We’ve been covering Boston-based Swaptree since mid 2006. The company, which is creating a network of users who swap books, CDs, DVDs and video games, just raised a third round of financing – $3.3 million from Safeguard Scientifics. The total raised over three rounds is now $5.6 million.
To create a trade the company finds up to four users who have and want items that form a match. Then everyone prints out address forms from the site and pays the shipping (usually $2.50) to mail it directly to the next person.
One of the coolest features is the ability to enter a few items that you have that you are willing to trade – show you all of the items that you can receive for your items.
This is a model that was tried and later abandoned by the recently acquired Peerflix. Peerflix was DVD trading only, though, and charged a transaction fee. Swaptree doesn’t charge a transaction fee, and the group-trade approach that covers books, music, movies and games means lots more matches.
The company first launched a little over a year ago, and says more than 100,000 trades have been completed to date.
I’m clearly biased, but am unconvinced by SwapTree — 100,000 trades doesn’t seem like a lot to me. At ReadItSwapIt we’ve completed almost 200,000 trades since 2006, and we’re in the UK only, and only allow books to be traded.
as their network grows, I think there’s a real chance at success. There is a definite WOW factor when you put in your stuff and see what you can get for it. And the company has done this right, not spending very much capital to date.
Michael,
I’m a bit surprised by your positive comments on Swaptree. Both Peerflix and LaLa have recently (last year or so) failed on trading and they were funded more than Swaptree. Yes, Swaptree has a neat mechanism to allow multi-way trades, but its still trades and by its nature inefficient that’s why they invented currency. All VC funded trade sites have failed, because IMO they can’t produce VC returns on this model.
Also 100, 000 trades is not a lot in over a year. Our company provides “Buyback” sites for online sellers/retailers to purchase consumers “no longer wanted” CDs, DVDs and Video Games for cash. Our consumers sell on average about 36 units in a trade and receive $125 per order – which can be used obviously for more media or pay for the ever increasing tank of gas. Our clients collectively have purchased over 250K units in the past year and the number of units being transacted from consumers is increasing 10% per month. There will always be a segment that will want to trade but its not a successfully VC funded model. We believe that consumers are better served by selling in bulk for cash than waiting around to trade a single item, but we are biased in this area.
I agree… I’m not impressed by SwapTree.com. And I don’t believe for a second that they are “not spending much capital”… It seems as though all VC businesses know to do is throw money into Google Adwords. SwapTree has to be spending a ton on Adwords…
It seems as though the businesses w/o VC are forced to figure things out along the way…or vanish. A good example is paperbackswap.com. They just keep sticking around (obviously covering costs somehow), focusing on the customers by adding functionality, and their member base keeps growing and growing. Up to 2.5million books available for swapping as of today. The more books available the more chances of people finding something interested and become interested…
CJ,
You’re correct. I’m not sure but I can’t find where paperbackswap.com has received any meaningful VC funding and as such they can hang around and provide a niche service for those who it appeals to and make a nice business for its founders and significant others. If Peerflix and LaLa are any indication they’ll have ~18 months before they join them.
Note: I just read an article on their third round VC funding raise (http://www.mass...ird-round-.html) and frankly I’m shocked. Yes, our company’s offering can be looked as competitive and thus we have a potential interest in minimizing them as such, but just read the article…
To highlight…
The company was started in June 2004 (not first launched a little over a year ago as reported here – respectfully),
Raised a total of $2.3M by the end of 2006,
Now in 2008 it says (per Techcrunch above) its conducted ~100,000 in little over a year,
Now in 2008 (per the article) it says it gets 1000 new registered users per day and the website claims only ~450 members complete a trades on daily basis. Which means very few people actually conduct trades based on its installed base over the last many years and only 450 members actually conducting trades today. And why if only 450 members are conducting trades daily after 4 years based on Google Adwords and shipping spread margin revenue model of less than $1 per trade does someone (Safeguard Scientifics) pony up $3.6M.
