The company is asking for protections from its debtors, and it has named a liquidator to start divesting its assets.

I’ve done  a little bit of research across the Web and it seems as if some Swoopo users have been waiting for their items for quite a while, and the site has been down for about a week now. But at least we’re finding out why: Swoopo’s run out of gas — not at all surprising since its business model is built on the willingness of bidders to lose money on lost auctions. If you don’t win, you still paid for every bid you made.

Swoopo caused quite a stir when it first burst onto the scene in 2008 with its promise of being able to get items on the cheap through its penny auction format. I first took a look at the company back in September of that year, asking whether the auction site was nothing more than a well-designed gimmick.

Although I just saw it your average story, that blog post has now become one of Technologizer’s most highly trafficked and commented posts ever. They would later return in October to attempt to explain their side of things. The European Commission said that the company’s business plan  was following laws governing online auctions.

I guess it may be time for us to add Swoopo to the deadpool of failed technology companies. I do have to say though, I’m really not all that sad to see this one go.

Over the past twelve years, I’ve sold thousands of dollars worth of stuff on eBay, and bought even more. And if I were to make a list of my biggest eBay annoyances, packaging would be high on the list. When items have arrived damaged, it’s usually been because the carton and/or the padding have been flimsy. And when I sell anything, I generally have to scout around for a decent box.

So I love the idea of an official, high-quality eBay box–which is what eBay is experimenting with right now. (I learned about them at an eBay press day which I’m attending today.)

The company has had a hundred thousand boxes manufactured and just began shipping them to selected eBay sellers this week. They’re made of recycled materials, come in three sizes, and are designed to be sturdy enough to survive at least five trips from seller to buyer. And to encourage recipients to reuse them, eBay has created a system that lets folks register the boxes online and follow their travels from eBay member to eBay member; if they register the box, they’ll get one dollar in eBay Bucks as a reward. (There’s also space on the inside for notes to accumulate as the boxes go from destination to destination.)

By eBay standards, distributing a hundred thousand boxes is a tiny experiment, one that’s part of the company’s Green Team sustainability program. It’s going to see how the program goes and whether it might make sense to deploy it more widely to eBay merchants.

So the classic eBay list of items is gone–you find stuff to buy or bid on via a gallery of images in which each picture is quite large, and you use your fingertip to scroll through a never-ending procesion of products–they’re not broken into multiple pages. When you find items you like, you can view pictures that fill the iPad screen.

Sounds like a logical approach to take–and I’m curious whether the iPad’s already-legendary zippiness makes trolling through eBay even more addictive. After the jump, a few screen shots of the app (in the form of a mini-slideshow–I’m experimenting with a new WordPress feature).

Beginner auctions are now live on the site, which Bauman claims will help first-time and new users learn the ropes of what is obviously a new method of online auctions. It will also prevent experienced users from taking advantage of the inexperienced ones as they are barred from bidding.

Many across our pages have also complained about the bidding fee of Swoopo’s auctions, which cost $1 per bid placed. Swoopo has lowered the this to 75 cents, which it claims has increased bidding on items.

While for many, the per-bid charge is a turnoff, at least they look to be realizing that a $1 per bid is a little steep. I’m not sure how much this will do since you’re still paying for those bids even when you lose — my biggest problem with the site — but I guess this is a step in the right direction.

Technologizer got in contact with the European Commission, the regulatory body of the EU. The EC then took a closer look at Swoopo apparently, and has gotten back to us saying the site appears to be following all laws.

Even though complains in Europe have already appeared online, the EC itself has as of yet not received any complaints from residents. Moreover, the site appears to be following the rules governing online auctions. Spokesperson Carol Franklin had this to say:

“The Unfair Commercial Practices Directive (2005/29/EC) applies to commercial practices of this kind. Under this Directive, the consumer must receive the material information he needs in order to decide whether to purchase an item or place a bid on an auction site. Complete information about the price and the costs involved must be provided. In the case of auction sites, consumers must therefore be clearly informed whether they will be charged for bids that will not lead to an eventual purchase. Omitting to provide such information would constitute a misleading practice which is banned under the Directive.”

Franklin added that if users did indeed have a problem with Swoopo, they would need to contact their local consumer authority who would then decide if the site is acting against the directive, which is incorporated into local law.

So all that grumbling out there seems to be a whole lotta nothing, or at least nobody’s gotten upset enough over losing an auction to get the authorities involved just yet.

Chris Bauman is the company’s business development manager here in the US, whose job seems now to include educating the public on the company’s auction practices. He argues that our view of online auctions has been shaped by the rise of eBay.

“It’s the biggest problem we have found,” he told Technologizer. “In a real auction, the auctioneer calls out the price, not the bidder automatically bidding the maximum amount he or she wants to pay.”

