> Swoopo’s run out of gas — not at all surprising since its business model is built on the willingness of bidders to lose money on lost auctions. If you don’t win, you still paid for every bid you made.<p>How does this make sense? The business model is to make money hand over fist on "stupid" consumers who are willing to pay for <i>nothing</i> the hope of winning something for below retail value.<p>HOW on earth did they lose money and how on earth is it unsurprising? My mind is blown that they're filing for bankruptcy.<p>Anecdotally I know 2 people who signed up to Swoopo, paid £10 for bids but then won nothing. That's £20 they made at <i>£0</i> cost to themselves.
To be fair, penny auctions sites are neither gambling sites nor scams (unless proven otherwise).<p>They are merely a variation of the Dollar auction <a href="http://en.wikipedia.org/wiki/Dollar_auction" rel="nofollow">http://en.wikipedia.org/wiki/Dollar_auction</a><p>They are not a gambling site because gambling implies that you depend on chance to win. Penny auction sites don't. If you put in one bid and that bid happens to be the last bid, you win. It isn't as if you put in a bid and hope to get randomly selected to win.<p>They are not a scam as they do tell you what they are doing and people who go in for it know that they pay per bid.<p>The only time they become a scam is when the site operator gets involved in the bidding. For example, if the site operator finds that the price is too low and put in a bid themselves to force the next closest bidder to up the ante.<p>Basically, penny auction sites sets people against each other and pick up the spoils. This is the only reason I hope they will all be gone.
Swoopo was a brilliant concept and it's the kind of thing I wish I had thought of... that is, in the alternate universe where I have no sense of ethics and don't mind ripping people off.<p>The psychology behind why the site works is identical to why some people fall big for Nigerian 419 scams... "If I don't spend a little more money, I'll lose it all!". Suddenly it makes sense to pay $100 more than retail for a PS3 or TV because if you don't you'll be out $250 in bidding fees <i>and</i> not have the item.
I have a personal philosophy of not doing business with any organization or person unless I understand how <i>they</i> will make money. I take this exercise particularly seriously when at first glance it seems I'll be coming out way ahead.<p>This works remarkably well for filtering out hucksters, scammers, and shady businesses.
My biggest issue with the site was every time I visited the site or saw an ad, it was all "too good to be true" and I was revolted by the idea of getting into something that so clearly seemed to be promising me a free lunch, or a nearly free lunch.
Funny to see them go. I was headhunted for them a few years ago & decided to play along just because I found their business model 'interesting'. Even though technically interesting (lots of realtime action), it had 'scam' written all over it. Sometimes only time will tell the difference between pure evil and pure genius.
Didn't their auctions appear to make money hand over fist? Were they rigged? Did they start doing poorly, recently? If you just multiplied the price of their bids by the number of bids, it would seem they were doing very well. What was really going on?
It was a great idea though. And they did state the rules clearly, so it was your fault if you still played the game. And as Spolsky said, as users lost money, they just dropped off.
Why is there so much hate for this company? So you don't agree with their business model and you label all the users as dupes. Maybe people like to gamble and really did find this shopping model entertaining? Either way, talk of making this illegal turns my stomach. If Swoopo wants to sell this service and there are customers willing to participate, who are you to interfere?
As someone who actually won something from Swoopo (a firebreathing laptop worth ~ $1000), I eventually saw the light and quit while I was ahead. All told, I 'invested' ~ $400 into Swoopo (spent $250 during the auction for my laptop and $200 in other failed bids). Not too sad to see them go. Saving fools like me from themselves. :)
There are quite a few sites based on this model. Hopefully they'll shut down too. I don't know if this is legal or not (probably legal, otherwise they wouldn't have lasted 2 years) but definitely not ethical.
> has named a liquidator to start divesting its assets.<p>So you could say that they've Died In A Fire <i>Sale</i>. That's pretty close to what many people seem to have been wishing they would do...