Swoopo Quietly Files for Bankruptcy

http://technologizer.com/2011/03/25/swoopo-quietly-files-for-bankruptcy/

by pathik • 15 years ago

68 58 15 years ago

citricsquid2• 15 years ago

> 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.

joshu3• 15 years ago

Yes. The first time I saw swoopo I couldn't figure out how it wasn't illegal.

stanley• 15 years ago

Why would it be? Is it because you believe there are no strategies to penny auction bidding? Just for comparison's sake, is there a strategy to roulette in casinos or to lotteries run by private corporations on behalf of the government?

Aetius7• 15 years ago

Competition in a free market is not a pretty sight. That's why gaming commissions never stepped in -- they knew what Casinos have long known; without state protection of gambling, the number of venues would quickly proliferate into the thousands and push profits to zero.

I'm also pretty sure that there is still a lot of legal liability in the air. August Capital will most certainly face some exposure; on my female facebook test account I've seen advertisements of Swoopo class action.

maxharris3• 15 years ago

without state protection of gambling, the number of venues would quickly proliferate into the thousands and push profits to zero.

Why is that a bad outcome?

What you're saying, if I understand it correctly, is that regulation helps keep scammy crap like gambling and Swoopo around. All I can say to that is that I'm against regulation precisely for this reason (among others).

hristov• 15 years ago

It's basically gambling carefully dressed up to look like ebay bidding. You gamble your money on a chance to get a fancy thing for 10 dollars, knowing that if you loose you loose your 10 dollars.

Actually last I heard those sites were very profitable but, you never know with gambling sites. They tend to misstate, hide profits.

pzxc• 15 years ago

Yeah but if you wiin, then you wiin the item.

How is it that people can spell and punctuate everything else correctly but can't remember the difference between lose and loose? (I see this all the time, and it's even becoming frequent on HN. I just don't get it).

Keep spelling lose that way, my friend, and eventually you will get your just deserts. (hope at least SOMEBODY gets the joke)

JacobAldridge• 15 years ago

Hopefully you can go broke underestimating the stupidity of the public.

spolsky• 15 years ago

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.

citricsquid2• 15 years ago

Every time I looked at the site (although this was last year, maybe it tanked) the item bids were very high, making the cost of a £500 laptop £2500 profit for them.

Alex3917• 15 years ago

In retrospect it's easy to say that if they had spent 15 minutes in the library learning about lead gen and lifetime customer value they probably could have saved a few years of their lives. But it wasn't clear it wasn't going to work ahead of time. Seems like they made the mistake of starting out by asking themselves what it would take to build a great business, instead of asking themselves what it would take to test their assumptions.

nate• 15 years ago

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.

nroman• 15 years ago

I don't buy that argument. If that were true, then the lottery and every casino would be out of business right now too.

tghw• 15 years ago

The business model depends on a certain level of involvement. Below that level of involvement, the "bidders" (or gamblers if you like) can actually "win" auctions at ridiculously low prices. If their user base savvied up and realized they were just throwing money away, like the people you knew, and not enough new suckers were coming in to replace them, they could eventually drop below that critical mass.

taphangum• 15 years ago

Their traffic decreased DRAMATICALLY when competitor, http://bigdeal.com showed up on the scene. That and the sudden uptick in clones is what probably caused their failure.

prknight• 15 years ago

This traffic comparison seems to somewhat support that http://goo.gl/FdQi3 Swoopo started tanking when bigdeal started rising, but bigdeal hasn't been anywhere near as well trafficked as swoopo was in its prime.

I find it irrational that people got more worked up about Swoopo than they do about gambling/lottery business models. Unlike with gambling you are able to purchase a product before an auction ends and use all the credits you had used on it. It's a pretty transparent model provided you think it through. It's recreational consuming that leverages a host of psychological principles really well - love it or hate it.

phlux• 15 years ago

>HOW on earth did they lose money...

Cocaine is a hell of a drug

Dennis_2• 15 years ago

"That's £20 they made at £0 cost to themselves."

No, they sell the product for less than market value. That loss must be recouped. But I am surprised that they are filing for bankruptcy as well. The model appears sound.

trickjarrett• 15 years ago

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.

pathik3• 15 years ago

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.

Aetius7• 15 years ago

Great idea, no. Epic scam!? Yes.

pathik3• 15 years ago

Ethical? Maybe not. Smart? Definitely yes.

c1sc0• 15 years ago

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.

biot• 15 years ago

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.

Aetius7• 15 years ago

Sunk cost fallacy.

tomkarlo• 15 years ago

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.

vijayr• 15 years ago

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.

DevX101• 15 years ago

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• 15 years ago

What's your personal philosophy on charities?

gjm11• 15 years ago

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.

gwern• 15 years ago

Consult Givewell, hopefully.

vietor2• 15 years ago

> 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...

ohashi• 15 years ago

Good riddance.

gersh• 15 years ago

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?

kschua• 15 years ago

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.

janoulle• 15 years ago

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. :)

Dennis_2• 15 years ago

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?

sosa• 15 years ago

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.

Swoopo Quietly Files for Bankruptcy

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