This post digresses a bit from web analytics but the business concept of Swoopo is so brilliant – but not endorsed by myself – that I had to post on it. Before I get into this post I want to make one thing clear:
DO NOT USE SWOOPO! YOU WILL LOSE MONEY USING THIS SITE!
Now that I have made my position clear I can get into how brilliant this site is for making money at the expense of others. It is not customer service oriented and it is probably not going to have a ton of repeat customers. What it will have is a huge pocket book as long as P.T. Barnum’s phrase holds true: There’s a sucker born every minute.
First I will lay out for you how the site works. It is a ‘auction’ site…sort of. Swoopo sells bids for $1. Each time you use a bid on an item the price is increased by $0.15 for that item. So here is an example:
Person A buys 5 bids from Swoopo for $5 total. Person A sees an auction for $1000 and places the first bid. The auction is now at $0.15. Person A now has a sunk cost of $1 (the cost of the bid they used). There is no way to get that dollar back, win or lose. If Person A wins they must pay the $0.15.
Person B also purchased $5 of bids. Person B sees the same auction and places the second bid. The auction price is now $0.30 (because each bid increases the cost by exactly 15 cents). Person B now has a sunk cost of $1. If Person B wins they must pay the $0.30. Swoopo now has $2 in the bank and the auction is at 30 cents.
This can happen with as many users as there are suckers to start accounts. Why are they suckers? Because everybody that does not have the top spot just loses the money they spent on bids. *Poof* Gone. If you think this sounds a little like gambling or a complete scam you are not alone. People get swept up into the auction and don’t want to get nothing for the money they spent on bids. I think you will understand it better if I show you an example of people getting ripped off on the site.
Please note that while the math in the laptop example assumes that the winner has to pay for the item, Swoopo has different types of auctions which are described in my post on types of Swoopo auctions.
An auction for a laptop that says on the auction page, and I quote, “Worth up to $1,399.99″ The winning bidder, as stated on the site, placed 2020 bids. That is $2,020!! And the auction page proclaims “Savings: 0%” when it really should read negative! So Swoopo made like $600. BUT WAIT! The auction started at $0.00 and finished at $3,353.85. Now read that again. They were already up $600 from the winners bids alone. The winner sucker still had to pay $3,353.85 because that was the price of the auction. Okay, so Swoopo walks away with a cool $4,000 pure profit. (Like a bad TV commercial) BUT WITH THERE’S MORE! Remember that bids are placed in 15 cent increments. That means that if the auction finished for $3,353.85 you take that divided by $0.15 which equals $22,359 in bids!!!! That brings total profit to $22,359 (bids) + $3,353.85 (auction) -$1,399.99 (retail cost of laptop, probably not their cost) = $24,312.86
This is not to say that there are no good deals on Swoopo. The auction for $1000 finished at $568.20. The winner of that auction placed 218 bids ($218 dollars worth) for a savings of 78%. Why is it 78%? because it is a 100% off auction – see my post on types of Swoopo auctions– meaning that you don’t have to pay the final value of the auction (how sketchy is that). In theory, if no one else would have bid, you or I could have spent $1 on one bid and won the auction. If we would have won the other guys $218 would have been for nothing. Now keep in mind that if this were not a 100% off auction that the winner would also pay $568.20 in addition to the $218 for bids. Total investment: $786.20. Is that really worth the risk of getting nothing? I think not.
There are 2 kickers that I have to throw in yet.
- Every time a bid is placed the length of the auction increases. Therefore if a bunch of people “snipe” it at the end, the auction can go from 5 seconds left to 20 min. Yeah.
- And in case you were worried about the one who got away, Swoopo provides a “BidButler” that auto bids for you up to your set amount when someone out bids you. If you are going to spend $1 a bid, please don’t let some BidButler do it for you. After all they don’t call it “entertainment shopping” for nothing.
All said and done this seems like a little bit of a scam, praying on people that either don’t get it or are stupid. If one were to use this site the only smart thing to do would be to research what auctions of stuff goes for and then place a single bid when it gets to that price and hope you are not out bid. Anything else is just a waste of money. That is, of course, if you ignore the fact that everybody else who has bid gets nothing. It is a combination of eBay and gambling – more gambling (in that you must pay to bid but if you don’t win you don’t get anything). Think of betting on red in roulette, you only get something if you win otherwise it is gone. At least if you win there others can win as well. If it were Swoopo roulette if you won everybody else would lose.
It is just amazing – and yet totally understandable once you get the mechanics – that this site made money selling $1000. $3788(bids) – $1000 (cost of item) = $2788 profit.
Paraphrased Swoopo business plan in short: find 10 people to give us $10 each and one of them will get this $20 gift card. Repeat. Official Song: I Get Money
What do you think? Scam? Brilliance? Awesomeness? Just another web site?
10/6 UPDATE: Check out my new post on PennyCave, a Swoopo look-a-like!