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Profitable Until Deemed Illegal

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Re: Profitable Until Deemed Illegal

#81

Post by mattmaroon »

patio11 wrote: post #43
imgabe wrote: post #8

Earlier quoted context omitted.

He doesn't say that it is illegal, only that it's so shady that it's likely someone will make a law against it. It could fall under gambling laws, since you're basically buying chances to win the opportunity to buy something at a low price.

Oh, I don't think they'll need a new law in most jurisdictions as soon as they find out about the "Auctions for money". "Wait, so let me get this straight, people routinely 'buy' $100 for $20 on your service, and you profit $300 from the transaction from selling the 'bidding rights' to 'non-winning bidders'?" "Yes." "Oh, thanks. What determines who wins?" "Final bid price." "But paying $20 for $100, why, anybody shou…

Games of skill with monetary prizes are legal in all states. How you define a game of skill vs. a game of chance varies, but with no random element here, I doubt this would be considered gambling in any.

There are 6 where they may run into some sweepstakes laws though, I'm not sure. There are states where it is actually illegal to have a contest that is free to enter but awards a prize.

Re: Profitable Until Deemed Illegal

#82

Post by axod »

mattmaroon wrote: post #77
tialys wrote: post #2

Wow. This is both genius, and despicable. It's amazing what kind of profit they drive, yet it seems like they're really taking advantage of people with gambling addictions, or poor money management skills.

I don't see why it's despicable. The format of the auction seems to be clearly available to all participants. It's all consenting adults, who have all of the information needed to make their own informed decision as to whether or not to participate. If people want to gamble, why not let them? How is this any different than operating a casino? It's not wrong to provide a service that many people deem enjoyable just be…

"How is this any different than operating a casino?"

Operating a casino requires a license for a start afaik, and there are checks to ensure things are fair.

How do we know the winning bidders actually exist? I agree people should be able to make their own minds up in the main, but they should be doing that safe in the knowledge that they are being treated fairly.

Re: Profitable Until Deemed Illegal

#83

Post by mattmaroon »

It's actually humorous to me how many people here are expressing firm opinions about whether or not this is legal despite the fact that they clearly have no understanding of the complexities of gaming law in the United States. This is why I always tell people "ask a lawyer". Non-lawyers think they know far more than they really do.

As someone whose startup has spent huge amounts of time and money on online gaming legal advice, my guess is that this is legal in at least 44 states, and possibly the other 6 as well. It's certainly not gambling, since there appears to be no random selection of the winner, but it may fall under the sweepstakes header. It may merely be an auction (legally, though maybe not morally).

Re: Profitable Until Deemed Illegal

#84

Post by fauigerzigerk »

run4yourlives wrote: post #44
tialys wrote: post #2

Wow. This is both genius, and despicable. It's amazing what kind of profit they drive, yet it seems like they're really taking advantage of people with gambling addictions, or poor money management skills.

So does the government and many charities, the entire city of Las Vegas and churches on Saturday nights across the country, every major sports league (not often directly), etc etc etc. Pretty much every business takes advantage of the fact that the consumer is lacking something, whether that's knowledge, time, money or material. It's the way capitalism works.

No. Capitalism is a system of decentralised decision making on resource allocation, ultimately leading to increased productivity and innovation.

I have no idea how a ponzi scheme that makes "simple" people overpay fits this description as it leads to incredibly bad resource allocation.

You could argue that such failures are part of capitalism and I would agree. But they are still failures. Capitalism depends on such failures being fewer than those cases where funds go where value is being created.

Re: Profitable Until Deemed Illegal

#85

Post by mattmaroon »

axod wrote: post #82
mattmaroon wrote: post #77

Earlier quoted context omitted.

I don't see why it's despicable. The format of the auction seems to be clearly available to all participants. It's all consenting adults, who have all of the information needed to make their own informed decision as to whether or not to participate. If people want to gamble, why not let them? How is this any different than operating a casino? It's not wrong to provide a service that many people deem enjoyable just be…

"How is this any different than operating a casino?" Operating a casino requires a license for a start afaik, and there are checks to ensure things are fair. How do we know the winning bidders actually exist? I agree people should be able to make their own minds up in the main, but they should be doing that safe in the knowledge that they are being treated fairly.

