Swoopo
Encyclopedia
Swoopo was a bidding fee auction
site where purchased credits were used to make bids. Prior to changing its name to Swoopo in 2008, the website was called Telebid. Swoopo was operated by Entertainment Shopping AG
and based in Munich, Germany. In March 2011, Swoopo's website became inaccessible, and a notice page claimed that Swoopo was experiencing "technical issues." On March 26, 2011, Swoopo's parent company filed for bankruptcy. There is no information regarding whether the site will reopen or permanently close.
The auction ends when time runs out. However, because each bid extends the length of the auction by 10–20 seconds, the auction could theoretically continue on indefinitely.
Besides making single bids anytime, users can place a so-called "Bidbutler", which is an automatic bidding tool. Users can employ a maximum of 50 Bidbutler bids each time. Once a Bidbutler is active, it will automatically bid in the final 10 seconds of the auction in an attempt to keep the user as the highest bidder. This means if two or more Bidbutlers are active they will repeatedly bid against each other (before the auction time increment is applied) until the one with the most bids left is the "winner". Bidbutler bids hold no more value than single manually placed bids, so once the bids booked for a Bidbutler are exhausted a single manually placed bid can become the winning bid.
The money collected by Swoopo consists of the cost of bids placed and the final auction amount. As an example, a MacBook Pro
with a suggested retail price
of $1,799 was sold on Swoopo for $35.86. However, a total of 3,585 bids were placed, so the total amount paid by Swoopo customers was $2,151.
Swoopo has claimed to make money on roughly half the items sold.
In August 2009, Swoopo modified its business model
to include a "Swoop-it-now" function which allows bidders who lose an auction to apply all of their lost bids towards the purchase of the item they were bidding on. If a bidder does not win, he/she can get back all their bids by buying the item directly from Swoopo.
Users from Swoopo must bid against users in all countries where Swoopo operates. , Swoopo operates in Germany, the United Kingdom
, Austria
, Canada
, Spain
, and the US. The same auction can be active on multiple regions, with the current price based on the opening price plus the number of bids times the bid increment price. So an item on the US site currently listed at $12 (Opening $0.12 and 99 bids incrementing the price by $0.12 per time) will be listed on the UK site with a current bid of £10 (Opening £0.10 and 99 bids incrementing the price by £0.10 per time). As it is not possible to determine the source of the bids, the amount collected by Swoopo cannot accurately determined. In the preceding example, it could be $59.40 if all bids were US based, or £49.50 if all bids were UK based. The closing prices will not necessarily represent a market based foreign exchange rate.
The item under auction may not be identical between regions, though it will be similar. For example, a different brand of USB memory stick may be offered in different regions, though the capacity is the same. USUK
stated that Swoopo "does not amount to a hustle
, it's simply a slick business plan," and that while it might be close to gambling, "the non-determinism
comes directly from the actions of other users, not the randomness
of a dice roll or a deck of cards." Nevertheless, the argument about "skill game" is put down by MSN Money
: "Chris Baumandirector 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". Ian Ayres
writing for New York Times blog called Swoopo a "scary website that seems to be exploiting the low-price allure of all-pay auction
s". MSN Money has called Swoopo "The crack cocaine
of online auction websites", and stated that "in essence, what your 60¢ bidding fee gets you at Swoopo is a ticket to a lottery
". The New York Times has called the process "devilish."
Speaking to the BBC
, Professor Mark Griffiths of Nottingham Trent University
, stated that "penny auction" sites in the UK should be regulated by the Gambling Commission
. However the Gambling Commission said that it "was not convinced that penny auctions amounted to gambling".
Speaking to the New York Times, Glen Whitney, a mathematician
and a former quantitative analyst
at the hedge fund
Renaissance Technologies, stated. “In aggregate
, consumers trying to obtain these products are overpaying. Unless you have an edge over other people who are bidding, and you can get them to subsidize your purchase, you shouldn’t do it. It’s a chump’s game.”
Swoopo has hired the star gambling lawyer Anthony Cabot of the Las Vegas law firm of Lewis and Roca.
German consumer protection
bodies also warn about the auction type offered by Swoopo and other similar auction platforms, likening them to gambling.
Techcrunch
states that Swoopo is an "'entertainment shopping' site that’s one part auction-house, one part virtual casino
"; whereas the alarm:clock calls it a "gambling auction biz". Toptenreviews states: "it warrants considering Swoopo with some different terminology. Rather than "auction" site, maybe we should designate Swoopo as a gambling site—a type of QVC-meets-the-internet-age ponzi scheme
".
firms: an undisclosed amount in December 2006 by Wellington Partners in Munich and $10 million in April 2009 by August Capital in Silicon Valley
.
Swoopo went offline on March 17th, with a message that read
On March 23rd, Swoopo filed for bankruptcy in Munich Germany.