For discussion purposes, let’s just say that ~15,000 (450/day times 30 days) members trade monthly for the last 4 years (which is impossible since there’s been a long slow ramp up to 450 trades/day over the last 4 years) this equates to 640,000 trades since they’ve started and they received $2.3M dollars or essentially the initial investors paid or lost $3-$4 for each trade (where in reality its probably closer to 2 -3 times this amount, based on revenue from Google Adwords and the margin they seem to get on shipping which may be around $1 – when its used).
So in summary, from this slightly biased individual’s perspective, like all significantly funded or VC funded trade sites this doesn’t make any sense. 10K-15K trades per month at maybe a $1/trade is a nice salary for a founder or two, but doesn’t provide anything for VCs after 4 years of operation. And only doing ~15K trades per month after 4 years doesn’t speak at all well for word of month or the ultimate opportunity that this model presents. And like all previous trade sites (especially funded ones) this one is destined to follow the rest.
Lastly, Michael with all of this available information what is your response. You’re obviously a sharp and successful guy, but (respectfully) you may not want to write a review at 3am in the morning
. Again, respectfully.
Steve
Sounds good – but only for US residents…you guys do realize there’s a pretty big world out there? As a European, this service is no good to me.
yeah well you obviously aren’t German, or else you’d already be working on a clone.
http://www.tech...vation-or-more/
A friend is involved in Swapitshop.com (UK) that uses the credits approach, heavily targeting kids. Personally it looks terrible but then I’m in my late 30s and not their target audience! Swapping isn’t the only way to show eBay the door – Raffle.it (UK) is getting there with people creating their own raffles to get more than they would with an auction.
I hate how so many startups can’t even see Canada on a map. Hopefully someone up here will start something that addresses this market. Hopefully Swaptree will have to compete with or acquire them at a massive cost. Hopefully future web 2.0 startups will be told to look to swaptree (or partnerup) as an example of how short sighted geographic restrictions can cost a company millions of dollars.
yeah, someone should copy/paste the whole thing for Europe. If you can cross the language barrier the audience of a combined Europe is about twice as large as the US. Who is up for it?
what are mailing rates around Europe? In other words, what does it cost to send a DVD from say France to Greece or wherever?
hah. the nextweb guys are already calling for a clone. and an iphone app:
http://thenextw...d-and-upgraded/
I agree on the iPhone app – brilliant way to increase usability. On the clone issue, if you are thinking of building one, you should contact swaptree about licensing their algorithm. Putting together all the possible trades among up to four users isn’t totally trivial, and there would be a lot of goodwill from a sanctioned clone.
They’re doing it all wrong.
I thought of this whilst in high school. The issue with using this model is that I can only swap stuff with someone that has something I want. Immediately limiting the potential.
The model I opted for, and subsequently didn’t follow up (duh!) was that you create a virtual currency, i.e. if you have something thats worth £10, its worth 10 credits – this means that I don’t need to find somebody with something I want – I just pass the credits on so they can find somebody with something *they* want.
Anyhows, that be my two penneth.
that’s not how they’re doing it. If I have X and want Y, and someone else has Y and wants A, and yet another person has A and wants X, Swaptree makes the trade happen.
The virtual currency thing is great except how do you price items? That’s exactly what Peerflix tried when it changed models, and it fell apart. You either need trades or you might as well use real currency.
Right now swaptree makes trades involving up to four people. that’s a ton of options. If enough people get into this, it’ll work.
What if I have X and want Y, but Y has a value of X*1.5? And what if A has a value of 10 times X?
Ebay uses something called money, I think that was invented for a reason.
Stu – then you load this so called “money” into your account from a credit/debit – or swap multiple items and save the credits. Its scaleable right out of the box, none of this “if” malarkey.
Mike – what’s the business model here?
They don’t charge for the transactions? Are they selling impressions? Or gathering swap data to sell to retailers? Or what?
