
Swoopo: The crack cocaine of auction sites - gabrielroth
http://www.thebigmoney.com/articles/money-trail/2009/07/07/crack-cocaine-auction-sites?page=full
======
patio11
The new "losing bidders can apply bids against the cost of the item" is just
plausible deniability for their ultimate business model, which is selling 100
people the same Wii.

If they end up selling 100 people the same five Wiis (1 at a deep discount, 4
at retail), it is still the same business model from the perspective of 95% of
the participants of the transaction, who end up spending a lot of money but
get no Wii.

I refuse to call them an auction site because that is just sheep's clothing.
Their model has absolutely nothing intrinsically auction-like about it -- take
a look at their "auctions" for CASH in which the putative "bid price" will
never actually be paid by anyone. It just exists to sucker more people into
paying scam participation fees.

------
gabrielroth
Followup by the author:
[http://www.thebigmoney.com/blogs/sausage/2009/07/10/were-
try...](http://www.thebigmoney.com/blogs/sausage/2009/07/10/were-trying-be-
less-evil-really)

~~~
cesare
Edit: Maybe there's an explanation for this but it still seems fishy to me.

How is it possible that the same people placed the same bids (in the same
order) and end up with exactly the same amount for two different items in two
different countries?

[http://www.swoopo.com/auction/apple-macbook-
mb466ll-a-13-3-i...](http://www.swoopo.com/auction/apple-macbook-
mb466ll-a-13-3-inch-laptop/194388.html) [http://www.swoopo.de/auktion/msi-x-
slim-x340-su3523-weiss-/1...](http://www.swoopo.de/auktion/msi-x-
slim-x340-su3523-weiss-/194388.html)

(The links above are provided in the followup).

What is the probability of this happening? This means that even if they were
all following these two items and placing the bids in the same order, nobody
else outside of this group has placed a bid.

~~~
eli
EDIT: At first I thought they were just putting up dummy back-dated auctions
to make the site seem more popular (and the deals better).

But check out the _related auctions_ across the top for both pages -- the same
numbers with the same winning bidders with the same (or similar!) products.
All of them. So Germans are indeed bidding against US users -- one in dollars,
the other in Euros? That doesn't make any sense

[http://www.swoopo.de/auktion/fujitsu-siemens-amilo-
xi-3650/1...](http://www.swoopo.de/auktion/fujitsu-siemens-amilo-
xi-3650/194480.html)
[http://www.swoopo.com/auction/asus-n90-series-n90sv-x1-18-4-...](http://www.swoopo.com/auction/asus-n90-series-n90sv-x1-18-4-notebook/194480.html)

Same ID number at the end of the URL. All the auctions appear to span both
sites: <http://www.swoopo.com/auction/x/194481.html>
<http://www.swoopo.de/auktion/x/194481.html> This one actually does the
dollars to euros conversion properly

So clearly people just get an item "similar" to the one they won. You'd think
for the massive house advantage they have, they could at least deliver the
exact product that you thought you won.

~~~
ephermata
Yes, they call this "international auctions." If you poke around in their FAQ
you'll see this documented.

~~~
eli
Except they're not always for the same item, and somehow a 100 USD bid beats a
99 EUR bid?

~~~
ephermata
Yes, that's right. In the TechCrunch thread about this, "Valentin" noticed
that this is documented in their FAQ as well. The reason given is that the
item being sold off may not be available in one of the countries. I (@dmolnar)
gave an example where the US bidders win an iPhone 3GS, while the UK bidders
win a 3G. Quite different propositions!

Pierre Carion then pointed out that as far as he can tell, the API doesn't
even count the type of currency. So even though it's not remotely fair, a 100
USD bid will beat a 99 EUR bid just because it's the most recent bid.

See the comments here: [http://www.techcrunch.com/2009/06/26/unique-auction-
site-swo...](http://www.techcrunch.com/2009/06/26/unique-auction-site-swoopo-
expands-to-canada-testing-buy-it-now/)

------
brm
He calls it evil but doesn't provide much justification other than what he
assumes people already believe.

In the interest of philosophical discussion... why is maximizing profit using
knowledge of consumer behavior "evil" so to speak?

If someone uses their available knowledge and decides to enter a swoopo
auction, is it really much different than choosing to play at a casino even
though we know the house is against us (gambling's existence is something that
few outside government seem to have a problem with?)?

Is the major hang up that people can pay but not win? If this is known up
front can someone provide the rationale behind this being "evil"?

Funnily enough I find that the debate over swoopo being evil seems to parallel
the debate over spec work being evil (just different currencies involved).

Can someone point me to literature on the rational arguments for and against
consumer protection?

