The Big Money published an interesting article about Swoopo, describing it as The Crack Cocaine of Auction Sites. I observed one of the auctions over the course of about 8 hours today and it is pure evil genius. I wish I'd thought of this first though I'm uncertain whether I could live with the guilt of such blatant robbery of the ignorant.
The Swoopo homepage displays 10 auctions that are close to "ending", giving the impression that bargains are to be had on those auctions. I clicked through to an auction for a MacBook Pro 13.3" laptop which was ending in 45 seconds.
The RRP according to the listing is $1699. I don't know whether that's true but its somewhat irrelevant as Swoopo conveniently informs me that an identical laptop recently sold for $323.98. What a bargain!!
As always, the devil is in the details.
Swoopo's auction allows bidders to only bid in 1c or 2c increments. It costs the bidder 60c to bid. That means for a $323.98 laptop there were almost 16,200 bids. At 60c a bid, Swoopo collects almost $9,720 in revenue, and if their RRP is to be believed Swoopo collects a gross profit of over $8,000.
The sneaky bargain hunter might be inclined to think that s/he could snipe the auction - wait until the last second and throw their bid in. Swoopo has you covered. Every time someone bids on an auction the deadline is extended by up to 20 seconds. The auction does have a hard deadline but as you'll see from the screenshot below the particular auction I watched has a deadline over a month away (image captured on 13th July 2009).
When I began watching this particular auction there was 45 seconds left, and the price was around $47 - an absolute bargain. As the timer ticked towards zero bidders started to appear from all sides. I went to make my breakfast (Weet-Bix Multi-Grain) and by the time I returned 3 minutes later the deadline had been extended such that there was 4 minutes left. As I ate the timer kept pushing out as various bidders joined in the action.
A couple of hours later I checked on the auction again and the time left had pushed out to over an hour, the price was around $65. A few hours later as I began to write this blog post the price had reached $84 with 4 hours remaining.
Most of the action seems to be coming from user "Maneumi". Throughout the day poor "Maneumi" has been in the most recent bidders panel. In the 25 minutes it took to write this blog post, "Vidoona" has joined in the action and now the two of them are wrestling it out through the magic of Swoopo's BidButler, boosting the price to $114. Yes sir, in 25 minutes there have been some 1500 bids @ 60c a pop.
BidButler automatically bids for you when you are away from your computer. I don't think I need to comment further on the ridiculousness of this.
The service preys on those who fall into the trap of "sunk costs", those who are unable to resist the sweet siren call of an amazing "bargain", and those who can't see that this is fundamentally a lottery - there's only ever one winner per auction. And all to produce gross margins upwards of 80% -- pure evil genius.
Finally, I had to check if they had any competitors given that the business model is extremely sound. Sure enough there's a copycat at Bid Rodeo whose apparent selling point is that they only allow Americans to bid so you don't have to compete against those funny smelling foraynors.
UPDATE: The MacBook Pro auction finished at $162.58 after 8129 bids. That's $4,877.40 in bid fees, a tidy profit for Swoopo of more than $3,100 over the RRP.
In a final, deft touch to lure you in the completed auction tells you exactly how many bids the winner put in.
Look at them savings!!
