Limbo is a San Mateo, California startup with funding from Draper Fisher Jurvetson and Azure Capital. The purpose of the service is to auction off things like plasma TVs, iPods, cars and event tickets, with bids being placed via text messages. The hook is that the winner of the item isn’t the highest bidder. The winner of each auction is the person with the lowest unique bid for that auctioin, meaning no other person bid that exact amount. If lots of people bid $0.01 and you are the only person bidding $0.02, you win.
The company is quick to issue press releases around the incredible deals that winner’s managed to get. This press release, for example, talks about a Salt Lake City woman named Sondra Peterson who won a $35,000 Hummer on a bid of $36.65.
It’s not quite that simple, of course, or Limbo wouldn’t have much of a business model. Bids must be placed via text message or via regular phone. I placed a bid on the 42 inch plasma TV and it required a total of four messages - two sent and two received, to finalize it. Based on my pricing plan, that’s $0.22 on my cell phone bill, some of which Limbo will receive in revenue share. Also, the TV is a Limbo premium auction, which means I was charged an additional $0.99 for my bid. That’s a total cost to me of $1.21, and Limbo is going for more: my last text message said
“Too High! Your bid of 1938c is unique, but there are 265 lower unique bids. Bid again? Rply “HDTB XX” where XX is yr bid in cents. *Bid award: 10 Loot”
If I place another bid, another round of text messages will be billed to my phone along with another $0.99 bid charge. With all of these charges it isn’t hard to see how Limbo can become profitable on a per auction basis. All of these “loot” points are designed to get me to bid often as well. You get these each time you bid, and they can be traded in for tshirts and other items once you’ve accumulated enough of them.
If you aren’t skeptical enough after understanding the basics, the fine print may be enough to keep you away.
Auctions run for a very long time (the TV auction runs from May 15 to June 5. Such a long auction period means there will be a lot of bids, and the chances of winning go down dramatically. Once you place a bid you are automatically going to receive a text message every time a new auction occurs, which you can opt out of only by sending another text message. If you use your home phone, things may be even worse. Limbo explicitly states that they will use your information for marketing purposes. Expect tele-sales calls.
And if you win, shipping isn’t free. You will be charged normal UPS rates on the item (or alternatively you can give them rights you use your picture for promotional purposes). And finally, you will be taxed on the difference between the value of the item and what you actually paid as normal income. So that Hummer that Sondra Peterson won cost her a lot more than $36.65. Not only was she taxed on $35,000 in income, but I can’t imagine what the UPS shipping charges on a Hummer might be. 
So all in all, the vast majority of bidders will be paying Limbo without any meaningful chance of winning, they will be subjecting themselves to numerous SMS and other fees, they will be giving explicit consent to use their phone numbers for marketing purposes, and the winners are forced to pay out of pocket fees for taxes and shipping of the item. So, after trying out the service and reading the detailed rules, Limbo seems like more of a gimmick to me (and a costly one) than a chance to get cool stuff for nearly free.
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I really hope this idea doesn’t take off.
I think you’re missing a few points Michael, first, she won the the Hummer in the companies hometown, so it wasn’t shipped to her (I know it was a joke, just covering all my bases.) Secondly, that press release says you can bid by toll free phone as well. So therein eliminating the text messages fees altogether and sort of making it like an eBay/Radio Auction ripoff. Feel free to correct me if that phone number is something else
Scott, will you send me a pointer to the toll free number?
To be honest this idea has been around for a while. Here in the UK ( not sure about other nations ) this idea has been used by radio shows, tv channels , internet gaming sites etc to do such a thing ( ie lowest unique bid wins ) as with the above idea users text in their bid .
So this idea is neither unique , new and honestly don’t know why it has been covered . This blog is going down hill.
Michael - its a new and funded startup in silicon valley and I’ve covered things like this since I started this blog. Don’t be a troll.
#4 - if this blog is going downhill it’s becasue jerkoffs like you leave stupid comments. why don’t you go beat your wife or whatever it is that people like you do for fun.
Complete (almost) copy of Bidmax in the UK which has been up for quite some time.
caw - you’re right, its very similar - http://www.bid-max.com/us/
thanks for pointing it out.
hmmm i too am from the UK and i soon as i saw this it reminded me of all those horrific Jamster-eque adverts that are apparantly the lifeblood music TV channels over here. For example, i just saw one today where you have to ‘guess’ whether a picture of screw was in fact of a screw or of a bottle and then text in your answer, only to be charge 50p for the privilage. the woman kept saying ‘text now’ about 50 million times, as though if she kept saying it you might actually do it, whilst the text at the bottom of the screen, though high (presumably to meet regulations), was really narrow to make it hard to read the costs. maybe 6 months later you’ll got those in the US?
i don’t think the site is “going down hill”, but i’m not exactly sure what this has to do with web 2.0, other than it is a startup in silicon valley, which means it is near to web 2.0 start ups geographically. at least, i suppose, it means we can compare where the US is in terms of SMS funded services vs. the UK.