~~~
calambrac
evil (n.) - 1. Killin folks, usually. 2. Preying on human weakness for your
own personal gain at others' expense.

Seriously, if you don't think of this as evil, what's your definition of evil?

 _gambling's existence is something that few outside government seem to have a
problem with_

Um, what planet are you from? At least 3 major world religions (Judaism,
Christianity, Islam) regard gambling as evil.

~~~
cellis
_"Evil: preying on human weakness for your own personal gain at others'
expense"._

I could easily make a dozen arguments where respectable companies do exactly
that. For instance, is Starbucks preying on the "weakness" of humans that
desire caffeine? Is EA preying on the weakness of humans that desire an escape
via gaming? By your definition of evil, everyone and everything participating
in a capitalist economy is evil.

Frankly i see nothing wrong with Swoopo, even if some end up _worse off_ than
they would have been had they not participated. This is because i place the
burden of responsibility on the actor, not the facilitator. Caveat Emptor.

~~~
jerf
In a free, ideal capitalist exchange, it is not a case of one party benefiting
at the others expense. It can't be, by definition, because then the free agent
that is losing would not enter into the exchange. It is an exchange that both
people benefit from. This is examined in more detail in the first couple of
chapters of
[http://www.daviddfriedman.com/Academic/Price_Theory/PThy_ToC...](http://www.daviddfriedman.com/Academic/Price_Theory/PThy_ToC.html)
(a textbook, not a blog post), but the short version is that due to the fact
that different entities have different valuations on different items, free
trade results in scenarios where _both_ parties pay X-personal-valuation and
receive X+N-personal-valuation, resulting in a profit. (The big failure people
have in grasping this is missing the facts that valuations are personal, and
valuations != money. After that, this logic flows simply and inexorably.)

Obviously not all exchanges are free and ideal, but both the cases you cite
(Starbucks and EA), it's pretty close. I'd say 100% in the Starbucks case (you
can get coffee from lots of places) and a little less so in EA's case due to
the fact they have an IP monopoly on EA games (you can not obtain a Madden
game from a non-EA source), but still, nobody's forcing you to buy Madden
games either.

Swoopo is not like that. It is not a mutually-beneficial exchange between two
parties; one party wins and numerous parties lose, with only one other party
winning in theory (the auction "winner") and that still only at the discretion
of Swoopo (if the "winner" is a plant, how would you tell?). Because the
losing party entered into it freely and with reasonable knowledge of what is
going on, I do not favor forcibly shutting it down either, as I can not
imagine what such a law would look like anyhow. But we can still call a spade
a spade; this is not like a free market exchange. This is a con game.

(The other possible out is that the auction losers are paying for an
intangible feeling of fun or something, which is a valid thing to do if you
choose not to judge people's value functions, but I suspect that a fair
analysis would show that they are not really winning on this front either.
Part of that analysis would be to show that Swoopo is the _best_ way to obtain
that feeling and I have to imagine a conventional casino is a better choice
there for most people.)

~~~
mschaecher
-"but still, nobody's forcing you to buy Madden games either."

And no one is forcing someone to bid on a Swoopo auction as well.

~~~
jerf
"Because the losing party entered into it freely and with reasonable knowledge
of what is going on, I do not favor forcibly shutting it down either, as I can
not imagine what such a law would look like anyhow."

Read fail?

