We Actually Put Swoopo to the Test: Scam? Gambling? We’ve got answers.
The bidding site Swoopo promises amazing deals, but with a twist; you’ve got to pay to play. Swoopo doesn’t try to hide the fact that they’re making money off this model. The question is, can you get a fair deal? That’s what we tried to find out.
The way Swoopo works is a bit odd, to say the least. The auction follows a traditional format, where each bid raises the asking price by a pre-determined amount. Only, you don’t get to bid for free. Each bid costs 75 cents. Bidding in the last few seconds extends the auction, giving people more time to “out bid” you. It’s a game of King of The Hill in multiplayer-speak. He (or she) who can run down the clock, and stay the highest bidder, wins. That’s how you can “get an iPod touch for $25″ (or some other jaw-dropping amount). Swoopo makes their money off of the $.75 per bid transaction cost. As you’ll see below, that winds up being quite a large profit in the long run.
We purchased $60 worth of bids, in two amounts (30 bids, and then 50 bids). The first 30 bids we didn’t expect to win anything… it really was for seeing what “forming a strategy” and “being patient” in the words of Swoopo’s CEO really meant.
And, unfortunately, we found problems. Bids timed out many times we tried to lock in bids at the last few seconds. Of course, Swoopo will argue that waiting until the last few seconds of an auction is risky. However, that is a bit of a lie of omission. Chances are, if you don’t place a bid in the last few seconds, you won’t win an item. Your bid will accrue more time on the auction unless it is placed within seconds of the end. This gives people dramatically more time to “out bid” you.
Unfortunately, being patient is where this turns into a gambling game that would make Las Vegas blush. See, even if you are patient, it’s really a matter of two factors; how many other people are bidding simultaneously, and if the server will time out before locking in your bid.
Time outs are bad, but actually Swoopo doesn’t like timeouts. It prevents more people from throwing more bids into the pile. The real problem is the system encourages people to lock in multiple bids at the very last second. Most of our bids were exhausted by clicking bid, only to find out others had already clicked to bid, which had already reset the clock.
Swoopo will probably argue that that’s how the web works, and that they have robust yadda yadda technology that minimizes that. However, there is no denying that it’s profitable for Swoopo. In fact, Web 2.0 is a poor premise for this system. Using flash-based technology would allow for near-instant responses, truly minimizing the Multiple Bid Syndrome.
A fair resolution however would to be to not debit those that bid simultaneously, only charging the person that bid (and pushed the end time out) the first time. I seriously doubt Swoopo would support this, since they claim that every bid pushes the clock out… and that’s true, but only by an inconsequential second.
Let’s look at this problem another way. Let’s say that Swoopo had a steady rate of auctions, enough that people were putting in accidential Multiple Bid Syndrome events at a rate of one per second. That results in a profit of $.75 per second on bids which should not (ethically) have been charged. That translates to a profit of $2,700 per hour on this bug. Or, $64,800 per day.
And, that’s if you’re being generous, and only saying that Multiple Bid Syndromes happen at a rate of one per second on the site. From our experience… that’s very generous. We found in the last few seconds of an auction, most people participating had several bids simultaneously. Everyone had caught on to “being patient” and waited until the last second, in order to kick things out in their favor. This winds up being a zero sum game for bidders in the long run; whoever is willing to bleed the most isn’t assured of winning, even if they do everything right.
The real shocking thing we figured out however, was how much money Swoopo was making.
For example, a Sony Ericsson XPERIA X1 phone sold for $59.11. At penny auction rates, that translates to $4434.25 in revenue (5,911 bids multiplied by the $.75/bid rate). Even factoring in the full retail price, the net revenue (after the purchase price of the phone) is $3,434.25. Assuming the system requires minimal maintenance, that’s pure profit at this point. We did notice some items fall short of this goal, however that was far from the norm in our two days of observation.
In short, Swoopo is gambling. It is a scam as well, because Swoopo doesn’t make any effort to explain to customers that their site is a gamble. It isn’t a gamble in the sense of an online casino, but you are gambling that you will be the king of the hill for a 15 or 20 second period. This is a random process, and one that we can’t even validate. There’s no way to be sure that some Swoopo employee isn’t shill bidding the entire system, keeping auctions alive until they cross a certain profit margin.
