10 ms·

Swoopo Quietly Files for Bankruptcy

68 points by pathik 16y ago

biot 16y 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.
- Aetius 16y ago
  Sunk cost fallacy.
  - tomkarlo 16y 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.
    - Aetius 16y ago
      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 ;)
vijayr 16y 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.
citricsquid 16y 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.
- joshu 16y ago
  Yes. The first time I saw swoopo I couldn't figure out how it wasn't illegal.
  - stanley 16y 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?
    - joshu 16y ago
      Actually those ate perfect analogies. And they are illegal most places in the US as well? I thought lotteries needed special exemptions, and gambling is outright not allowed.
      - rorrr 16y ago
        And it's not a lottery. The person who is willing to pay more, wins.
        joshu 16y ago
        There's no strategy for winning. You don't get it by spending the most. It's just gambling.
trickjarrett 16y 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.
pathik 16y 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.
- Aetius 16y ago
  Great idea, no. Epic scam!? Yes.
  - pathik 16y ago
    Ethical? Maybe not. Smart? Definitely yes.
    - vietor 16y ago
      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'.
      - pathik 16y ago
        In hindsight, it is easy to see and understand how their business model didn't work out. But when they launched, it seemed to be a nice idea. Even in casinos, the odds are stacked heavily against the player. Still, people do keep playing. Swoopo was similar. I guess it's hard to get new users when every blog calls you a scam.
      - flomo 16y ago
        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.)
c1sc0 16y 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.
DevX101 16y 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 16y ago
  What's your personal philosophy on charities?
  - gjm11 16y 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 16y ago
    Consult Givewell, hopefully.
vietor 16y 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 16y ago
Good riddance.
gersh 16y 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 16y 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 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 16y 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_ 16y 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 16y 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.

68 points by pathik 16y ago

biot 16y 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.

Aetius 16y ago
Sunk cost fallacy.
- tomkarlo 16y 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.
  - Aetius 16y ago
    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 ;)

vijayr 16y 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.

citricsquid 16y 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.

joshu 16y ago
Yes. The first time I saw swoopo I couldn't figure out how it wasn't illegal.
- stanley 16y 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?
  - joshu 16y ago
    Actually those ate perfect analogies. And they are illegal most places in the US as well? I thought lotteries needed special exemptions, and gambling is outright not allowed.
    - rorrr 16y ago
      And it's not a lottery. The person who is willing to pay more, wins.
      - joshu 16y ago
        There's no strategy for winning. You don't get it by spending the most. It's just gambling.

trickjarrett 16y 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.

pathik 16y 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.

Aetius 16y ago
Great idea, no. Epic scam!? Yes.
- pathik 16y ago
  Ethical? Maybe not. Smart? Definitely yes.
  - vietor 16y ago
    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'.
    - pathik 16y ago
      In hindsight, it is easy to see and understand how their business model didn't work out. But when they launched, it seemed to be a nice idea. Even in casinos, the odds are stacked heavily against the player. Still, people do keep playing. Swoopo was similar. I guess it's hard to get new users when every blog calls you a scam.
    - flomo 16y ago
      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.)

c1sc0 16y 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.

DevX101 16y 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 16y ago
What's your personal philosophy on charities?
- gjm11 16y 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 16y ago
  Consult Givewell, hopefully.

vietor 16y 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 16y ago

Good riddance.

gersh 16y 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 16y 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 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 16y 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_ 16y 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 16y 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.