

Swoopo Quietly Files for Bankruptcy - pathik
http://technologizer.com/2011/03/25/swoopo-quietly-files-for-bankruptcy/

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citricsquid
> 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.

How does this make sense? The business model is to make money hand over fist
on "stupid" consumers who are willing to pay for _nothing_ the hope of winning
something for below retail value.

HOW on earth did they lose money and how on earth is it unsurprising? My mind
is blown that they're filing for bankruptcy.

Anecdotally I know 2 people who signed up to Swoopo, paid £10 for bids but
then won nothing. That's £20 they made at _£0_ cost to themselves.

~~~
spolsky
How many times did they do that? Everybody who "loses" at Swoopo gets a crash
course in the scam, and never falls for it again.

~~~
nate
I guess I don't understand the "scam" label. I haven't completely analyzed
Swoopo's marketing, but I think the majority of people that play realize they
are trying to get something big for something little. And it's a game. If they
don't win, sometimes they come back. Sometimes they don't. It's not everyones
cup of tea to put money on a game they think they can win. Just like its not
everyones cup of tea to put their money and time on a startup thinking they
can make a decent income.

I also don't get why people collect Precious Moments. Or play
Cityville/Farmville. Or play most of the games on Xbox/Playstation. They pay
good money and time for these distractions. And they come out with "nothing".
But they have fun.

There's a lot of people who spend a crap load of time on StackExchange sites.
And there's game mechanics roping them into collecting badges and points. But
they enjoy it. Do the people answering get much out of it? Virtual points? :)
Some virtual pats on the back for an answer well done?

But people enjoy it. Just because I wouldn't spend my money on Cityville or
all my time commenting all day on some site, doesn't make them scams.

~~~
jamaicahest
Sites that try very hard to make their product appear as auctions, but are in
reality gambling qualify as scam in my book. Now I enjoy gambling as much as
the next guy, but I want to know that I am gambling and what my chances/odds
are and I want that information to be in plain sight.

~~~
yankeeracer73
I'm not sure I understand your point: what prevented you from watching the
numerous auctions they had going at any one time to see how it worked? What
also prevented you from revisiting the hundreds of closed auctions they made
available for review to see what final selling prices were? Or reading their
help/FAQ's, all provided in the open? Seems like this was all in plain site.
Also you use the term "gambling" - can you cite where the law explicitly
states this auction model is gambling or even why the mechanics of it make it
"gambling?"

~~~
psyklic
The point is truth in advertising. If a bottle says that it's 100% fruit
juice, it had better be 100% fruit juice. Sure, I could look at the
ingredients, but should companies be allowed to outright lie to sell their
products?

It seems that the "gambling" claim is well supported. (see Wikipedia -- e.g.
from MSN Money: "Chris Bauman [[director of Swoopo in the US]] told one
blogger: 'Winning takes two things: money and patience. Every person has a
strategy.' Indeed, he undoubtedly does. The problem is that, as with the
gambling systems peddled by countless books, none of those strategies will
actually work. Just remember that no matter how many times you bid, your
chance of winning does not increase.")

~~~
yankeeracer73
How was swoopo "outright lying" about their product? Did you ever actually
visit or use Swoopo? They explained the rules clearly on the site and with a
dozen or more auctions running on the front page of the site, I think this
qualifies as showing how it works right on the front of the bottle.

I think you're also misunderstanding what qualifies as gambling, at least in
the U.S. (international law I'm not as familiar with) Look no further than
bigdeal.com, a site that operates exactly like Swoopo and is based in the U.S.
It is venture backed with a few million dollars. I suspect before making that
investment there was some due diligence in this auction mechanism and it was
found to be legal. People in this thread are throwing around "gambling" and
"scam" but I'd still challenge anyone to cite any portion of the law which
specifically makes a penny auction "gambling."

Do people lose money if they don't win, yes. Does that piss people off? Of
course. But that still doesn't mean it's gambling or a scam.

If it's not for you, don't play it. Simple as that.

~~~
psyklic
"Gambling is the wagering of money or something of material value on an event
with an uncertain outcome with the primary intent of winning additional money
and/or material goods." - Wikipedia

Sounds like an apt description of Swoopo if, according to the MSN Money quote
above, any "strategy" is equally ineffective. Recall that "the law" and what
governments choose to enforce of it are not the final say on word definitions
...

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kschua
To be fair, penny auctions sites are neither gambling sites nor scams (unless
proven otherwise).

They are merely a variation of the Dollar auction
<http://en.wikipedia.org/wiki/Dollar_auction>

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.

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.

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.

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.

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biot
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.

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 _and_ not have the
item.

~~~
Aetius
Sunk cost fallacy.

~~~
tomkarlo
The funny thing about sunk cost is that everyone seems to know about it, but
nobody seems to actually act on the concept. You see lots of folks with MBAs
doing it when it comes to trading, and they've all sat in the econ class and
nodded when that topic came up.

~~~
Aetius
Hey man, I'm doing it right now ... got a startup i've spent 10 months on that
I'm still hoping I can make successful. Even though I could probably quit and
pickup one of these 150k jobs everyone seems to be getting ;)

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DevX101
I have a personal philosophy of not doing business with any organization or
person unless I understand how _they_ will make money. I take this exercise
particularly seriously when at first glance it seems I'll be coming out way
ahead.

This works remarkably well for filtering out hucksters, scammers, and shady
businesses.

~~~
Joakal
What's your personal philosophy on charities?

~~~
gjm11
Replace "make money" with "achieve what may credibly be thought to be their
goals". A charitable organization may have the goal of reducing poverty or
disease somewhere rather than making money; fair enough. (Of course in some
cases you might elect not to believe that that really is their goal.) But I
don't think anyone ever thought that Swoopo was a philanthropic endeavour.

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trickjarrett
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.

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c1sc0
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.

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gersh
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?

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pathik
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.

~~~
Aetius
Great idea, no. Epic scam!? Yes.

~~~
pathik
Ethical? Maybe not. Smart? Definitely yes.

~~~
vietor
How does "as users lost money, they just dropped off." followed by "filed for
bankruptcy", mean "Smart? Definitely yes."?

I guess they did make money for a while, so it's wasn't _terrible_ , but
having a business model that makes your customers leave? I'll pass on calling
that 'Smart'.

~~~
flomo
You are thinking in terms of the corporation, or the investors. However, it's
a fair guess that some "smart" people personally did very well from this
model.

(If you think about it, a practical definition of "scam" is something that is
profitable but doesn't generate repeat customers.)

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Dennis_
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?

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ohashi
Good riddance.

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janoulle
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. :)

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vijayr
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.

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vietor
> has named a liquidator to start divesting its assets.

So you could say that they've Died In A Fire _Sale_. That's pretty close to
what many people seem to have been wishing they would do...

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sosa
u people are full of sh*t. everything is a scam, casino is a scam, poker sites
are scams, ebay is a scam. get a f. life.