In short, we spent $60 to confirm that you shouldn’t spend a penny on Swoopo. Just avoid it.
P.S. No, we didn’t win anything.
[...] one, the Black Sheep Edition that most didn’t even know got upgraded. And, we also tear apart Swoopo-style auction sites, letting you know what you need to about them. (RSS [...]
Swoopo Warning. Not as it first seems….
I hesitate to write about Swoopo. They have apparently hit upon the recipe for making a lot of money on the Internet. They do this by taking advantage of the learning curve of many new “customers”, and perhaps compulsive gamblers. My fear …
I disagree of calling this site as a scam, but this is just my opinion, we all have different takes on this matter. But take note that the site never really forced any bidders to participate in the first place. If only people would learn to read the manual or try to understand the bidding system first before participating maybe they wont lose that much or maybe even decided not to bid if they’re not up for it.
Steam, under that logic, 99.9% of scams wouldn’t be considered scams. Virtually all scams do not “force” anyone to participate.
Rather, good scams lure people in with just the right set of logic and promises.
We put the manual to the test. It failed because of the technical reasons for which we outlined in the article.
Swoopo is good, huge inventory. But it’s so expencive compared to some sites. For example http://muulu.com there alot better 50 cents per bid, and discounts for when you buy a bid pack. nice looking site too. 1 in 4 bids give you a discount. Cheapest I could find.
It is not a scam purely based on the business model. Where they run into problems is with not shipping items in a timely manner. They also have a nonexistent customer service department. They send a form letter when you make inquiries and say they will reply back, but they never do.
I am waiting over 3 weeks for a TV and others have posted on various forums they are waiting over a month. I won’t say for sure but they COULD be a Ponzi scheme if they need to sell more bids to pay for past won auctions. Their is no excuse to not ship in a timely manner or at least provide an explanation why unless they can’t afford to buy the items.
As their shipping times spiral out of control… the latest winners will receive NOTHING when they go under!
Shipping is a problem with Swoopo, I have to agree. I’m still waiting for my item.
It’s not a scam. But it is calculated gambling and there is nothing wrong with that if you know what you are getting yourself into. It’s a game of chance and someone usually walks away with a great deal. If you have a strategy and commitment, you can easily be on the winning end of their equation.
I did on paper. It’s been over 5 weeks for me and I still haven’t received anything from them.
If I finally get my product, I’ll update here.
Its a total scam! I won a PC and a Refrigerator. Its been over 5 weeks and now I’m beginning to believe I will never see it. I am a lawyer and I will see what I can do about this and I’ll update here. From what I remember, I read that items won in an auction will be delivered within 2 weeks.
I am interested to hear about Andy’s findings, since you are a lawyer as I have actually bought a laptop on Swoopo (not won it) and have yet to receive it. At least they responded to my emails but that doesn’t mean I shall ever see the item arrive
Well, as an update, it is 11/28 and neither the computer or the refrigerator arrived. It’s been six weeks now.
Would you say you could reclaim your money, Andy? As you bid and won – they seem to say that bids placed are non refundable. I wonder where a consumer stands legally with this if the item then doesn’t arrive or the company goes belly up…
We shall see if common sense prevails. I initiated a chargeback with PayPal when I didn’t receive my item. I documented over 50 attempts to contact Swoopo customer service. They only responded a few times. Every response was a lie as they said the item shipped or was going to ship. They were using the old trick of stalling to pass the threshold date for initiating a PayPal dispute. Even if it is a valid chargeback, PayPal won’t look into it if enough time passes.
I got the chargeback filed on time and with my thorough documentation I received the money back into my PayPal account almost immediately. Swoopo had 45 days to dispute the chargeback which they did on about day 45.
I disputed the amount they claimed for the value of the item with the reasoning they could either produce the item or what they claimed the value to be. They could not or would not produce the item so I felt I was entitled to compensation for their stated value.
Their reply was that they should not refund the price of intangible bids. Here is our quandary… part of my chargeback is for bids and part is for the final value price plus shipping. Do those intangible bids become a tangible purchase once they are used to win a real item?
