Profitable Until Deemed Illegal

blog
201

Re: Akos: Any other business practice that tries to hack human behavior… Social networking sites? Political parties? WOW?

It’s a fact that the people who play WOW the most are those who are the worst at it. Blizzard (the creator of WOW) did nothing more than create an absolutely gigantic game with the promises of advancement in a thousand different ways. The reason a lot of people seem to have problems and get hooked on it is because they are so bored with the rest of their crappy lives, that a totally different life where they cannot lose, where there are really no devastating consequences to messing up, and where they can be who they want to be, is just overwhelming for them. The reason that its so damn obvious that it happens to all kinds of people with WOW is because the game was created to be accessible to everyone (aka easy), while most other games downright required the investment of time to get anywhere.

202

This is a similar situation as the people at old-time parties that used to bet even odds (assume the party had 50 people), that two people would have the same birthday. The probabilities say that yes, two people will most likely have the same birthday, but intuition is that this bet is the same as a person having a specific date as a birthday, which is false.

The war of attrition is nothing new to people, it is taught in a rudimentary game theory course. This site just finally puts it into practice, and is making a lot of money at it. It is nice to see a practical example of this type, just don’t try to’beat’ it.

203

i think (i haven’t tried this, and i will not try it, since obviously you lose money every time you place a bid (if the site makes money, obviously you lose money)) if you only go for items that are already far more expensive than what they usually sell for (on that site) you can get some decent deals.
however, i don’t think even i could stop myself from bidding on an ipod that’s priced at $5.

204

This company can essentially place a bid on their own, and literally outbid everyone, AND still make $.75 of the bidding fees they charge. They don’t even have to ship the item or anything. This seems like a scam to me.

You can bid all you want. All they have to do is have their script swoop in and make sure they have the winning bid. They don’t have to ship anything and still be able to charge their hefty fee.

205

Many great comments in this thread! Those who focused on the raffle idea are the most precisely right.

But a raffle disguised as an auction. Brilliant!

SWOOPO appears to have the same elements as an illegal lottery (payment, results are based on chance, and a prize to the winner) except in an ordinary lottery (or street corner numbers game!) the size of the pot distributed among the winners gets bigger the more people pay to play. In SWOOPO, in comparison, SWOOPO participants can purchase an infinite number of chances, but at most one wins. That’s what makes it a raffle – and what makes the payoff to the promoters potentially huge, since they can, in theory, receive an infinite number of payments for bids and still only have to give away a single iPod (or whatever).

SWOOPO must know they’re going to face challenges. So what’s their plan?

SWOOPO claims they are providing entertainment shopping, and uses auction language as a way to point out how many people lavish hours on eBay without ever winning (to imply, perhaps, that SWOOPO is selling that experience too). But that’s an easy fiction to see through. SWOOPO is perhaps providing entertainment (the entertainment of a raffle), but hardly shopping.

And SWOOPO may have a way to claim they’re not providing a raffle. In a true Raffle, the more tickets you buy, the greater your chance of winning. In SWOOPO, you either win, or (more often) not, and you know the results immediately. Buying more tickets doesn’t improve your odds. That might take SWOOPO outside the scope of some of the State laws against Raffles, but it would seem to make it only more criminal – making the connection between payment and reward even more tenuous.

They fact SWOOPO may lose 70% of the time (when the cumulative value of the bids is less than the cost of the item won) is possibly a clue to their planned defense. I suspect those losses are a key component of the challenges they must know they’re going to face.

This will be a fun one to watch!

Charles

Ambrose Bierce, The Devil’s Dictionary (1911):
LAWYER, n., One skilled in circumvention of the law.

===========================================
THIS POST IS FOR INFORMATIONAL AND DISCUSSION
PURPOSES ONLY and does not constitute legal advice

206

More thoughts…

While the law varies from State to State, in general in the USA only States legally can run lotteries; so to the extent SWOOPO fits this model…

  • to participate you have to pay

  • whether you win depends on chance

  • winning means getting something of value (money or other prize)

it is potentially a lottery, and criminal.

SWOOPO is a particularly greedy type of lottery, because unlike a corner store numbers game (where the more people play, the bigger the pot split among the winners), in SWOOPO no matter how many participate, there’s still only one prize. That makes SWOOPO potentially a sort of raffle, which generally cannot legally be run for profit. http://rafflefaq.com/can-a-for-profit-business-or-individual-run-a-raffle/

I’m not saying there’s no room for debate about whether SWOOPO is illegal, but there’s not much room. Consider the ways SWOOPO is different from a raffle (and maybe different enough to avoid the rules that apply to raffles):

  • SWOOPO is disguised as an auction, so instead of buying a ticket, you buy a bid. But to win, participants need to do more than just buy a ticket (the way a true raffle works); they need also to:

    – 1) time when they make their bids, and

    – 2) choose how many bids to make (by themselves, or using an automated bid butler).

