In short, swoopo is about as close to pure, distilled evil in a business plan as I’ve ever seen. They get paid for everything up front, and as they drop ship everything there’s no inventory or overhead to worry about. It is almost brilliantly evil, in a sort of evil genius way. You can’t stop people from endowment effect fueled bidding when they have the individual chance, however small it may be, to win a $2,000 television for $80 — while collectively sending the house $10,000 or more.
Read the whole post to get the details of what Swoopo does. I have to say that I don’t understand what this guy is getting on his high horse for. Does he call casinos evil and get all outrage by them?
I would not call these people honorable businessman out to provide a needed service. But there are a lot of companies out there there who rip people off in worse ways. At least these people are up front about how everything works.
Still, I share his sneaking admiration for their brazen upfront manipulation of human psychology for their own profit. But I don’t think they will make money for long. If they don’t get shut down under some obscure hypocritical law (How can any state that has a lottery prosecute these guys with a straight face?) they are going to face a whole bunch of competition from other people looking to do the same thing. That will drive down profit margins in a big way. Why pay 75 cents for a bid when some other site will let you do it for a nickel or less?
I also think that greed got the better of them when they started offering cash auctions. That is just asking to be shut down. They would have been better off sticking solely with auctions that gave you an actual product. At least then they would a have a little bit of a fig leaf to hide behind when they got accused of being a gambling site by some regulator.