If PayPal rules against me when I was clearly scammed, that would be a huge blow for people attempting to keep these sites honest.
I WILL pursue other legal avenues if this is the case. Once again… the business model of Swoopo is not a scam. What makes them an illegal operation is not shipping won items and fighting an attempt to get your money back when you cry foul.
Excellent point in case. I was thinking that if the item does not arrive the company is out to scam people and would find it very tough to challenge a legal case. They certainly would not be able to survive the bad publicity that would ensue. I for one would contact Scotland Yard Fraud Unit as this is exactly the kind of criminal act they love to investigate, especially now with the recession on. I just wonder how they manage to still operate – aren’t there more people out there who are still waiting for their deliveries? Why is nobody filing against them? Why haven’t they been investigated by the Consumer Watchdog? Very odd…
THIS ARE THE REAL PROBLEMS WITH SWOOPO :(
Swoopo is a scam site because they use scam techniques to modify auctions and increase their profit There is some problems with swoopo that frankly i think make anyone loose faith in the fairness of the site.
Some of the problems are time-outs, unfair currency conversions, and different action description for the same item in different country sites.
I will take an auction and illustrate how this problems make the site a very unfair environment:
Ex: “Auction ID: 256264″ (check it out for urself, by going on both sites, just click the different country flags)
i am from Canada and the item description for the item in the Canadain website is: This iMac features a 2.66GHz Intel Quad Core Processor,1TB Hard Drive, 4 GB RAM, 27″ display and Mac OS X 10.6
in the US website the item description is very different: This iMac features a 3.06GHz Intel Core 2 Duo,1TB Hard Drive, 4 GB RAM, and a 27-inch display
-this are 2 different Apple computers and in an auction that is something horrible to do, because it attracts more bidders for no reason. There are people that are looking for the 3.06GHz Intel Core 2 Duo iMac that will be attracted and people that are looking for the iMac features a 2.66GHz Intel Quad Core Processor, and they will all bid. but the problem comes with the fact that all the bids are added on top of each other to each other. This is wrong because the different countries are biding in 2 different items, so we should have 2 different auctions because we have 2 different products.
-the above example can be simplified if you consider bidding for a car, the US will bid on the Toyota for example and Canada will bid on Honda. Now the bids from both cars will be added together and so will the times. So if so far 100 US customers bid in this penny auction the price for the Toyota would be $1 dollar, and if 50 Canadian customers bid on the other auction, the price of the Honda would be 50cent = $0.50. this would be fair but swoopo adds the price and makes the price for both cars 1.5 dollar at this point, and the worst part, is that the time has been increased over and over because they have combined this auctions. in the end tho they will only sell one car and either the toyota if a US customer wins or the honda if the canadian customer wins, making double the profit just like that. WOULD YOU BID ON THIS?? Than they will auction the other car the same way.
THAT IS WRONG!!!
CURRENCY CONVERSION
-Now lets say that we are bidding on a “Nikon D90 with 18-105mm Kit + 150 FreeBids”. the price on the US website for this item is USD $1,339.00
while for the same item (excluding that the problem mentioned above exists, since the running 2 different items in the same auction happens more with laptops and desktops), a “Nikon D90 with 18-105mm Kit + 150 FreeBids” with the same item descriprtion, the price for it on the Canadian website is CAD $1,652.49. Now some might say that makes since since the US dollar is higher that the Canadian dollar, but today the rate is 1USD = 0.95 CAD while when calculating Swoopo’s rate you get 1 USD = 1.23 CAD, now how is that fair.
This problem is even worst when considering the iMac auction above where the US price is USD $1,699.00, and the Candadian price is CAD $2,284.99 buming the rate to 1 USD =1.34 CAD which is very high, that is 40 cent extra per dollar IT’S CRAZYYYYYY !!!!!
TIME OUTS
- this is an obvious problem, basically the times just gets stuck on you leaving you confused and sometimes having to refresh in the final seconds and it could cost you the auction, which can be devastating if you are bidding on an item for a while and have used 100ds of bids. this is caused by the website glitches and network lag some times. now the worst if combining all of the 3 factors mentioned above into the same auction which happens on almost every penny or high price auction.