But does that make SWOOPO a game of skill, and not an illegal game of chance? Without doing more research, I’m skeptical, and in some States buying a ticket to play a game of skill can be illegal.

  • While a raffle can sell an infinite number of tickets for a single prize, that’s only theoretically true for SWOOPO, where each bid advances the auction price by 15 cents. After enough bids, the auction price will exceed the prize’s true value, and participants will eventually cease bidding. That may also take SWOOPO out of the narrowest definition of a raffle, but probably not enough to make it legit.

  • SWOOPO claims to lose money on a large percentage (I believe 70%) of its auctions. That’s good for the winning bidder, who may get a bargain, but no so different from real raffles (which might also raise less money than its prize is worth). And even when a SWOOPO winner gets a bargain, SWOOPO can still profit big by taking in many times the item’s value. Check out the example on Wikipedia:
    an item retailing for $200 may be sold at a 65% discount for $70, saving the winner $130. In the process of the price reaching $70 there will have been 465 bids placed, costing bidders a sum of $348.75. With $70 from the winner and $348.75 from bidders, Swoopo received $418.75; bidders, in total, paid $218.75 more than retail for the item.
    http://en.wikipedia.org/wiki/Swoopo
    SWOOPO only launched in the USA recently – in September 2008 – so whether State attorney generals or others start asking these srts of questions remains to be seen.

  • Charles

207

WOW! I came across swoopo purely by accident while purusing EBay and a promo on a seller’s website. Sounded good so I went to Swoopo, read all the info. and signed up. Went first to the ‘beginners’ auction to place a bid and got a pop up saying I had to buy some bid stuff before bidding. First suspicion! I’d read the Terms and Conditions and did not think much of all the legal mumbo jumbo. But decided to check further and so glad I did based on the information I read here. It makes a lot of sense and it truely is NOT an auction site since it would cost me $.75 per bid - upfront- YEOW! it finally hit me this was, um, somewhat ‘unconventional’. Ah, the naivety of the human mind LOL. Thanks for all the posts and saving me from entering some ‘contest’ that is far from any deal except for Swoopo! As someone said above if it seems to be too good to be true, it probably is. Happy holidays to all!

208

By the time they sort it all out, the founders will be on a beach drinking margheritas

That could be the plan!

Swoopo supposedly launched a UK website in December 2007, another in Spain in May 2008, and the US and Austria ones in September 2008.

That’s a lot of margheritas already in the bank. :slight_smile:

  • Charles

===========================================
THIS POST IS FOR INFORMATIONAL AND DISCUSSION
PURPOSES ONLY and does not constitute legal advice

209

Who cares??? All i know is that this is genius. Whoever made this Swoopo site is sitting back enjoying life…wish i would have thought of it…

210

Nice post. Pretty ingenious even if they didn’t originate the idea.

The process is pretty misleading and greedy, but I don’t think it’s illegal.

The site will probably get a bad rep after a ton of people have bad experiences. By then they would’ve cashed in big time.

211

As for losing money on 70% of the items this is easily explained. I heard Elton John waaaaaaaaaay back in the 70’s (before you were born, remember kids? George Carlin) when he sold over 200 million records say this when asked about how much money he had to pay in taxes, which at the time was supposedly about 80% of his income; I manage to live quite comfortably on the other 20%. Wish I could find the quote but like I said it was the 70’s and no one could find anything!

Point being that Swoopo can say that they lose money on 70% of their auctions because the other 30% could easily be paying for the whole business and still make the creators rich. If there are items being bid on enough times for a $1000 laptop to sell for $6000, even assuming that Swoopo is paying full retail for the item (which they are not) they are $5000 ahead… on that one auction! So it’s easy to imagine how they can lose money on 30% of the auctions as long as they make outrageous profits on the other 30%.

212

Of course I meant So it’s easy to imagine how they can lose money on 70% of the auctions as long as they make outrageous profits on the other 30%.

213

See a lot of people saying that swoopo could be bidding themselves to inflate the price cos it would ‘cost them nothing’. I doubt it. If you ran this business and were making $20,000 a day running it honestly why risk it being shut down by being dishonest. They could run this at huge profits till the end of time or make a little extra for 6 months and then get done for fraud. Plus if I ran the site I’d want as many winners as possibly to ‘evangelise’ my site

214

This is one of those parts of human nature that make government necessary.

215

I see alot of people slagging off swoopo. These are the greedy people that also believe that you get things for free in this life and that money grows on trees! Nobody just gives away products at the end of the day. Swoopo is a gamble there is no way you can guareetee that you win an item without spending alot of money. But read all of the free information they give you and are very upfront about and then work out how to win an auction without spending more than what the item is worth. People aren’t happy enough to be winning an item for half of what they’d pay for it in the shops are mental if you ask me. YES Swoopo are making a killing but so can you if you use your head!

