Swoopo - An Amazingly Evil Con

Swoopo, which I refuse to link to, is one amazingly evil site. It is an auction site (for some loose definition of the word "auction") that works as follows:

• A mark registers for the site and buys "bids" for $1 each.
• The site puts an item up for auction, starting the price at 15 cents.
• The marks take turns "bidding". Each bid makes them the auction's current winner, costs them one "bid", raises the price by 15 cents, and bumps the timer up if it's close to the end. Whoever has the winning "bid" by the time the auction expires gets the item.

The auction timer ends up being pretty pointless as it gets bumped up endlessly; an action really ends when the marks stop bidding.

Why is this evil? Well, do the math. I've been watching people fight over a Wii, retail price $249.99. It currently stands at $111.30, and the competition remains fierce. (Perhaps it'll be done by the time I finish this message.) $111.30 / 0.15 - $1 = $741! Plus let us not forget the $111.30, for a grand total of $852.30 for the Wii.

Yes, it's a great deal if you buy one bid and make the last bid. However, work the math: If this company is walking away with over $800 for a $250 product, somebody's getting screwed and it's probably you.

For extra bonus points, they have a "feature" on their site that will automatically use your bids at the last moment if you aren't there. Quelle surprise. Other various auction "specials" further disconnect the users from the pricing signal, allowing even more bids before it is actually sold, or preventing the top price from being a restraint by fixing the final price and making the current auction price nothing more than a fiction.

I have to admit to a certain admiration of this sick scheme. It's brilliant. It probably isn't even illegal, and probably can't be made illegal easily. And with the outrageous return-on-investment the company makes on their product, it's going to be impossible to dry up the pool of marks enough to put them entirely out of business.

(There are some places in their interface where they appear to be flat-out lying. For each finished bid, they have a place where they claim to compute the "savings" on the item, where they take the value and subtract the price of the "bids" made. However, the bids so subtracted are just wrong. The Wii I was watching, which is now done, came in at $138.00, but they claim this was done in 140 bids. Simple math shows it takes 919 bids to get this high. I've scoured their help site and I see no reason for this discrepancy, no exceptions where they start an auction higher (why would they?).)

(Update, Oct. 20, 2008: A reader emails to point out that they appear to be showing what the winner is paying, which after re-examining a closed auction appears to be correct, based on the layout of the page. They just don't bring to your attention that all the losers also paid money. Classify that as you will.)

Their site shows nearly 2500 "ended auctions". Cha-ching!

Oh, that Wii? 919 bids = $919 (by their own accounting they show no free bids), plus final price $138.00, plus shipping $14.80 = $1,071.80. Wow. Just wow.

(Swoopo, in the event that you should see this and feel compelled to fire off a nastygram, be aware that I will be posting your entire correspondence and my reply publicly.)

Update Oct. 23, 2008: Look! Copycats! Inevitable.