit.
In 2014, when Hales reviewed Casper favorably in a YouTube video, not only did he and his wife, Samantha Hales, learn that there were online consumers eager for mattress reviews, but also that they could monetize such reviews with referral and affiliate links, like a digital coupon, resulting in rewards. Hales either worked directly with the mattress company to negotiate a commission structure or with an intermediary site.
Due to a number of circumstances, Hales “had stumbled into early-mover advantage in a category primed to explode” and built his site “into the most-trafficked web destination for people seeking information on mattresses, beating out a raft of competitors.”
Hales and Sleepopolis enjoyed great success and a cozy relationship with Casper until 2016. By then, Casper had become incredibly successful and the leader in the online mattress industry thanks to a “$55 million in Series B investment at an implied half-billion-dollar valuation.”
Zax delved into Casper’s affiliate contracts, learning that the company had let them expire and was interested in, according to another mattress blogger, exploring new economic relationships.
As some of these relationships grew tense, a few of the reviewers “conspicuously began to downgrade their assessment of the company’s mattress, and to more vocally favor competitors that did still pay commissions, like Leesa.”
By April 2016, Hales had posted a new assessment of Casper’s product and included copy in “a little yellow box” that urged consumers considering a Casper to reconsider. Said Zax:
“That little yellow box was a huge thorn in Casper’s side. If you Googled the search term ‘casper mattress review,’ which about ten thousand people did per month, the first webpage Google served up was Derek’s review, with its poison box. Derek ranked first for that query, too.”
On April 29, 2016, Casper filed suit against three bloggers, including Hales, alleging false advertising and deceptive practices. By the end of the year, only Hales remained, defiantly maintaining his legal position.
“The company complained that Derek was not forthright enough about his affiliate relationships, noting his disclosures were buried in a remote corner of his site. This did violate recently issued FTC guidelines, and Derek updated his site to comply.”
Casper was looking to an end to Hales’ activity and monetary damages, estimating the blogging site had done millions in damage to the mattress company. Hales filed a motion to dismiss, citing censorship.
According to Zax, the judge found that among Hales’ opinions, which were immune to the lawsuit, he had also made some statements of fact. “If Casper could prove those statements false, it might have a claim for damages.” The case moved on discovery.
Did Hales have the stamina and funds to litigate for months or years? While he had enjoyed financial success (Zax estimated he could have made around $2 million in 2016), he was no match for the Casper corporation. And by February of this year, he had a new legal problem on his hands.
Casper’s attorney had sent a letter to the judge that alleged that while Derek was giving the mattresses of a Casper competitor, Leesa, positive reviews, and receiving affiliate commissions, he had also been paid for SEO consulting, totaling $40,000. These payments could harm Hales’ claims and case.
Just when it seemed like Hales had no more fight and was heading toward a settlement, he submitted a counterclaim against Casper. Hales claimed that after he refused to resume the affiliate relationship, and at a more lucrative rate, in exchange for positive reviews, “Sleepopolis came under a massive negative SEO attack.”
Hales’ lawyer alleged in the countersuit that Casper was behind the SEO attack and that Hales was the wronged party and entitled to damages. Casper’s lawyers responded swiftly with a motion to dismiss. It seemed the legal battle would continue.
This July, Zax learned that the battle had not only ended, but it had taken a very unexpected turn — flip?
Derek and Samantha Hales were out. Sleepopolis was under new ownership — a subsidiary of JAKK Media LLC. “Who was JAKK Media?” Zax wondered.
After some Internet sleuthing, he discovered the startling news …
Joe Auer, a name vaguely familiar to Zax, was the JA in the JAKK; he was the co-owner of two mattress review sites.
Then the startling realization hit Zax: The KK was none other than Kenny Kline, the same blogger who had unloaded one of his mattresses to Zax for free. Kline now owned Sleepopolis, thanks to a loan from Casper.
Casper informed Zax that it was a loan without any review strings attached. It would neither “exert influence” on the site nor could access its data.
Also in July, Hales and Casper reached the final stages of settlement and resolved the lawsuit.
Through August and September, Zax observed with great interest the evolution of Sleepopolis, including “Derek’s damning yellow box,” that had once dissuaded a prospective Casper purchase to consider alternatives, morphing into a green box with a link to a Casper coupon.
Now, it seemed, Casper could finally rest easy.