------
pj
_I discovered Swoopo, as many people do, through an online ad plugging its
latest deal, a fancy desktop computer at more than 90 percent off_

See here! This is the problem with ads. You see ads, you click it, and you
regret it. This author would be better off without ever having seen the ad.

Block ads. They are bad for you.

~~~
petercooper
_Block ads. They are bad for you._

Unless you like to enjoy newspapers, television, free content sites, Spotify,
or the like, of course.

------
randallsquared
Must the community exclaim moral outrage over Swoopo every few months? Sheesh.

(For the record, I don't think it's a terrible thing or should be illegal, no
matter how profitable.)

~~~
nazgulnarsil
everyone's mad they didn't think of it first. it's the most brilliant scam
I've ever encountered, doubly so because you can make the case that it's not
technically a scam.

~~~
dave_au
I had an idea for a non-evil gambling site a while back - basically runs at a
profit with a small bias against the house. Not a scam, but it has a
'compelling mechanic' component in common with Swoopo (albeit a different
mechanic).

On one hand I think it could make some cash while not being as dodgy as a
regular gambling site, but on the other hand I don't want to encourage
gambling addicts with the positive feedback.

I'm just glad it's not my only money-spinning idea :)

------
eli
That's not an auction site, it's a social psychology thesis.

~~~
moe
Ahem, actually it's just a scam, in it's purest form. No, it doesn't qualify
as gambling because your chance to win is not determined by luck but solely at
the discretion of the people running the show.

Imagine you enter a casino and someone offers you the following game:

There's a red button, one push costs $1. Anyone may push as often as they want
and can afford. If the button isn't pushed for one hour then the last person
who had pushed receives $1000 USD (fixed).

Fine you may think, I'll come here at thanksgiving when nobody is around and
push it then. Except that there's _always_ this one sleazy guy lurking in the
corner, even at thanksgiving, with that strangely swollen thumb and an
seemingly unlimited budget...

~~~
cesare
Exactly.

Maybe there are people working for them by placing bids until they win every
item.

It would explain this: <http://news.ycombinator.com/item?id=700250>

Even with the new option to buy the products at full price, it would still be
a scam since they've acquired customers by cheating them into thinking they
would have the possibility to buy at a discounted price.

Anyway, there's an issue with the transparency of their operations which is
not required in an auction site like ebay since on ebay the winner of the
auction must be real, in order to buy the item from the seller.

~~~
moe
In reality you don't hire people for that, way too risky.

You simply have a few "good friends" run a bidbot-script on some leftover
machines. That's near impossible to detect (just create new accounts and cycle
credit cards regularly) and makes the scheme entirely bulletproof.

~~~
wlievens
I'm sure that falls under the definition of what he meant by "hire".

------
DanielBMarkham
_Finally, I gave up when it became clear that Swoopo could make money faster
than I could count it._

Two thoughts come to mind. First, it's a rigged game: don't start playing it.
Second, people are going to clone this business model. Swoopo is simply one of
the first-movers.

~~~
derefr
> Second, people are going to clone this business model.

I was pondering variations on Swoopo, and think I went and made it even
_worse_ : I would cross it with an MMORPG.

~~~
inerte
Lovely idea!

The Natrium Bag of Discount, an item which give you 5% off on bids.

The Necromancer class, which can resurrect dead auctions, and kill top bids
(with a 15m cooldown timer).

The Tamer, which can invoke pet-bots that automatically bid $0.25 each.

I really think you're onto something here derefr... a system that gives you
the possibily for real life money manipulation, self-loop'ed into skill/item
progression!

------
zaidf
I love people that try to make this a black and white case of scam.

If this is a scam, so is, say, charging folks 15 cents to send a text message.

In both cases, the end company ends up making a windfall of money. In both
cases the customer knows exactly what he is getting and agrees to it.

~~~
dasil003
Text messages are totally a scam because of the markup factor... but Swoopo
also has the lottery factor. That is the vast majority of people get NOTHING
for their $10, $100, $1000. I don't understand why people are trying to defend
it on a technicality. Yes, technically it may be legal, however it's ripping
stupid people off left and right.

~~~
zaidf

      it's ripping stupid people off left and right
    

It's not ripping off if people _clearly_ know what they are getting into.

