Swoopo, Smart Like a Fox or Just Dumb?

www.swoopo.com.png Meet Swoopo, a business that is so wrong on so many levels that it’s hard to believe that someone thought they could sucker people into playing. The idea is really quite simple, get people to pay the site in order to place bids on popular products with the promise that the final sale price will be dramatically lower than retail.

In order to play, you prepurchase bids, minimum of 30, which increment the price of an item each time you bid by .15 cents. This is important so let’s go over that again, let’s say you buy a pack of 100 bids for $75… you still haven’t bought a product, all you have done is bought the right to bid 100 times. When you bid, it’s a fixed increment of .15 cents… want to bid .30 cents up then it’s 2 bids out of your prepaid pack.

You find something you want to bid on, like a Wii Fit and Balance Board for example, with a retail price of $89 and the bidding starts at $70.95. The item attracts 17 bids and because each new bid is only worth .15 cents more than the last, the final purchase price is $73.50 but that’s not the whole story. It cost each bidder .75 cents to make a new bid so the aggregate cost of the item, some of it paid by the eventual buyer and the rest by the people who lost the auction, is $86.25. BTW, this isn’t a hypothetical example, this is a single auction I watched today while looking at this site.

In essence, the bidders who lost the auction subsidize the final purchase price for the bidder who won the auction.

I forgot to mention that Swoopo has a robot that can bid for you, and then there is this little gem… in the final 15 seconds of every auction, each additional bid extends the auction close time by 15 seconds. So basically you get a bunch of robots bidding with hopped up prepaid bid packs and an auction that will basically only end when the robots run out of bids and it’s easy to see how this system can go bad very quickly, at least as far as the bidders are concerned.

I actually watched several auctions today and there is a clear pattern. Some items are priced close to MSRP and attract under 20 bids while other items, like a Wii console priced at $10 attract hundreds if not thousands of bids. Either way, Swoopo comes out ahead because they get paid either way. It’s kind of like Vegas, the house always wins.