Great posting. The best post for a long time.
I guess the real problem is not if this is a gambling system or not. The problem is some people are just unable to think for themselves and that’s why they need the government to take care of it with regulations.
Anyone doing the math can see Swoopo is making a killing on stupidity, hell I wish I thought of this idea. What is worse is they are based out of the UK, which would make me more cautious of a rigged BidButler service or virtual bidders.
There’s no point banning gambling, people will find ways to do it anyway. A fool and his money are easily parted, and that will always be the case. Even if you ban traditional gambling facilities doesn’t the stockmarket provide the ability for gambling?
Interesting, I never saw it from that perspective and I have been in the situation of having to write an automated bidding agent for one of these sites. My employer thinks a penny auction site is a good idea but he likes to scam people left and right so it seems like a perfect fit. But most of the placed bids are not real so even if you calculate a total of $12000 for a MacBook, the auction site will make considerably less.
I don’t get the evil part, but then again I don’t think gambling in all of its forms is evil. I went to swoopo and there’s a large ‘how it works’ button that I clicked on. I then read what I felt was a very clear description similar to what Jeff described. You clearly risk 75 cents for a small chance to win the opportunity to purchase an item. Sorry, but I don’t think this is evil.
When I was a kid in boy scouts I sold raffle tickets. People bought them knowing they might get nothing, because that’s what a raffle is. This site has essentially taken the raffle idea, and exchanged ‘free prize’ with ‘pay the amount that you bid’.
It’s certainly not a noble concept, but calling it evil seems a bit overboard.
“This site has essentially taken the raffle idea, and exchanged ‘free prize’ with ‘pay the amount that you bid’.”
Except raffles are normally done for charity, and people buy tickets as a fun way of making a donation, rather than expecting to make a profit. And you usually only buy a few tickets, not keep buying on the basis that whoever spends the most will get the prize.
Every lottery has mio. of losers. Every gambling has mio of losers.
I personally never bid on auctions, also not on eBay. I use eBay as a shopping portal. There are so many shops selling items as “new” on eBay for a fixed price and I always find what I’m looking for. Bidding on auctions is too much gambling for my taste.
Here in the Netherlands we recently have had exactly the same. There’s a guy who has a penny “auction” website, exactly as you describe. The government is investigation if what he is doing is legal or not, and he was on TV being asked about his website. Ofcourse he insisted that it is an auction and not gambling.
Oh, I see pvc already wrote about this.
The key point here is that it is gambling in disguise. The operators of such websites try to mislead people into thinking that it is actually an auction, while in reality it’s gambling.
@Wojtek: Adults should be allowed to do “bad” things such as gambling, but that’s not the point here. The point is that people are being misled, and they don’t know they are gambling.
So, what’s this evil thing called an OSB?
ALso what i realized is, what if some clever user learns to make DOS attacks on swoopo’s server to make sure all legit bids in the last 2-3 secs timeout and his/hers bids make to the last one!
Infact, i wonder if it’s already being done on the site?
It should be quite simple for a dedicated hacker to do that i’m sure, only it won’t be able to prevent the butler bidder. (and that give MORE undue advantage to the butlerbidder).
I wonder if swoopo’s got any DOS prevention mechanisms for DOS or DDOS.
Jeff,
Once you’ve gone after payday loans (after the ridiculous exercise of extrapolating to annual interest rates), you should hit the hotels next!
While it is shameful that these people can get away with this, I have to ask whatever happened to “Let the buyer beware”? I think that we as a country try to protect everyone from themselves way too often. Some people should lose their money and learn themselves a valuable lesson. We are creating a nation of imbeciles who are incapable of caring for themselves. Even if the Government decided to regulate this industry, these sites will only move their servers to another country where it is not regulated. Government action is unnecessary, we have to stop trying to slow evolution. Let people make their own mistakes.
I see a “Wargames” reference 
Ayn Rand said ‘if you protect people from their folly you fill the world with fools’
Like we need more fools.
Don’t know why you don’t just have done and give your website the ‘hammer and sickle’ branding you seem to want.
I’d like to just post this example of Swoopo’s evil brilliance. I visited there this morning to check it out, and watched one of their 300 bid vouchers sell.
The ending price, for this item worth $225 (and only then $225 of savings from Swoopo, they pay nothing for this item), was $39.68. That means that people paid, to Swoopo, $2,976.
Worst of all, however, the winner was a BidButler ‘winner’. They set some ridiculous ceiling, and left. Here’s what Swoopo proudly displayed:
Congratulations, Wallece!
Savings: 0%
Savings:
Worth up to: $225.00
Placed bids (515): $386.25
FreeBids (38): $0.00
Final price: $39.68
Savings: $0.00
At least they had the courage to admit, openly, that this person saved nothing–quite the opposite! In attempting to get just 300 bids, they spent 553 bids–losing 253, overall. More to the point, in cash, trying to buy this $225 item…they /lost/ $200.93 on the deal.
Swoopo: Where even the winners are losers.
I hate big government, but sometime regulations are necessary. Take the current housing collapse here in the United States. The one main reason it happened is because Bill Clinton (and the Congress/Senate) remove the regulations that would have stopped Fannie/Freddie and other lenders from making all the bad loans that they did (to people who could not afford them). Now we are paying the price and have had to pay over a trillion dollars to bailout all those “fools” that we allowed to be parted with their money.
If we do not regulate these type of sites, then the way things are going we all will be paying to bail-out all these people who used these site spending money they did not have. Nowadays no one wants to take the consequence of there actions. Not regulating these sites (defining them as gambling sites, and regulated as such), will come back to bite us. Then we will be bailing out all the fools that used these kinds of sites (Because they were to stupid to know they were gambling). In the long run if that happens not only will the person who used these sites be the victim, but we all will pay for there foolish decisions.
Good article Jeff, it is good to see a non-technical article every now and then.
It’s certainly not the same as a raffle, since in swoopo you’re pretty much guaranteed that bids launched early in the auction have effectively zero chance of winning. It’s only when the bid price reaches some weird sort of optimum that your bid has any actual chance of winning the auction.
Damn you, letters OSB! And damn you, Order of Saint Benedict, too!
Stupid monks.
‘How it works’ gives no indication of the anecdotal evidence described by the article jeff linked to: that bid butler almost always wins.
But the opposing question in this… is ‘gaming’ the system fair?
what about those script kiddies trying to win the coveted B.O.C. on woot? is that fair?
what about sniping on ebay? is that fair?
if everyone used bid butler, then normal market conditions would prevail… ie: those too squeamish to continue drop out (hmm kinda like poker) allowing the final price to ‘settle’.
meh… looks like gambling, sounds like gambling, smells like gambling.
Jeff, I think you misunderstand how capitalism is supposed to work. Don’t take our current economy as a model of capitalism… it’s pretty broken at this point. As long as Swoopo (or any other service) discloses it’s full terms up front, it’s up to the CUSTOMER to figure out if they want to put their money in. If it’s gambling, so be it. I don’t like Swoopo any more than you do, but there is no need to get the government involved. Vote with your wallet: don’t use the service. The same goes for payday loans; if they disclose the interest rate, it should be up to the customer to decide if they want the loan. Government regulation just discourages innovative business practices like Swoopo – like it or not, it’s an effective business.