~~~
dasil003
The thing is they don't. I think most people at HN have been introduced to
Swoopo based on articles analyzing just how much of a ripoff it is by running
some numbers.

To the first-time visitor it is not clear at all that they are basically
playing a lottery with a very low payout. Calling it an auction is misleading
because in an auction you only pay if you place the winning bid. This is more
like a raffle, but it's not labeled as such.

------
raquo
I am neither a good programmer nor an expert in machine learning or whatever,
but look - for each item they have a public bidding history with usernames.
So,

1\. Write a script that will pull this info once a second

2\. Analyze it - You're interested in predicting when a person will quit
bidding so that you can join the auction in the latest possible moment and win
the item with a minimal number of bids. You have time series of each user's
bids (with a distinction of whether they were made manually or automatically)
and a dollar value of the item price.

3\. ...Profit!

Could this work?

~~~
JimmyL
Someone tried it -
[http://jcs.org/notaweblog/2009/03/06/trying_to_game_swoopo_c...](http://jcs.org/notaweblog/2009/03/06/trying_to_game_swoopo_com/)
\- and couldn't get that to work.

The author does some interesting pattern analysis of how auctions actually
work, and concludes (roughly) that you can't beat BidButler.

~~~
there
that's my site.

i'm pretty sure the last idea i proposed on part two would work fairly well.
have the script watch bid activity and when it looks like there's only one
other user using bidbutler, turn it on and let it spend money. as soon as a
third user starts using bidbutler, turn it off to save money and let the other
two fight it out. since both users probably won't use the same price ceiling,
it should be pretty clear when one user drops out and the other keeps bidding
with bidbutler. at that point, turn it back on and repeat until you're the
last one using bidbutler.

------
jemka
I just watched this auction:

[http://www.swoopo.com/auction.html?cm_re=Homepage-_-
Grid-_-1...](http://www.swoopo.com/auction.html?cm_re=Homepage-_-
Grid-_-1/1/Link&aid=193934)

Let's hop on over to newegg:
[http://www.newegg.com/Product/Product.aspx?Item=N82E16822148...](http://www.newegg.com/Product/Product.aspx?Item=N82E16822148341)

Yikes. I think I'll tick to ebay for my auctions.

BTW, I can't figure out who pays the $73.20 for the 122 bids. Where those the
bids of the user? Or was that total bids from everyone?

~~~
mildavw
To me, their "savings" window math implies that the 122 is the number of bids
the winner placed; the winner only.

------
robryan
Sounds a lot like all the other press swoopo has got. While on the surface
there new offer to allow the bidder to make up the difference for the item on
lost bids seems like an improvement, there retail prices seem to be high
enough to negate any benefit there is buying online over your local retailer.

------
jv2222
These kind of sites were invented in the UK a few years ago. The idea is based
on a practice where con artists set up similar kind of "auctions" in the real
world (mainly in unused shops on London's Oxford street).

The hook is that as you walk past the shop you see that you have the chance to
get a play station for $1. So, you and about 100 other people pay $1 with the
hope of getting a play station. After everyone's put their money in then they
"randomly" select 5 people in the audience and hand over the play station to
them.

Of course after the show, the audience "plants" secretly give the play
stations back. So, in essence they keep recycling the same play stations all
day long and real punters keep paying $1 and not getting anything.

~~~
dtf
The Real Hustle did a nice reconstruction of one of the mock auctions you're
talking about: <http://www.youtube.com/watch?v=-o1zdm7ANVw>

------
jimmyrcom
[http://blog.jimmyr.com/Auction_site_Swoopo_a_scam_or_a_barga...](http://blog.jimmyr.com/Auction_site_Swoopo_a_scam_or_a_bargain__13_2009.php)
has a list of the most money swoopo has made on some of their auctions. Bots
don't help at all either, the whole system is designed to where swoopo always
wins.

------
omarish
Here's a link to their html and js in .tar.gz format: <http://bit.ly/10hSUR>.
Have fun!

