Swoopo.com: Alternative to Ebay or Evil Scheme?

If you haven't encountered Swoopo yet, it warrants a very cautious look. I just took a quick glance at some of the bargains had on Swoopo this afternoon and a brand new PlayStation 3 went for $75, a Canon Rebel XSi for $5, a 42-inch Sony Bravia HD TV for $12. These are some ridiculous deals. They even "sold" an ounce of gold for just over twenty bucks. It makes you want to get in on the action, no? But realistically, in what economic universe is gold cheaper than coal?

Something doesn't smell right.

Swoopo presents itself as an auction site not unlike eBay. There are however, a couple key differences. Namely, each bid you make on Swoopo costs you .75 cents. Additionally, bidding on an item causes its price to rise marginally (by either a penny or fifteen cents depending on the type of auction). And, importantly, each successful bid adds ten seconds to the remaining time on the auction.

The homepage is decorated with provocative countdown timers offering items at 60%, 70% and even 80% discounts. But after watching the timers replenish themselves as they near zero, it becomes clear that actually winning an auction on Swoopo is much harder than it looks. It becomes increasingly clear too, that Swoopo is running a money printing factory.

Do the math on that PS3 quickly:

Each bid caused the price of the PS3 to rise by $.01 for a total of 7500 bids. Each bid cost a user $.75 for a total of $5625 in bid fees. Factor in the $75.00 final price and Swoopo cleared a whopping $5700 on a $400 PlayStation 3. Sure, a lucky bidder also went home with a PS3 on the cheap. But don't forget the substantial losses on the part of the unsuccessful bidders.

If you, like me, are left scratching your head at the economics of such a transaction, it warrants considering Swoopo with some different terminology. Rather than "auction" site, maybe we should designate Swoopo as a gambling site--a type of QVC-meets-the-internet-age ponzi scheme.

I suppose it was inevitable.

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