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> 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 w

> 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.
Aetius 16y 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.
- maxharris 16y 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).
  - Aetius 16y ago
    I'm quite happy that Swoopo is failing. Did you get the impression that I wasn't? I'd love for gambling to be legalized.
    - maxharris 16y ago
      Sorry that I misunderstood you. I agree, now that I have more context. [It was "Competition in a free market is not a pretty sight" that made me disagree. It is a very pretty sight indeed when scammers fail, and that's something that free markets are conducive to. (I define free market to mean a situation where the government intervenes only to protect individual rights (i.e., they only stop force and fraud). Unfortunately, we don't yet have any free markets in America today, or anywhere else in the world, for that matter.)]
      - Aetius 16y ago
        Yeah let me rephrase that: When the business is scamming customers, competition in a free market is not a pretty sight. And no, I'm not aloof enough to believe we have a truly free market. But it's free enough to let thousands of Swoopo clones race bid prices to the bottom. Now it seems customers may even be winning more from the auction sites than the auction sites are taking in. But fear not for Swoopo! They'll undoubtedly sell their soon-to-be patented "technology" to the likes of Intellectual Ventures, who'll use it to extort other would be scammers, completing the circle of evil!
hristov 16y 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 16y 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 16y ago
Hopefully you can go broke underestimating the stupidity of the public.
spolsky 16y 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.
- Alex3917 16y 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.
  - deleted 16y ago
    [deleted]
  - powertower 16y ago
    30 million in revenue in 2008.
- citricsquid 16y 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.
- nate 16y 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.
tghw 16y 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 16y ago
Their traffic decreased DRAMATICALLY when competitor, http://bigdeal.com http://bigdeal.com showed up on the scene. That and the sudden uptick in clones is what probably caused their failure.
- prknight 16y ago
  This traffic comparison seems to somewhat support that http://goo.gl/FdQi3 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 16y ago
>HOW on earth did they lose money... Cocaine is a hell of a drug
Dennis_ 16y 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.

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.

Aetius 16y 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.

maxharris 16y 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).
- Aetius 16y ago
  I'm quite happy that Swoopo is failing. Did you get the impression that I wasn't? I'd love for gambling to be legalized.
  - maxharris 16y ago
    Sorry that I misunderstood you. I agree, now that I have more context. [It was "Competition in a free market is not a pretty sight" that made me disagree. It is a very pretty sight indeed when scammers fail, and that's something that free markets are conducive to. (I define free market to mean a situation where the government intervenes only to protect individual rights (i.e., they only stop force and fraud). Unfortunately, we don't yet have any free markets in America today, or anywhere else in the world, for that matter.)]
    - Aetius 16y ago
      Yeah let me rephrase that: When the business is scamming customers, competition in a free market is not a pretty sight. And no, I'm not aloof enough to believe we have a truly free market. But it's free enough to let thousands of Swoopo clones race bid prices to the bottom. Now it seems customers may even be winning more from the auction sites than the auction sites are taking in. But fear not for Swoopo! They'll undoubtedly sell their soon-to-be patented "technology" to the likes of Intellectual Ventures, who'll use it to extort other would be scammers, completing the circle of evil!

hristov 16y 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 16y 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 16y ago

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

spolsky 16y 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.

Alex3917 16y 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.
- deleted 16y ago
  [deleted]
- powertower 16y ago
  30 million in revenue in 2008.
citricsquid 16y 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.
nate 16y 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.

tghw 16y 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 16y ago

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

prknight 16y ago
This traffic comparison seems to somewhat support that http://goo.gl/FdQi3 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 16y ago

>HOW on earth did they lose money... Cocaine is a hell of a drug

Dennis_ 16y 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.