Global Geek News » laws

I’ve spent most of the day catching up on podcasts, when I heard about the new auction site Swoopo from Ken Rutkowski of one of my favorite podcasts, KenRadio. If you haven’t heard of Swoopo, I wouldn’t be too surprised as it is a new auction site that is unlike any auction I have seen before.

Swoopo is like an auction site for gamblers. Unlike Ebay, you can’t sell anything on this auction site. Swoopo is the one selling all of the items. They sell items ranging from game consoles to bids (more on this later). Also unlike Ebay, there is no defined end time to an auction. The more bids an item receives, the longer the auction will continue until people stop bidding. If you thought that’s where the differences end, you would be wrong. All bids take place in $.15 increments and there is no reserve price. Auctions also start at $.15.

If you were wondering what I was talking about when I called it a gambling auction site, this is what I mean. You have to pay for bids. Every time you bid, it costs you $1. It can cost you less than that if you buy your bids in bulk. Whether or not you win the auction, if you are bidding, they are making money off of you. Much like the gambling you would do at any casino, you can spend a lot of money in the hopes of winning something, only to end up with nothing more than a dent in your bank account. This is where the genius part of the site lies.

While many auctions often go for less than their retail value (I saw a 8GB USB drive go for less than $6 last night), because you are paying for the bids you place on an item with a set bid increment, they are still making money hand over fist. Let me give you an example. Last night, I was watching an auction for a PS3, just to see what it would go for. It was an 80GB PS3 with the retail value of $400.00. The last time I looked, the auction was approaching $430 (why people will pay above retail when they don’t have to is always something that will confuse me). Not only did the company make back the retail value on the game console, but when they charge at most $1 per bid (it could be less if you buy bids in bulk) which is $.15 above the last bid, they have likely made over $3000 profit from a single auction. This is not something other auction sites such as Ebay can boast.

Another ingenious part of this new auction system is that the auction end time is only dependent on when auctions stop receiving bids. With the real-time AJAX interface, there is no need to refresh the page to see if somebody has outbid you. If somebody bids in the final seconds of an auction, the clock is immediately increased back to 15 seconds, allowing people to bid again if they choose. By upping the time left on the clock when people bid, the auction will continue to go on until people stop bidding. This allows the company to make the most amount of money from bids while making sure that people don’t have their auction sniped without being able to do anything in the last second of an auction.

While I will admit that I love this concept and think it has profit margins that no other auction site can come close to, there are some problems with this system. Since Swoopo is the seller of all products instead of the consumer, there is a fairly limited selection of items on the site. Don’t expect to find any antiques or stamps that my be missing from you collection here. This site can’t compete in the number and diversity of items with companies like Ebay. While I would call this a possible flaw, it does keep the profit margins on the products they do have much higher. Another major drawback of this system is its gambling like nature. Because of this, there are several states that you are not allowed to participate from what I presume are gambling laws. While I would call this a major drawback to the system, I don’t think it is having a major impact on the system at this time. I do see it as likely that they will run into legal issues as more state attorney generals find out about the site.

All things considered, if you are looking to try to get some great gadgets for cheap, this might be a place to check out although you should be prepared to lose money if many other people want the same item, not something many people can do in this down economy. I recommend checking out Swoopo, but I will warn you, even watching other people bid can be addicting.

Follow me on Twitter!

-Jeremy “pcnerd37″ Bray

P.S. Don’t forget to check out the return of the Global Geek News Podcast!

Tweet This Post

Ebay is Web 2.0 Gone Wrong