Barry, These kinds of sites are 95% rigged.
Often by the owners themself, since there are nobody controlling the rules for them, compared to an auctionsite, a gamblingsite and similar.
/Marcus
Sellers on ebay have little to gain for bidding on their own stuff as they risk it not selling… But on Swoopo… if they weren’t already making obscene profit (There is a Nokia N96 16 GB (~$600) going for $1,272, which means they’ve already made $6,361 in bids, not to mention the fact that they get to sell it for at least twice its resale value when the action finally finishes) they COULD have employees with free bids bid on their own stuff, so then if the employee wins it, they get to keep the money for all the bids and don’t have to actually go and purchase the item. That is if they are more evil than they already are…
What some commenters have alluded to, but no one has explicitly stated, is that you can run a site like swoopo.com without ever holding any of the items you auction.
When the house puts the item up for sale, it costs the house nothing to raise the item’s bid. (It costs the house nothing to buy an item from itself.) Now in an ordinary auction, the house gains nothing by buying from itself (reserves just prevent losses). However, swoopo.com collects a fee for every bid, which means they can make money on a no-sale.
Bad timing on my part–Dan wrote it before I did. Anyway, this means the site takes a loss only if they choose to–and I’m going to guess they choose not to. The key to extending their profit–because people tend to get bored or get wise–is to move the site around, using different names and hitting different regions.
Ok, not they’re auctioning off $80 cash. How is that not illegal?
I see several like this. What is wrong with this? The value price is a little inflated (these are about 40 bucks), but other than that it is still a good deal.
http://www.swoopo.com/auction/kawasaki-cordless-screwdriver-set/126799.html
First off, it’s brilliant. If they’re bidding on their own items, that’s shill bidding, and it is already illegal (it’s a type of fraud). But if they’re not bidding on their own items, I see no reason that this should be illegal. It’s a game for suckers, but then so are slot machines. If they’re disclosing the rules and playing by them, what’s the harm? I could sell a stupid plastic kitchen gimmick on TV that costs me $1 to make and call it a $60 value and suckers would buy it by the truckload. Just because people overpay for something doesn’t mean it should be illegal.
Not very ethical, but I don’t think the premise of the site is, or should be, illegal. Pitting bidders from UK vs the US, making use of the sunk cost decision-making bias, etc, are simply clever business ideas. Like you say, caveat emptor. The bidders know what they are in for. They can see for themselves how the site works. Damn, I wish I thought of this idea myself.
It’s pretty clear to me that swoopo isn’t an auction site. It bills itself as entertainment shopping. I think it is in fact a lottery; the only way to win here is sheer dumb luck. There you have it. Lotteries are not illegal.
Reading my above comment I realise that I should add one thing: the site should be deemed a lottery and it should be made to represent itself as a lottery explicitly clearly, rather than a hybrid ebay auction style shopping site.
I don’t understand why sniping is a problem for auction sites. Is it just that it’s annoying and might cause customers to go elsewhere, or does it hurt profitability in some other way?
@ASDF: Lotteries are not illegal.
Depends on where you are. I know there are a lot of places where random businesses can’t legally run lotteries (even though there are state-approved or run lotteries in some of those places).
They admit it is gambiling in their job postings:
3-5 years product management in ecommerce or online gaming.
Not just the websites. There are Reverse Auction schemes working just like this. They work mainly through TV and phones (SMS + calls) although a web interface is provided at http://bid2win.in
great post
Sounds like someone read about the dollar auction (http://en.wikipedia.org/wiki/Dollar_auction) and decided to turn it into a business plan.
I went ahead and tested out 30 bids on swoopo.com. I can confirm there is no possible away of winning anything cheap. The amount of people placing bids was insane.
My fear is that all it would take is for a bot, written by their company, to keep the bids going until they made their money back. I actually saw prices go over the retail amount.
My advice is to stay away.
Any cease and desist letters from swoopo’s legal goons arrive yet?
I wish i’d invented this. Seriously.
Oh no, I am kidding.
How will this software get a 22 year old laid? If they figure that one out, Google better watch out. I suspect Dr. Evil might be one of the founder.