Now i know it was long and i apologize, but i hope you learned something more because what i have mentioned are all facts and you can verify them. Sites like this are very addictive and there are people who i feel bad about because they will still play even knowing this crazy odds. Well my advice is stay away, but im not your mother so GOOD LUCK!!!!
Well, another update. Seven weeks after winning a refrigerator, it arrived. One guy delivery, so they had to park it in the garage as my girlfriend could not carry it in with him. Still waiting on the iMac.
Thanks a million for info .I was about to buy some credits .You saved the day again thanks a ton
It is not a scam because it fully explains how the bidding process works and clearly states that bids in an unwon auction WILL NOT BE REFUNDED. By explaining how the site works and revealing the risks you must part take, it clearly separates it from being a scam. If one were to say this site was a scam, then they must also agree that gambling in a casino is also a scam. The only aspect that could make the site a scam is if indeed they did bid on their own auctions and modified them in order to keep them alive and profitable, which has not yet been proven. This however, is unlikely due to the fact that many auctions on swoopo sell at a loss, and this, you can say, is basically like an advertising cost. Having an iphone sell at 2 dollars, which happens quite often actually, will promote word of mouth advertising and encourage people to buy more bids. If they were to keep auctions alive until it reached a profitable margin then they will obviously defer bidders from bidding early in the auction and therefore have no bids placed at all, aka no auctions will sell. Saying swoopo is like gambling can most definitely be argued being that even though strategy can help significantly, winning is still highly dependent on chance its self. From my observations on swoopos auctions, and having won 2 insignificant auctions, I have inferred that auctions are ultimately won by other bidders being distracted (bathroom break, phone call, having to go to work, bidding a second too late), lag or disconnection, and the rest, depending on others to bid that last second, due to all the other times 6 bidders bidded that last second.
Upon reading other comments on this page, i wished to address other problems that were introduced. Following up on Bess’s comment… all the times I bid on swoopo, i have never experienced any timeouts on MY computer. When using my school’s computers, I did witness a significant amount of lag but I believe this is more dependent on your internet connection and the specs on your computer than it is on the site its self. On my computer I have experienced very minimum lag and my bid is always placed, when bidding the very last second. Swoopo states that during system down times, the site does not accept anyones bids and therefore does not debit anyones bidding account. The auction then jumps up to a 10 minute countdown in order to give bidders a fair chance at getting back into the auction, in which bids are once again, then, accepted. Unfair currency conversions and different action description for different countries is not something I have looked into, but will point out that these issues measure the fairness of the site its self and has nothing to do with whether the site is a scam or not….
On 5/8/2010 I bought 40 “swoopo” bid credits.I placed several bids to become familiar with the site. Seeing the need for more credits to have any type of chance winning anything I bid on a bid credit pack of 50 credits. I was leading for over an hour with $.02. As the countdown reached about a minute someone else bid and then another. I bid again to raise the total price of $.05. There was 16 seconds left and I pressed the bid button and my PC didn’t lockup, the website went crazy and looked like it was corrupted. About two minutes later, I got back to the bid and it had ended. “Spider120″ won the 50 credits with two bids at $.06. I requested a refund from paypal. I also got and email from swoopo within minutes of this event awarding me two bid credits for my participation in another bid, an IPad. I now have 22 remaining credits that I don’t plan on using. I hope PayPal negotiates a refund of my $24.00. If that doesn’t work I will try and dispute my PayPal payment with Amex. If that doesn’t work I’ll just be glad their glitch happend when it did or I may have lost a lot more than $24.00. I didn’t even get a chance to “swoop it now” the IPad I spent about $5.00 bidding on for a huge retail price amount (minus my $5.00). What a racket. Caveat Emptor.
Correction: I bid again to raise the total price to $.05. Then “Spider120″ raised the bid to $.06. There was 16 seconds left and I pressed the bid button and my PC didn’t lockup, the website went crazy and looked like it was corrupted. About two minutes later, I got back to the bid and it had ended. “Spider120″ won the 50 credits with two bids at $.06. Congrats to Spider120, I’m glad someone won……
i was bidding on a macbook pro then kinda forgot about it…. when i saw who won later on that night, they had used over 1,500 free bids, and it showed that they paid nothing for those bids… wtf?