Swoopo Quietly Files for Bankruptcy
technologizer.com
technologizer.com
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.
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.
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).
[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.)]
When the business is scamming customers,
competition in a free market is not a pretty sight.
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!
Actually last I heard those sites were very profitable but, you never know with gambling sites. They tend to misstate, hide profits.
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)
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.
It seems that the "gambling" claim is well supported. (see Wikipedia -- e.g. from MSN Money: "Chris Bauman [[director of Swoopo in the US]] told one blogger: 'Winning takes two things: money and patience. Every person has a strategy.' Indeed, he undoubtedly does. The problem is that, as with the gambling systems peddled by countless books, none of those strategies will actually work. Just remember that no matter how many times you bid, your chance of winning does not increase.")
I think you're also misunderstanding what qualifies as gambling, at least in the U.S. (international law I'm not as familiar with) Look no further than bigdeal.com, a site that operates exactly like Swoopo and is based in the U.S. It is venture backed with a few million dollars. I suspect before making that investment there was some due diligence in this auction mechanism and it was found to be legal. People in this thread are throwing around "gambling" and "scam" but I'd still challenge anyone to cite any portion of the law which specifically makes a penny auction "gambling."
Do people lose money if they don't win, yes. Does that piss people off? Of course. But that still doesn't mean it's gambling or a scam.
If it's not for you, don't play it. Simple as that.
Sounds like an apt description of Swoopo if, according to the MSN Money quote above, any "strategy" is equally ineffective. Recall that "the law" and what governments choose to enforce of it are not the final say on word definitions ...
I'm happy with the argument that gambling is okay, but Swoopo should have called a spade a spade, been regulated as a gambling site, and published the odds.
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.
Cocaine is a hell of a drug
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.
They are merely a variation of the 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.
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.
This works remarkably well for filtering out hucksters, scammers, and shady businesses.
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'.
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.
(If you think about it, a practical definition of "scam" is something that is profitable but doesn't generate repeat customers.)
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...