I love comments.
After reading all of the fine print on the HDTV auction it doesn’t look to me like they are trying to make all their money off from SMS. “Submit a Phone Entry for free by calling 1-877-771-9257 and entering the numeric value of your Bid. ”
Time period is clearly stated: “Beginning on May 15th, 2006 at 12:00 PM PT and ending on June 6th, 2006 at 12:00 P.M. PT”
This part is more of a problem. “If you submitted a Phone Entry, your home phone will be called with the notification. During the Eligibility Period, Sponsor, at its discretion, may send entrants unlimited additional notifications. There is no limit as to the number of notifications Sponsor may send during the Eligibility Period nor restriction on when notifications may be sent.”
Have you just signed up for telemarketing hell?
Nothing but a lottery with a trivial twist. Each of 100K people makes a small payment of $1 (buy a ticket or 10 text messages, whatever), and one of them (the right number, lowest unique number, whatever) wins a $35K prize. As long as enough morons play, the profit is guaranteed.
Here is the VC pitch: Assuming 1B internet users, 20% market penetration, each users plays 10 times a year and 50% margin, you got a $1B company. Add to that a share on all the ads to be displayed on the 100″ flat panel prize over its 5 years life, and we have the next GoogleFacebookMySpace.
“Nothing but a lottery with a trivial twist.” Lotteries like that are illegal in the US. They have to allow the free entry by telephone as outlined in comment #11.
They are selling advertising impressions when the sponsor annoys you to death with ‘notifications’.
Michael, look in the next to last paragraph on your press release URL.
“With over ten national cell phone carriers participating, mobile users simply visit http://www.41414.com to see current auctions and bid by text messaging ‘FREE’ to 41414; or you can call in from your home phone line on 1 877 771 9257.”
Yep, saw it. Thank you. I made some clarifications to the post.
http://www.41414.com/auction.php?id=1002549
Limbo is supported by:
• The phone networks who share their text messaging revenue with us
• Brands that want to create awareness and increase visibility of their great products
and new releases
==================================
http://www.41414.com/rules.php?id=1002549
If you do not want to receive further notifications, send an SMS message to 41414 with the message “STOP” from the wireless phone where the bid was entered, or call 1-877-771-9257 and select option 9 from the residential home phone number where the bid was entered.
There are many, many sites just like this one that require the bidder to pay said bid amount to actually get their number in. I can’t be bothered to read the whole post to see if that is what’s happening here or not, but if it is, the only thing new is that you have to waste time typing in words through your number pad (worst experience, ever) because who can be bothered with using a computer?
Can’t say I’d find much use for that. Sounds like a business model that’s in trouble early on.
Talk about being “nickled and dimes to death”.
Just by way of TechCrunch explains it I am already feeling dizzy. This startup is waste of money and people’s time and whoever started it should be pulled out and bitten. If a site involves so much explaination and work to get people to use it. It will die soon. The gimmick involved sounds more like a tricky manuever instead of a real, legal, beneficial business model. It’s a joke!
You can digg this story here http://digg.com/links/Limbo,_SMS_Auctions
Geez, what’s with all the “this has been done a million times before…yawn”? Sure, it’s not going to cure cancer but it’s at least a tiny bit interesting.
It may have been done before but I have never seen it on this side of the pond. There are TONS of innovations waiting to be brought over from other countries. Is this is the best the UK has to offer?
The broader point here is the creative use of the cellphone! A vastly under utilized resource.
This particular project is not all that intriguing… but, the space is worth your attention.
Jonas. We’re on it. See http://www.mobilecrunch.com.
Sort of like jigsaw. almost “evil” - or am i wrong?
I think the owners forgot the original meaning of “Limbo.”
Why is it there is a critical point in any community site where a lot of the readers become haters but yet they still read and troll the site?
Michael, 37signals has a troll cap you can annoint people with. I think you should start using it.
http://www.37signals.com/svn/a.....ll_cap.php
web20guy - I don’t think this is evil, yet. If they send an unreasonable number of random text messages or start a telesales blitz, I’ll rethink that. For now, I just think it’s misleading people into paying a buck or two when they have no real chance of winning, and if they do win they get hit with a massive tax bill.
I have been keeping an eye on Limbo since its early existence. I thought DFJ were some smart guys specially Draper himself (which im sure he still is..but but), but the business model around Limbo is not scalable at all. The bidding process through premium sms (over charged sms where Operator keep usually from 19.5-40%, the premium sms access provider take 10-20% and the remaining one is given after VAT etc to Content Provider, which in this case is Limbo).
