I bumped in to a site called Swoopo a while ago, and, after lengthy conversations with a friend of mine decided it was not just a complete scam, but one that could not be cheated. I do not entirely believe this, but recently I’ve seen adverts on the London Underground for Swoopo and I’ve really been curious as to how it’s managed to stay up so long.
The basic idea is that you buy the ability to bid on items and each bid, instead of being of an amount you choose, is an increase of 10p or 1p, depending on the type of auction. You pay 50p per bid and then, when you win an item, you pay the winning price. Say for example I’ve bought a load of chances to bid and I’ve been bidding on an iPod, which I win for £20, maybe I’ve used up 200 bids if each one increases the value by 1p. That beans I’ve spent 200 * £0.5 + £20 = £120. Depending on the iPod that could be what you think is a bargain, but then if you think about all the other auctions I may have bid on and lost, say I bid on a tv with 50 bids and didn’t get it, and a car with 200 more bids but didn’t get that either. That’s adding up pretty fast, I’ve now spent a total of £245 and I’ve got an iPod.
So it’s easy to see that it’s a con, you’re going to be throwing your money away like nobodies business. Lets now look at how much these guys must make, and I’m being conservative here. My iPod sold to me for £20, lets say it started at £5 (It is more likely to start at 0). Each bid increase the price by £0.01 and I won it for the £20, so that’s £15 worth of bids each at £0.50. 15/0.01 = 1500 * 0.5 = 750. So on that auction alone they made £750 + £20 (£20 that I won the item for). If that’s not a great way to make money I don’t know what is.
However, Swoopo is in a grey area of law whereby it can be considered gambling, you are buying the right to gamble on the ending price of the item. At which point you are given the opportunity to buy it at that price. If you check the Wikipedia page for Swoopo then you can see the controversy that they are under and the call to have them under the Gambling law in the UK due to it being a Bidding fee scheme.