216

I think it is a great idea for a way to make money that doesn’t effect single users much but it still seems really unethical to be honest.

217

I have no problem with anyone making money from a good idea. I do have a problem if it picks on the vunerable or stupid people who bid and even try to outbid each other when 10 hrs or more is still on the clock. I feel advice should be given when people buy bids and make them aware.

The biggest provable scam is the countdown clock when close to the end of the auction, you can bid last couple of seconds all through the auction,as I did, (26hrs)I was after a laptop (1300 worth)and was willing to go up to half it’s price inc bids. It got to the time when, if you watch the play, bidders dwindle or come and go(after a while they become almost old friends dropping by), then you have your die hards and bidbutlers, if you try and bid, last 3 secs in my case, the countdown will freeze and, whooops surprise surprise you lost the auction, I lost 250 on that occasion.
I has happend to me on 8 other occasions, when I complain, I am told it is internet lag and there is nothing they can do about it, but the thing is, bidbutlers, which they like you to use because they take your money in seconds, also in my case bidbutlers won the item simply because bidbutlers can place a bid last second but if you single bid you have to bid 4th second at latest or lose it.
I like to bid last seconds because it draws out the single bidders also waiting for last second bids, then you start to learn your competition.

There are probably 100s of single bidders losing auctions in this manner and just accept it.
If you want to complain send to NIGEL WHITEOAK who is the top man for uk. If you google him you will find his profile and address.

I would just like to add that their was 7 other single bidders doing just the same as me, bidding last seconds so as not to waste bids and make the others bid first, so all seven either stopped bidding at the same time? or just like me the item was basicly stolen by the bidbutler, because he is not restricted by what they call 3second internet lag, I do’nt think so!! so if this is the case then can’t all those losers who could have been possible winners sue the company because, nowhere in the terms and conditions does it say anything about internet lag. It’all bull and they are praying on fools who have absolutly no idea of what they are doing, and ther is an awful lot of them.

Here is One of my mails to them and the answer I recieved…

Hi Julie,

I apologise for being a bit offish with you, I am just trying to point out
what seems to be a possible bug,problem. I am not after recompense for my
losses but if there is a bug or problem it is in your own interest to check
it out. Maybe I am wrong but I would like an answer as to how 7 different
auctions did the same thing to me. In condensed format below…

When only myself and bidbutler are left to bid and I bid last 2-3 seconds
the bid is not accepted and the bidbutler wins.?
My strategy for bidding last seconds is just to see if there are other
single bidders also waiting to bid last second. So by logical conclusion
,there were either no other single bidders, which would have left myself
and bidbutler to fight it out, this is when I would play my bidbutler,or we
were all victims of a timing bug.
I had option of all my bids credited back to me if I won, so I had no real
reason to let this item go by doing a stupidly late bid, I only bid the same
way I had been bidding for the previous 26 hours sat in front of the
monitor. (it’s a long time) Julie, all I ask Is for you to escalate this
and look at it with the view I might be right!

Your uk country manager Nigel Whiteoak has said in interviews that to win on
Swoopo you need a strategy and you can bid right down to the last second,
which was also seconded by his US counterpart, which is True until you do a
last second bid and it just so happens its you and bid butler and no other
bidders then the bid is not accepted, as I stated earlier. but no probs if
you are bidding against a single bidder.
I love playing Swoopo, but to lose so many auctions and losing such a lot of
I money. Particularly on the last auction for the laptop.
Regards and happy christmas Mal

The answer…

Even when a BidButler places his bid in the last two seconds, the timer will
always reset to a minimum of ten seconds, giving other bidders the chance to bid.
I have escalated your issues, but our technical team has informed me that there
were no technical issues. As I’ve said, it’s something inherent to internet use. I
understand just how frustrating lag can be, but with the current state of
technology, it’s impossible to eliminate the problem completely.

I am very sorry that your bids weren’t registered in time, and hope that you
understand that we can’t refund the bids, as we cannot be held responsible for the
lag you experienced.

Kind regards, and merry Christmas,

-Julie

Well that really clears it up, does’nt it? I do’nt even know if the winner really existed. At least on ebay you can see a profile which could be followed up.

As there seems to be no way of making an official grievance, I presume it must be a bit suspect!!!

Good Luck

218

Thank you so much and I am glad that I read this Forum. Regardless of my education (P.h. D Mathematics), the fact is that most people (like me) are just lured by cheap prices. Sometimes we just don’t bother to read all the facts and the strings attached because we are blinded by these deals. I wanted to read a little more into these things before actually applying for an account (w/ Swoopo) and I am grateful that I ran into your posting.

219

Similar sites are on their way, in Poland we got Fruli.pl which operates basically the same way, you buy one bid for 1PLN + VAT (this makes 1.22PLN) but the bid is actually worth 0.08PLN(!).

220

next one: http://biddingmadness.com

i wonder how many are there?