March 9th, 2009
A $79.16 MacBook? On Swoopo, if it sounds too good to be true...
Depending on who you are, Swoopo is either 1) the greatest thing since sliced bread, 2) the biggest scam since the pyramid scheme or 3) a business model that’s pure evil genius.
Swoopo - an online auction site that’s pretty much everything eBay is not - is a place where real, in-the-box, fully warrantied items like laptop computers, video game consoles and other products that otherwise might cost hundreds or thousands of dollars can be found for a fraction of the regular retail price. The bids - which raise the price of the item by 15 cents - cost the bidder 75 cents each time he raises his virtual paddle. It doesn’t sound like much - but when bidding wars begin over hot-ticket item, Swoopo (and its investors) turn out to be the winners - 75 cents at a time.
Swoopo, which initially launched in the U.K more than a year ago, has been in the U.S. for about six months. The timing may prove to be surprisingly wise, considering that economy has consumers scouring for a bargain at the same time that the best known online auction site - eBay - is seeing some rocky times in the auction business.
Also see: eBay doubles down on payments as it buys Bill Me Later; Lays off 1,000
eBay’s first quarter was a rocky one, with the marketplace unit - basically eBay and other e-commerce sites like StubHub - seeing a 16 percent drop in sales for the quarter while the payments unit - basically PayPal and BillMeLater - saw an 11 percent jump in sales.
Privately-owned Swoopo, on the other hand, says traffic to its auction sites (different sites for different countries) has stayed steady. It hasn’t seen big growth from economy-strapped bargain hunters nor has it seen any declines in traffic. For the truly committed bargain hunters, Swoopo has potential to attract a huge, loyal following.
But it’s not as simple as it sounds. There are auctioning strategies at play within Swoopo, including an automated “bidding butler” that places bids for you while you’re away, ensuring that you’ll be the one to walk away with the items. And there are also “penny auctions,” which appear to provide even better deals for the bidders but end up benefiting Swoopo the most. Consider a weekend penny auction for a 13-inch Apple Macbook, which regularly retails for $1,299 but went to a winning bidder for $79.16, plus $239.95 in bidding fees (that’s 319 bids times 75 cents each.)
In the end, the winner paid $318.41 - still a fantastic deal. But that $79.16 means that there were 7,916 bids on that Macbook - and at 75 cents each, Swoopo collected $5,937 on that single laptop computer. Assuming it paid full retail price for that Macbook (and that might be a naive assumption), it still profited $4,638.
However, you’re less likely to sing Swoopo’s praises if you’re the one who was bidding back and forth against the winner but finally gave up the fight. You also paid your bidding fees - possibly $50, $100 or more before you finally gave up - and have nothing to show for it in the end. Suddenly, I can see where someone might feel like Swoopo is a big scam.
Will bidders wise up and refuse to pay a 75 cent fee? If they win some sort of insane bargain, probably not. Even those who lose and get upset might be inclined to figure out the right strategy and start again, instead of giving up all together. It’s in our nature to want to discover big savings. That’s why we converge on yard sales and flea markets. Swoopo has found a way to lure people in and get them to pay for the chance to win.
Pure evil genius.
Sam Diaz is a senior editor at ZDNet. See his full profile and disclosure of his industry affiliations.
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| 03/09/09
