If I met the guys behind Swoopo

by wfgodbold

I don’t know if I’d want to shake their hands, or cower in fear; they’ve got to be evil geniuses.  I wouldn’t be surprised if their corporate offices were in an ancient mansion on a rocky crag overlooking the ocean, and if the CEO played the pipe organ from the board room on the top floor.

Swoopo.com is a self-described “entertainment shopping” site; they have various auctions going, and while at first glance it seems like everyone is getting a great deal, the reality is much more insidious.

Each bid on an auction raises the price by one cent (and increases the time remaining by ~40s); however, placing a bid costs sixty cents.  So if an iPhone 4 has a current price of $23.50, then 2350 people have placed bids on it (netting swoopo a cool $1400).  You pay for your bids whether you win or lose; let’s say that iPhone sells for $23.50, and the guy who won it placed 400 bids.  It might look like he got that phone for $23.50, but he’s actually paying $263.50 (the price plus $240 worth of bids).  That’s still a ~70% savings over the retail price of an iPhone 4, but it’s not as big of a bargain as swoopo makes it appear.  Those other 1950 people who placed bids and didn’t win are out the money those bids cost, and they don’t have a phone to show for it.

I’ve seen ended auctions for laptops where the final price means that swoopo collected over $20,000 just from the cost of the bids.

I’m telling you, these guys are evil geniuses; their entire business model is based on the sunk cost fallacy.  “I can’t stop bidding now, or all the money I’ve spent bidding will have gone to waste!”

I’m afraid to even make an account, lest the lure of deceptively cheap electronics prove too strong to resist.

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