Bidding fee auction
A bidding fee auction, also called a penny auction, is a type of all-pay auction in which participants must pay a non-refundable fee to place a small incremental bid. When time expires, the last participant to have placed a bid wins the item and also pays the final bid price, which is purportedly...
site where purchased credits were used to make bids. Prior to changing its name to Swoopo in 2008, the website was called Telebid. Swoopo was operated by Entertainment Shopping AG
Aktiengesellschaft
Aktiengesellschaft is a German term that refers to a corporation that is limited by shares, i.e. owned by shareholders, and may be traded on a stock market. The term is used in Germany, Austria and Switzerland...
and based in Munich, Germany. In March 2011, Swoopo's website became inaccessible, and a notice page claimed that Swoopo was experiencing "technical issues." On March 26, 2011, Swoopo's parent company filed for bankruptcy. There is no information regarding whether the site will reopen or permanently close.
Mechanics
In order to participate in an auction, registered users had to first buy bids (called credits, and henceforth referred to as "Bid-credits") before entering into an auction. For the US version of the site, Bid-credits cost $0.60 apiece and were sold in lots (called BidPacks) of 40, 75, 150, 400, and 1,000. Each credit is good for one bid. Standard auctions begin with an opening price of $0.12 and every time someone bids the price increases by $0.12. Other auction types use different values, penny auctions use $0.01, 6¢ auctions $0.06, etc. The price of bids and the incremental values vary depending on the regional version of the site used.The auction ends when time runs out. However, because each bid extends the length of the auction by 10–20 seconds, the auction could theoretically continue on indefinitely.
Besides making single bids anytime, users can place a so-called "Bidbutler", which is an automatic bidding tool. Users can employ a maximum of 50 Bidbutler bids each time. Once a Bidbutler is active, it will automatically bid in the final 10 seconds of the auction in an attempt to keep the user as the highest bidder. This means if two or more Bidbutlers are active they will repeatedly bid against each other (before the auction time increment is applied) until the one with the most bids left is the "winner". Bidbutler bids hold no more value than single manually placed bids, so once the bids booked for a Bidbutler are exhausted a single manually placed bid can become the winning bid.
The money collected by Swoopo consists of the cost of bids placed and the final auction amount. As an example, a MacBook Pro
MacBook Pro
The MacBook Pro is a line of Macintosh portable computers introduced in January 2006 by Apple. It replaced the PowerBook G4 and was the second model, after the iMac, to be announced in the Apple–Intel transition...
with a suggested retail price
Suggested retail price
The manufacturer's suggested retail price , list price or recommended retail price of a product is the price which the manufacturer recommends that the retailer sell the product. The intention was to help to standardise prices among locations...
of $1,799 was sold on Swoopo for $35.86. However, a total of 3,585 bids were placed, so the total amount paid by Swoopo customers was $2,151.
Swoopo has claimed to make money on roughly half the items sold.
In August 2009, Swoopo modified its business model
Business model
A business model describes the rationale of how an organization creates, delivers, and captures value...
to include a "Swoop-it-now" function which allows bidders who lose an auction to apply all of their lost bids towards the purchase of the item they were bidding on. If a bidder does not win, he/she can get back all their bids by buying the item directly from Swoopo.
Users from Swoopo must bid against users in all countries where Swoopo operates. , Swoopo operates in Germany, the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
, Austria
Austria
Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...
, Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
, Spain
Spain
Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...
, and the US. The same auction can be active on multiple regions, with the current price based on the opening price plus the number of bids times the bid increment price. So an item on the US site currently listed at $12 (Opening $0.12 and 99 bids incrementing the price by $0.12 per time) will be listed on the UK site with a current bid of £10 (Opening £0.10 and 99 bids incrementing the price by £0.10 per time). As it is not possible to determine the source of the bids, the amount collected by Swoopo cannot accurately determined. In the preceding example, it could be $59.40 if all bids were US based, or £49.50 if all bids were UK based. The closing prices will not necessarily represent a market based foreign exchange rate.
The item under auction may not be identical between regions, though it will be similar. For example, a different brand of USB memory stick may be offered in different regions, though the capacity is the same. USUK
Controversy
The method of selling employed by Swoopo is controversial and has been criticized. The company, responding to claims that Swoopo is a type of gambling, stated that winning auctions involves skill and is not reliant upon chance. Ted Dziuba writing for The RegisterThe Register
The Register is a British technology news and opinion website. It was founded by John Lettice, Mike Magee and Ross Alderson in 1994 as a newsletter called "Chip Connection", initially as an email service...
stated that Swoopo "does not amount to a hustle
Confidence trick
A confidence trick is an attempt to defraud a person or group by gaining their confidence. A confidence artist is an individual working alone or in concert with others who exploits characteristics of the human psyche such as dishonesty and honesty, vanity, compassion, credulity, irresponsibility,...
, it's simply a slick business plan," and that while it might be close to gambling, "the non-determinism
Indeterminism
Indeterminism is the concept that events are not caused, or not caused deterministically by prior events. It is the opposite of determinism and related to chance...
comes directly from the actions of other users, not the randomness
Randomness
Randomness has somewhat differing meanings as used in various fields. It also has common meanings which are connected to the notion of predictability of events....
of a dice roll or a deck of cards." Nevertheless, the argument about "skill game" is put down by MSN Money
MSN Money
MSN Money, a service of MSN, is a website about business news, that is edited in association with CNBC. It provides stock exchange prices and financial information on companies. Information on stock and share options is also provided. Stock prices are also supplied through msnbc.com.The site also...