Isn't that endemic to any auction site? eBay knows your max bid and could easily have bots forcing up the incremental bids to earn themselves more fees. Perhaps all auction sites should be audited, but I don't see how this one is any worse than the rest.

And sadly the licensing requirements for online casinos are a joke. Read up on the Kahnawakee Gaming Commission some time, you'll get a kick out of it. Until we legalize and regulate them, they'll never improve.

Re: Profitable Until Deemed Illegal

#86

Post by asdflkj »

mattmaroon wrote: post #63
sgman wrote: post #31

I don't see the difference between this and playing the slots in Vegas. In both cases the house has the advantage; in both cases more is paid for the final prize than what it's worth; in both cases the winner likely gets a good deal on the prize and the losers lose their investment.

There's nothing random involved in this, whereas there is with slot machines. Legally that makes a world of difference.

Someone who can see the slot machine's internals and understands how it works will be able to predict the outcome, so in that sense it's not "truly" random. The reason it's still legally random is that it's as good as random from the point of view of the player. Same applies here. No?

Re: Profitable Until Deemed Illegal

#87

Post by fauigerzigerk »

mattmaroon wrote: post #77
tialys wrote: post #2

Wow. This is both genius, and despicable. It's amazing what kind of profit they drive, yet it seems like they're really taking advantage of people with gambling addictions, or poor money management skills.

I don't see why it's despicable. The format of the auction seems to be clearly available to all participants. It's all consenting adults, who have all of the information needed to make their own informed decision as to whether or not to participate. If people want to gamble, why not let them? How is this any different than operating a casino? It's not wrong to provide a service that many people deem enjoyable just be…

I'm not sure it's despicable, but the difference to gambling is that gambling is sold as purely entertainment. The fun _is_ the product. Swoopo mentions entertainment as well, but they also make people believe that they are buying a product for a good price, which is clearly not the case.

So as a (potential) customer I'm taking note that this company is using deceptive tactics, claiming one thing and structuring their system to do something else. Yes they do it openly, so it's up to everyone to not buy from them and to remember not to buy from this company and the people behind it ever again.

Re: Profitable Until Deemed Illegal

#88

Post by [deleted] »

asdflkj wrote: post #86
mattmaroon wrote: post #63

Earlier quoted context omitted.

There's nothing random involved in this, whereas there is with slot machines. Legally that makes a world of difference.

Someone who can see the slot machine's internals and understands how it works will be able to predict the outcome, so in that sense it's not "truly" random. The reason it's still legally random is that it's as good as random from the point of view of the player. Same applies here. No?

[deleted]

Re: Profitable Until Deemed Illegal

#89

Post by froo »

Just did some napkin math for this site (please bare with me, there are a few assumptions based off the figures I could actually find)

They say they have 50k users, and in 2008 their revenue was $28.3 million USD (from wikipedia).

Theres also a comment on a related Crunchgear article from the "CEO of the company" (linked at the end), which states he is shipping about $1.5 million (presumably) USD in value of goods each month which totals $18 mil for the year.

So thats around $10.3 mil a year profit (roughly) making around $26 per user.

Although, I'm wondering how many of their users are actual active users.

so they're making about $26 per user (roughly)

http://www.crunchgear.com/2008/09/24/swoopo-entertainment-sh...

EDIT - actually on quick reflection, I wonder if the value the CEO stated was retail or wholesale value of the goods (I expect retail) and if the value listed on Wikipedia is correct (which it might not be) then that number may be higher.

These also don't take into account their advertising budget, but I wouldn't think they'd spend close to $10 mil a year in advertising.

These guys are definitely making a tidy profit thats for sure.

Re: Profitable Until Deemed Illegal

#90

Post by stcredzero »

steveplace wrote: post #57
run4yourlives wrote: post #35

Earlier quoted context omitted.

Actually, good businesses only do the former. Great/exceptional businesses do both.

Sorry for my improper adjective use, apparently.

I think it's more that you two have different opinions on percentages.
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