Tag Archives | Auctions

The site that put the concept of pay-per-bid auctions on the map is now apparently in financial trouble, Technologizer has learned. Although the company’s front page claims “technical issues,” documents from a Munich, Germany bankruptcy court indicate its parent company — Shopping Entertainment AG — filed for bankruptcy protection on Wednesday.

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.

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As you saw in Harry’s earlier post, our Swoopo coverage still tops the charts as some of Technologizer’s most frequented articles. This has obviously put us on the radar of the folks at the auction site, so they have been keeping us informed of the goings on with the company. This latest round of changes aren’t all that surprising: many of them we already new about from our interview with US business chief Chris Bauman in October.

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.

When we began researching more into Swoopo following our initial post on the unusual auction site, we also looked into whether the business model could possibly be challenged under EU laws, where the company has its primary base of operations.

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.

Our original post on Swoopo generated a lot of interest, and a good deal of it was negative. In the interest of fairness, we invited Swoopo to give its side of the story on our pages, as well as explain parts of its business that may have caused some initial criticism.

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.”

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Technologizer’s seen quite a bit of traffic over the past few weeks regarding our initial take on Swoopo, the newest auction site here in the US. A lot of this probably has to do with our search engine position — we are the #2 result when searching for “swoopo” — which no doubt probably isn’t sitting too well with the folks at the auction site considering we were not all that complementary.

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.

[UPDATE: We’re about to talk to Swoopo. Have a question for them? Tell us here.]

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.