What I am skeptical of, is the bundling package of using a limbo bidders mobile nr for marketing purposes and the sucbscription which surrounds Limbos business model. We all know very well the “Jamba” case in EU being sued by hundred of people for not clearly stating the terms and conditions when purchasing a content through Jambas subscription packages.
Limbo is lame, TURN the business model around, cut that subscription model, yes I understand you want to earn more money on getting the user bidding more and more. but then let the user invite others to bid too if some thing is “kool”. In this way spread the nr of bidders by inviting more (still through sms-sms) rather making one l6 year old college student spend upto 6$ for a plasma screen ( it does come to a shock later when his phone bill comes and he is NOT coming back to you Limbo).
Ken Rossi - I hadn’t seen that, thanks for linking. I love the idea in general.
why is it called limbo? the shortcode doesn’t even spell that out…
anon - think of the game, limbo.
http://www.pricerightauctions.com/ This site has been doing it for years. I “won” a digital camera from them once. gambling bidding is fun!
DFJ funded this? I thought they had a decent reputation for funding businesses, this is a gimmick.
I don’t know how the average Joe is supposed to feel confident about this. As soon as they “the consumer” see all the charges and complexity of bidding and billing … I think they’ll shy away and not take part.
Hi Michael
This idea was used as a special campaign by http://www.baazee.com (an auction site based in India, now acquired by eBay) a long time ago. I remember placing quite a few bids for cameras and cell-phones, only to be informed that someone esle had placed a lower unique bid (unique was the catchword). Only registered users who had acquired enough points through transactions were eligible. It did appeal to me as a very novel idea, but not one that would last long-term (after all, for how long can you give away goodies at one-hundredth of the retail price). Let’s see how far Limbo’s able to carry this.
I agree with Richard Dean. I’m shocked that DFJ would put any amount of money into this. I thought everyone learned their lesson after the first bubble. Guess not.
There is another site which launched last year called uniqueauction.com, same concept minus the mobile text message thing.
Again you pay per bid, you can see what the current lowest bid is and sabotage it by bidding on the next lowest unique biod and then bidding on the current lowest unique making yours the lowest.
It turns more into a game of trying to position yourself into the winning bid. But for a $50.00 dollar itme you may spend $30.00 bidding and 3.22 to win the item. I’m pretty sure the site is doing well and was self funding by the Rocky Mirza who started Ibetx.com. Ibetx.com was a bettign site based in the UK.
I tried this out a couple months ago - I don’t remember exactly what I was bidding on (I obviously didn’t win)…the kicker was that even after the auction was over they kept sending me text messages. Not a lot, maybe one every 2 or 3 weeks….pretty annoying…I finally replied “remove from list” and got a text message back within minutes letting me know I was successfully removed from their sms list.
Hehe… we did a similar site for one of our clients: http://www.flashbid.com. Although with us, all bidding is done online.
Sounds more like a lottery than an auction.
It’s basically theft, no different than the common nigerian money transfer scams. This sort of nonesense should be illegal.
this canadian website has been around quite a bit but not that many items to make it truly take off yet… they did a sony ps3 console auction last month and that generated some buzz.
http://www.uniqueauction.com
I also think it’s basically a lottery and the investors are taking a big gamble that the company won’t be shut down by regulators. Where’s the transparency - how do we know that the “lowest unique” bid is, in fact, a real bid? With regular bids, the motivation is obvious. Here, the motivation is the exact opposite - they’re highly motivated to not give the prize away and concot another fake prize to keep SMS revenue flowing in.
The only news here is that there’s too much capital floating around the valley again with bad ideas like this getting funded.
this is just a souped up RAFFLE!
Sounds like the bad old Web 1.0 days where any business plan gets funded with any idea. Lets hope this dies.
sounds like this idea is based on hype and promotion. but then again people love watching home shopping on tv so who’s to say it won’t work?
This is no difference than than the one million sweepstakes running online on any given day. Go to any major site - Sony, Tropicana, Toyota - and you will get a chance to win big prizes for free in exchange for your personal information. The ‘new’ angle here is that you ‘pick a number’ in order to get a chance to win. In addition, you can either i) pay to play through your cell phone or ii) give away your phone # to play for free. It’s not my cup of tea, but there are millions of web users who truly enjoy these games. Limbo will find their audience - whether they will find a profitable business model remains to be seen.
Its 100% legal, makes good money, and has a huge imprint rate. Although the average TechCrunch reader thinks that state lotteries are stupid waste of money they still make profits in the BILLIONS each year. Just goes to show that the real money to be made via the internet/mobile is not from the technophiles, but rather from the average Joe Smoe. The buzz around Limbo in the VC community was for a good reason.
wow, this thing sounds pretty complicated.