Profitable Until Deemed Illegal

Isn't that what most businesses do?

There are tons of sites with this concept, or at least the variant of "least unique bid wins". The most evil part is how they manage to get so much media attention, now even our beloved Coding Horror has been reeled in.

Very evil, but I'd love to see the data that comes out of it.

What they're doing is most probably not illegal. What they are doing is leveraging a lot of little things to make themselves good cash.

Let's be very clear - they use auctions. This is not a lottery. At the end of the day, the high bidder "wins" and pays the amount of the high bid to win the auction. Then Swoopo adds the (.75 * number of bids placed) to that figure. It's not inconceivable that that sum is less than MSRP.

At the end of the day, you can ensure that you win by placing the last (and highest) bid. Because there's certainty of winning - it's not random - it's not a lottery, and as such, doesn't need to be state-sponsored (as is the case with lotteries in most jurisdictions).

What's fascinating about that is that very few retailers use auctions to sell goods that they own/control/are obligated to ship. Auctions historically have only really been done by venues - eBay doesn't sell their own goods on the site; neither does eBid; and neither did Yahoo Auctions or Amazon Auctions (remember those?).

So Swoopo reinforces online marketplace psychology and eBay-style dynamics by having auctions. This is even though Swoopo is the retailer and has to ship the good (whether Swoopo's dropshipping or not is irrelevant; they still make sure the high bidder gets the item or its nearest equivalent).

On Dawdle, we initially launched with a structure that eliminates the "sniping" problem that you have with eBay. We had a structure where you could name your own price and any seller that had what you wanted could sell to you. However, your offer was blind to the seller and the seller's minimum price was blind to the buyer. It was very similar to the Priceline model, except that on Dawdle, the selling price was limited to the amount of the next highest offer + a bid increment. So when the listing ended, the price that the item sold for was the 2nd highest amount + bid increment. (On Priceline, whatever the offer is is the selling price; we wanted to give the impression to the buyer that they were getting a deal as they were paying less than what they had offered.)

I bring this up only to show the difference between having a different kind of auction structure (like Dawdle did, and we retain in a limited fashion with our StandingOffer technology) and what Swoopo is doing. All Swoopo is doing is charging people to bid, setting the bid increment, and being a retailer disgused as a venue.

The question is, can this last? Given the limited amount of differences between Swoopo and eBay, my guess is probably. They'll have a branding issue if people keep attacking them, but at the end of the day, it's transparent.