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.

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.)