Is Pricey New Micropayment Site Worth the Shopping Entertainment?

A new kind of micropayment is apparently getting traction, through the site Swoopo, where users pay $0.75 each time they bid for an auction item. That’s right; you pay $0.75 for the entertainment pleasure of bidding, regardless if you win. VentureBeat reminded me of Swoopo in their recent article.

The basic idea is both brilliant and evil at the same time. On Swoopo the microbid price  increases in increments of $0.15 meaning an item can be bid up from $1 to $1.15 to $1.30 to $1.45, etc; each bid increase incurs a micropayment of $0.75. When an item is bid up the minimum microbid amount, for each $1 in bids the company running the auction has made over six times $0.75, or more than $4.50. If an item increases $10 in price this way the company makes $50. So if that Nintendo DS you want increases in price from $1 to $31 in increments of $0.15, the company has taken in $150.

Think about that for a second. It would hurt to have bid 10 times in that auction, pay the $7.50 in bidding fees, and still lose.

Think about that again – would you stop bidding and lose your investment, or would you keep bidding to try to win that one item? Pretty evil.

That’s also where the brilliance is. As soon as someone bids they’ve lost money unless they win the auction. And by win, I mean they’ve probably paid another $15 to $30 to win the right to buy the item for the final price. Since there’s only one winner, it could easily feed into spending more in another attempt to win an auction. To make it more attractive, think about how it looks to drive by visitors – Wiis won for $50, DS won for $30, PS3s won for $100. There’s potential for huge profit margin on bigger ticket items. Almost sounds like printing money.

Is this a smart way to spend your money bargain hunting? Is it really entertainment, as the spokespeople claim in the Venturebeat article? I’ll avoid Swoopo, but I’m compelled to watch how they are able to tap into the basic human need to win, not lose money, and get a good bargain.

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