The timer for auctions works in a similar way. When somebody makes a bid, no matter how close it is to the end of the auction, the time goes up, usually by fifteen seconds. This is similar to giving people a last chance to rebid as is done by auctioneers.

Bauman said that these and other misconceptions about how Swoopo works has led the company to develop a new section of the site which would offer a “beginners auction.” Participants would be able to use this area to learn what is obviously a drastically different online auction format.

“Believe it or not, we really want more people to win,” he added, saying the company was hiring to help support more auctions over the coming months. “My job is to get people to understand it better.”

I did notice that a lot of our commenters in the original post did bring up the issue of the pay-to-bid model that Swoopo uses, and in some cases allows it to make quite a bit of money. I made sure to ask Mr. Bauman about this.

He did acknowledge that the auctions we all pointed out were correct, and that the company does make a healthy profit on some of them. But overall, Swoopo claims it is currently losing money on about 70 percent of auctions.

Bauman says the most common items it can’t cover usually are items such as DVDs, watches, and flat screen televisions. However, other items through the pay-to-bid system allow it to profit, and thus stay afloat.

Appropriately using a baseball analogy (it is the playoffs), he said “Some look like a home run, but those cover when we strike out.”

On the company’s performance in the US market, Bauman could not give specific user numbers, although said that the site went from practically nothing at launch about three weeks ago to 20,000 site visits per day, about half of them coming from returning users.

That’s not too bad, although we must also consider that Swoopo has siginficantly ramped up its advertising efforts: in fact, the company’s ads have even begun to appear more frequently here on Technologizer.

(I wonder if that may be a direct effort by Swoopo to combat what it may have seen as negative coverage, but i do digress.)

Before we parted, Mr. Bauman was sure to point out that the site is for real. “It’s not a scam,” he said in response to Swoopo’s critics. “We are incredibly legit. You control your outcome.”

In the interest of fairness, we got in contact late last week with Swoopo to give them the opportunity to tell their side of the story and to answer what seems to be from commenters some concerns over its business practices. So, we’re opening the floor. Is there a question you would like to ask the company? Let us know in the comments. We will try to ask as many of them as possible.

The floor is yours.

I first ran across Swoopo in one of my Google searches earlier this week. What caught my eye was the claim in its ad that it had just sold an iPod Touch for $28.05. My journalistic curiosity got the best of me, so just for the heck of it I clicked the link to investigate.

Indeed Swoopo was legit: the company was selling not only iPods, but computers, televisions, and other products at prices that seemed just too good to be true. So where did this company come from? Apparently its not new at all (at least in Europe). Founded in Germany in 2005 as Telebid, it expanded to the UK last year, and launched in Spain this Spring.

The concept goes something like this: items are put up for bid, and each time a user bids, the price is increased by 15 cents. At the same time the amount of time added to the auction also increases up to 20 seconds with each bid. If no new bids are received before time runs out, the last bidder wins the item.

Swoopo claims that this allows users to purchase items at about 35 percent of the retail price. A check of recently ended auctions seemed to indicate that was generally accurate, although most seemed to either be at substantial savings or not much of a deal at all.

It is fairing rather well financially for a start-up. In 2007, the company recorded about 11 million Euros ($15.5 million USD) in sales, with 20 million euros ($28.3 million USD) in revenues expected this fiscal year. It expects to attract 50,000 customers in the US during the rest of 2008, increasing to 800,000 by next year.

These deals sound too good to be true to you? In a way they are. Users cannot just simply register and bid. Instead once registered a user must fill his or her account with prepaid bids. Yes, that’s right, you pay to bid. Each bid costs the user $1, and can be purchased in packs of 20, 50, 100, 200, and 500. There is no discount for buying larger packs.

Here’s where it begins to get gimmicky, and Swoopo begins to lose me. Before the first bid, you’re already financially into the whole thing for as much as $500. What’s worse is that if you lose an auction, you also lose all the bids you placed, and thus have essentially given the site free money for just giving you the privilege to bid on the item.

Thus once you start bidding, you have a vested financial interest in winning that item. While the winner is likely to get a very good deal, especially on bigger items where the final price is hundreds below retail (even when you add the cost of bidding), those who lost could have spent quite a bit just to bid, and are likely doing so because of the money they need to spend to win.

Suddenly it does not look like Swoopo is really that crazy: in some cases, they could be making quite the profit through this system. Take this auction for example: this guy paid $423.55 altogether for an 80GB PS3 worth $399.99. I’m sure there are other examples, or auctions where the total number of bids from all bidders when added to the final selling price mean a sizable profit for the site.

Don’t get me wrong, I understand these sites need to make a profit. However, the way this is done just doesn’t seem right. Shouldn’t those who lose get their bids back, even at least partially? I think that is much more fair, and would make using the site more attractive to many.