It is a great idea. I wonder if their feedback system is as powerful as the one from eBay, as in Swaptree one does not make money. It could be that is the reason that people care less about what feedback they get.
But overall a great idea. I am sure my former colleagues in eBay Netherlands and Marktplaats will like it
)
Egbert
@Boris: If it only were the language barrier, many would volunteer! There are e.g. 24 different models of online consumer rights mandatory. And trading low value items across borders hasn’t proven to be practical – even ebay does acknowledge it.
Sorry (may be) for my stupid question.
It will work also integrate with some german language pages like this on?
http://www.arti...tschaft-128.php
If yes how can i use it.
Sweet. I’m putting this old RV I have up there to see what I can get. Fun. Business model? Unclear…micro-transaction fee?
“Ebay uses something called money, I think that was invented for a reason.”
Love this comment who ever it is!
There have been about 1000 of these swap sites over time. I had one in 2001 called GameXchange. The .com era produced tons of well-financed ones, like Mr. Swap. They are all dead.
Some thrive, though, like the recent PaperBackSwap.com.
I think ultimately they all suffer the “unequal” trade problem that money solves. Even worse, it’s pretty tough to make a business model out of it. Even at 250k trades a year, what will you make, $125k revenue? That’s the tricky part. It’s not so profitable.
A good business, not a great business.
Alan,
Your dead on. Most trade sites have failed and the most recent example is Peerflix. I believe that all tradesites fail if they’re VC funded. It is impossible to produce VC returns for this business model. Trading is ineffecient, thats why currency was invented to faciliate trades of items of unequal value. That’s the reason one sees the increased activity of “buyback” sites which provides consumers a mechanism to sell their no longer wante items for cash immediately and simply, versus the challenges associated with online auctions, marketplaces, classifieds and trade sites.
What’s the business model here? How do they intend to make money on this?
Hi I want to introduce our site with this opportunity.
We launched our barter based swap site http://www.takasmerkezi.com for 2 months ago and announced at Techcrunch & Webrazzi Meetup Turkey at StartupPad. (http://www.webr...da-gerceklesti/)
We are working on two versions (one for USA, one for european market) under whatswap.com adress.
How our system works? Members put goods that they no longer use up for sale on our site by auction or buy it now methods. When they sell they gain virtual money from successful transactions. (for example 20 USD is 20 points 1usd =1 point consersion)
you can watch our “How it works” animation with english subtitles here : http://www.vimeo.com/1787024
Possible business model — sell membership fees that give users free shipping on all items. It’s like a distributed netflix.
why would the unequal trade problem occurr if you only put stuff that you WILLING to trade, knowing that you will get something else in return? i mean, say I want I am Legend DVD, and I am willing to trade my Halo3 game for it, i have already specified on the website that I am willing to give up my Halo3 for the DVD, so if the site notifies me this trade can happen, why wouldnt i go for it?
valuing halo3 at $60 and I am Legend at $20
hmm…
This sounds like it could be interesting. I’ll have to swing over there and check it out. Thanks for the post!
Jake
NoteScribe: Premier Note Taking Software
Based on the fact that Amazon dominates the media category that SwapTree plays in – IF SwapTree builds critical mass – this currently looks more like a challenger to Amazon Marketplaces than eBay.
I mostly swap books, and am not too impressed with swaptree. They need to provide a means of sorting the list of items you can swap for; it’s just a big dump of items.
Bookmooch.com is my book swap site of choice.
Why do they have Canada on their map if they don’t support Canada?
When the financial market collapse, perhaps this kind of system would work. Barter was the first form of trade in the past. People trade cow for corn, corn for hammer, cow for chicken, etc. When carrying these items to trade with each other became too time consuming, people opt to use metal like gold and silver for money, then people advance to use paper money, then people advance to use digital money.