: "Chris Bauman
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". Ian Ayres
Ian Ayres
Ian Ayres is an American academic who is the William K. Townsend Professor at the Yale Law School and a Professor at the Yale School of Management.-Biography:...
writing for New York Times blog called Swoopo a "scary website that seems to be exploiting the low-price allure of all-pay auction
All-pay auction
In economics and game theory an all-pay auction, is an auction in which all bidders must pay regardless of whether they win the prize, which is awarded to the highest bidder as in a conventional auction...
s". MSN Money has called Swoopo "The crack cocaine
Crack cocaine
Crack cocaine is the freebase form of cocaine that can be smoked. It may also be termed rock, hard, iron, cavvy, base, or just crack; it is the most addictive form of cocaine. Crack rocks offer a short but intense high to smokers...
of online auction websites", and stated that "in essence, what your 60¢ bidding fee gets you at Swoopo is a ticket to a lottery
Lottery
A lottery is a form of gambling which involves the drawing of lots for a prize.Lottery is outlawed by some governments, while others endorse it to the extent of organizing a national or state lottery. It is common to find some degree of regulation of lottery by governments...
". The New York Times has called the process "devilish."
Speaking to the BBC
BBC
The British Broadcasting Corporation is a British public service broadcaster. Its headquarters is at Broadcasting House in the City of Westminster, London. It is the largest broadcaster in the world, with about 23,000 staff...
, Professor Mark Griffiths of Nottingham Trent University
Nottingham Trent University
Nottingham Trent University is a public teaching and research university in Nottingham, United Kingdom. It was founded as a new university in 1992 from the existing Trent Polytechnic , however it can trace its roots back to 1843 with the establishment of the Nottingham Government School of Design...
, stated that "penny auction" sites in the UK should be regulated by the Gambling Commission
Gambling Commission
The Gambling Commission is Great Britain's regulatory body for most, but not all, gambling.-History:It was established under the Gambling Act 2005 and assumed full powers in 2007, taking over responsibility from the Gaming Board for Great Britain, in regulating arcades, betting, bingo, casinos,...
. However the Gambling Commission said that it "was not convinced that penny auctions amounted to gambling".
Speaking to the New York Times, Glen Whitney, a mathematician
Mathematician
A mathematician is a person whose primary area of study is the field of mathematics. Mathematicians are concerned with quantity, structure, space, and change....
and a former quantitative analyst
Quantitative analyst
A quantitative analyst is a person who works in finance using numerical or quantitative techniques. Similar work is done in most other modern industries, but the work is not always called quantitative analysis...
at the hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
Renaissance Technologies, stated. “In aggregate
Aggregate data
In statistics, aggregate data describes data combined from several measurements.In economics, aggregate data or data aggregates describes high-level data that is composed of a multitude or combination of other more individual data....
, consumers trying to obtain these products are overpaying. Unless you have an edge over other people who are bidding, and you can get them to subsidize your purchase, you shouldn’t do it. It’s a chump’s game.”
Swoopo has hired the star gambling lawyer Anthony Cabot of the Las Vegas law firm of Lewis and Roca.
German consumer protection
Consumer protection
Consumer protection laws designed to ensure fair trade competition and the free flow of truthful information in the marketplace. The laws are designed to prevent businesses that engage in fraud or specified unfair practices from gaining an advantage over competitors and may provide additional...
bodies also warn about the auction type offered by Swoopo and other similar auction platforms, likening them to gambling.
Techcrunch
TechCrunch
TechCrunch is a web publication that offers technology news and analysis, as well as profiling of startup companies, products, and websites. It was founded by Michael Arrington in 2005, and was first published on June 11, 2005....
states that Swoopo is an "'entertainment shopping' site that’s one part auction-house, one part virtual casino
Online casino
Online casinos, also known as virtual casinos or Internet casinos, are online versions of traditional casinos. Online casinos enable gamblers to play and wager on casino games through the Internet....
"; whereas the alarm:clock calls it a "gambling auction biz". Toptenreviews states: "it warrants considering Swoopo with some different terminology. Rather than "auction" site, maybe we should designate Swoopo as a gambling site—a type of QVC-meets-the-internet-age ponzi scheme
Ponzi scheme
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation...
".
Finances
Swoopo has received financing from two venture capitalVenture capital
Venture capital is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as...
firms: an undisclosed amount in December 2006 by Wellington Partners in Munich and $10 million in April 2009 by August Capital in Silicon Valley
Silicon Valley
Silicon Valley is a term which refers to the southern part of the San Francisco Bay Area in Northern California in the United States. The region is home to many of the world's largest technology corporations...
.
Closure
As of November 2011, Swoopo website is completely inaccessible.Swoopo went offline on March 17th, with a message that read
On March 23rd, Swoopo filed for bankruptcy in Munich Germany.