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Brilliantly Evil Business Model

Discussion in 'Making Money' started by tacopalypse, Dec 4, 2009.

  1. tacopalypse

    tacopalypse Executive VIP Jr. VIP Premium Member

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    Just came across this article:
    Source:
    Code:
    http://www.codinghorror.com/blog/archives/001196.html
    ________________________________________________

    I was fascinated to discover the auction hybrid site swoopo.com (previously known as telebid.com). It's a strange combination of eBay, woot, and slot machine. Here's how it works:

    You purchase bids in pre-packaged blocks of at least 30. Each bid costs you 75 cents, with no volume discount.
    Each bid raises the purchase price by 15 cents and increases the auction time by 15 seconds.
    Once the auction ends, you pay the final price.

    I just watched an 8GB Apple iPod Touch sell on swoopo for $187.65. The final price means a total of 1,251 bids were placed for this item, costing bidders a grand total of $938.25.

    So that $229 item ultimately sold for $1,125.90.

    But that one final bidder got a great deal, right? Maybe. Even when you win, you can lose. Remember that each bid costs you 75 cents, while only increasing the price of the item 15 cents. If you bid too many times on an item -- or if you use the site's "helpful" automated BidButler service, which bids on your behalf -- you'll end up paying the purchase price in bids alone. For this item, if you bid more than 305 times, you've paid the purchase price -- and only raised the cost of the item by $45.75 total.

    OK, so bidding a lot is a bad idea, so maybe we only bid one time, or a few times, and near the end of the auction? Great plan, except the auction is extended 15 seconds each and every time someone bids in those final seconds. There are absolute end dates for the auctions, but they're usually so far in the future that the auction will end through attrition long before they reach their end date. I've often wondered if eBay would implement this feature, as it would effectively end last second sniping, a huge problem for auction sites. Well, beyond the obvious problem with auctions, which is that the most optimistic person sets the price for everyone else.

    There's something else at work here, though, and it's almost an exploit of human nature itself. Once you've bid on something a few times, you now have a vested financial interest in that product, a product someone else could end up winning, rendering your investment moot. This often leads to irrational decisionmaking -- something called the endowment effect, which has even been observed in chimpanzees. So instead of doing the rational thing and walking away from a bad investment, you pour more money in, sending good money after bad.

    It's pretty clear to me that swoopo isn't an auction site. It bills itself as "entertainment shopping". I think it is in fact a lottery; the only way to win here is sheer dumb luck.

    Or, of course, by not playing at all.



    But wait -- it gets worse! Swoopo also offers

    Penny auctions, where each bid only increases the price of the final item by 1 cent, while still costing you 75 cents.
    FreeBids auctions, where the item up for grabs is Swoopo bids. Near as I can tell, this is swoopo printing their own money.
    100% off auctions, where the "winner" (and I use this term loosely) pays nothing for the final item, regardless of what the final price is bid up to. Imagine the bidding frenzy on this one at 75 cents a pop.
    Cash auctions, where you win actual real money at the end. It's like they're not even trying to pretend they don't run a gambling site with these.

    It's not clear that Swoopo even has the items they auction; they appear to sell first, then use the money they gain from the completed auction to buy and ship the item. Furthermore, they have a clause in their Help under Delivery and Shipping that lets them ship "equivalent" items:

    On rare occasions we are no longer able to source the specific item detailed in the auction. When this happens, we will contact you and offer to send you an equivalent item of at least equal value. Many of the products we sell are high-technology items that have a short life-cycle, so often this will mean an upgrade to the newer version of the item.

    There are also rumblings that swoopo silently pits users from the different territory websites against each other in individual auctions, such that UK users are unwittingly bidding against US users. This is done to ensure that there is around the clock bidding to extend auction end dates as long as possible.

    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.

    My admiration stops short of sites that prey on the weak and the uneducated -- and of business plans that are almost certainly illegal, at least here in the US.

    As always, caveat emptor.
     
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  2. ebostrom

    ebostrom Registered Member

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    So I guess the question is how to start something like this.
     
  3. Lawlerskates

    Lawlerskates Junior Member

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    Reminds me of when a group of four channers got together and attempted to bit on items and then immediately DDOS the site.
     
  4. Mangamarie

    Mangamarie Registered Member

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    DDOS the site? What does that mean?
     
  5. Lawlerskates

    Lawlerskates Junior Member

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    It means distributed denial of service.

    "One common method of attack involves saturating the target (victim) machine with external communications requests, such that it cannot respond to legitimate traffic, or responds so slowly as to be rendered effectively unavailable. In general terms, DoS attacks are implemented by either forcing the targeted computer(s) to reset, or consuming its resources so that it can no longer provide its intended service or obstructing the communication media between the intended users and the victim so that they can no longer communicate adequately."

    Pretty much a bunch of people get together, spam the website with requests, so it slows to a stop. The plan was to mass-bid on all the items on the site, then DDOS it so that nobody else can bid.

     
  6. Mangamarie

    Mangamarie Registered Member

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    Some people really don't have anything better to do. I heard ********** did some other stuff like this.

    I just wonder who coordinates this stuff and actually gets people to do it?
     
  7. Lawlerskates

    Lawlerskates Junior Member

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    I don't know but it's flat out stupid. As if they're going to ship you items after you just DDOS'd their site. :rolleyes:

    Anyways, swoopo is genius for the people who created it. It must only lure idiots, unless anyone here can provide a success story.
     
  8. blackhat37

    blackhat37 Junior Member

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    I was actually thinking the same about bidrodeo in the past. Remember that each penny is $1.

    Code:
    http://www.bidrodeo.com/auction/list/past/
    They made over $1000 on an ipod touch.
     
  9. Randy569

    Randy569 Junior Member

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    This is a black hatter's wet dream. They get paid upfront, they exploit human nature, and are making an absolute killing.

    I gotta figure out how to start one of these.....:p
     
  10. blackhat37

    blackhat37 Junior Member

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    I was thinking the same. The site made $3600 off a ps3 slim... that's pretty crazy.
     
  11. blackhat37

    blackhat37 Junior Member

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    If anyone wants to null the script... it can be bought here.

    Code:
    http://www.pennyauctionscript.com/Order.php
     
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  12. badassmamma

    badassmamma Regular Member

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    This is not evil at all. People that complain about are dumb. ITS BASICALLY A LOTTERY i read about a page full of peeps complaining about swoopo and how its a scam. Its a little deceptive because its seems like an ebay but its all by chance that you can win. The people that are complaining simply got sucked in by their greed and that's the beauty of it.
     
  13. breakfree

    breakfree Registered Member

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    I wouldn't think it's a long lasting model, but apparently it si, at least until new idiots discover it.

    I think that even idiots, after a while, realize that they can't win, unless they get sick, like gamblers.

    Anyway, how would it be illegal in the US? I mean, I wouldn't be surprised, just wondering what laws it would violate, if you know exactly. Thanks!
     
  14. Randy569

    Randy569 Junior Member

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    I'm not completely sure that it would be illegal, as long as you made it very plain that people are buying the opportunity to bid. After all, that is all the bid packs are. There is really no lottery to it. People are simply paying to participate in an auction. No different than paying for a bid number at an auction house.
     
    Last edited: Dec 6, 2009
  15. Saberu

    Saberu Registered Member

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    Wow, I vote this as one of the BEST posts on BHW just for telling me this idea. This is so fantastically awesome I can't even describe.

    It's like taking something like poker/casino/gambling which is very addictive then throw in shopping which is also very addictive then throw in BIDDING which is so addictive to many people just think how many people live their lives for bidding on Ebay.. it's a lot.

    A lot of people end up enjoying bidding for things and still come back to buy more EVEN IF they end up paying more than they otherwise would have elsewhere.

    I am TOTALLY going to do a site exactly like Swoopo. I love you OP :)

    In fact I had already planned to do a site similar to Ebay but this just takes the biscuit.
     
    Last edited: Dec 6, 2009
  16. redtide1969

    redtide1969 BANNED BANNED Jr. VIP Premium Member

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    That's the way I see it, it's deceptive to those who are being led by their own greed. Ethics aside, the business model itself is brilliant.
     
  17. tacopalypse

    tacopalypse Executive VIP Jr. VIP Premium Member

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    if you guys liked that you'll also like this,

    it's basically the evil core of the entire method:

    Code:
    http://en.wikipedia.org/wiki/Dollar_auction
    what's particularly fascinating to me is that it's actually possible for a sequence of rational choices to ultimately lead to an irrational result.

    because pretty much everyone intuitively believes that "if i just make sure every individual decision i make is a good one, everything will turn out fine in the end". this is not true. and it can be used to lead people very effectively.

    the best part is that it's not blackhat.

    the people know all of the rules and are not being lied to, yet they're still compelled to make the wrong decision.

    as they say, The road to hell is paved with good intentions. :rolleyes:
     
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    Last edited: Dec 6, 2009
  18. dizz

    dizz Elite Member

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    This... AND MORE!! :D
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    there is a way to work this and be legal in the us. Its simple take more of the gambling out. Make a large total of the profits go to charities.

    From our research, to be considered a charitable organization, you have to only keep about 33.3% or less of the profits, and donate to a particular charitable reason (as stated in the IRS codes).

    It means a lot of paperwork, but it is possible. And it would just fire off on a rocket ship on its own launch, since most of the profits are for charity. So, there is plenty of money to be made by pulling this scheme in the name of charity.

    Oh and you have to have a board of directors that meets once a year. Its Mandatory. And the board of directors are paid as part of that 33.3% that you keep for expenses. And the traveling expenses to the meeting would also be tax exempt... LMAO...

    Oh and left out one other matter, everything that you auction off is considered tax exempt for you, so when you buy it, you just pay the wholesale cost, without any tax. So technically, you pay less for more.
     
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    Last edited: Dec 6, 2009
  19. WoosterOh

    WoosterOh Junior Member

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  20. LaveymorT

    LaveymorT Registered Member

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    Nice idea :)
    Even more nice to see that I have such a site, not yet online though.
     
    Last edited: Dec 6, 2009