I’m not sure how this fits in but it seems to me this model is very poor to earn money and is fast becoming deadpool
interesting but i trust more in eBay…
One of the coolest features is the ability to enter a few items that you have that you are willing to trade – show you all of the items that you can receive for your items.
Is there a copy editor in the house?
Hi guys,
There is actually already an exchange platform for DVDs, CDs, books and video games in Switzerland, which is quite successful and exists since more than two years ( http://exsila.ch ). Apparently they where doing last January about 1000 exchanges a day (and that for a small country like Switzerland, 7 mio people) with a quite rapid growth (I was unable to get more numbers).
They started their service in Germany a couple of months ago. I think it has a huge potential.
Cheers,
Its interesting to see online exchange models evolve, other than the companies noted above by MA and in the comments … I’ve been also following the evolution of a company out of betterlabs, I believe the company is called iLetyou. It started as a DVD exchange platform and has now evolved into a wedding/event rental platform. I’m looking forward to see how Swaptree shapes up, the model though looks promising.
Hey Mike,
Maybe you should ask SwapTree what they do when a member doesn’t receive the item they were promised to receive??? So they send what they agreed to send but they don’t receive what they should have received for the trade in return.
The answer? Nothing! The person who sent their item as instructed is left with nothing in return and they lose the item they sent off. SwapTree’s only response to a bad trade is better luck next time.
That’s why SwapTrees system of direct trades does not work because sadly their are dishonest people and the honest traders get left with nothing and lose the item they sent when a trade goes bad.
SwapTree has received amazing coverage here at TechCrunch as well as other media coverage that millions of dollars and 3 rounds of funding can help make happen.
But no matter how many users you send there they will not stick once they find out what happens when a trade goes bad and they are told “better luck next time!”
I’ve used Swaptree since the private beta and have gotten a lot of value out of it, mostly because I can get a lot of stuff in exchange for a lot of stuff that I no longer want. And I can keep doing that, into perpetuity.
Chris, your comment misses the plot on several points, mostly because you are trading things you no longer want (otherwise you’d keep them) and the eBay trust model will prohibit bad traders from perpetuating their frauds. At least with Swaptree, you aren’t out any cash (you’ve just given away something you didn’t want). And the bad traders/swappers won’t continue, because I’m fairly sure Swaptree will simply ban their shipping address. And besides, why would a fraudster choose to rip people off for their used CDs or books?
Net-net, I’m a fan, and have done over 100 trades on the site (with no frauds incidentally).
Jay
Ive done over 90 trades on Swaptree (joined probably 6 months ago) and never had a problem. Does it mean the site is perfect, no, but either is Amazon. Ive used services like the one mentioned by Chis above, and their point models are flawed. People kept on saying that they never got my item, when i know i shipped it.
Thing is you only got points when someone said they received your item, and only go points deducted when you indicated you received the item. See the problem?
People are incentivized to lie that they never got it, so they could keep their points, and now the person who truly sent it is not given any points. Worse sometimes the bad traders are given free points (at which point the value of these points is totally undermined, pointless). Like the US lending markets, the whole system screetches to a halt.
Its funny there are even sites now that let you trade your points from one stupid point site, for another.
If i have to deal with points – id rather deal with money.
I was a fantastic member of Peerflix. Sent probably 200 DVDs out. Amassed a lot of peerbux (their points).
All was great. And then they shut down. And i got nothing. Zero. Totally burned. Trading is great but, points stink. Never again.
Beware of any system that says – give us this today and will give you something tomorrow, as someday that tomorrow never comes.
Couldn’t agree more with the last couple of comments.
Why would I send you my stuff to receive fake currency (points or Peerbux)? It’s a flawed model to create liquidity in a marketplace.
At least with Swaptree I can see what I can get in real time and make the decision…it’s mostly a shopping experience… except it’s free.
The other argument is that it’s more efficient then using real currency. If I no longer want a CD (or book or DVD or videogame), yes, I COULD sell them on eBay, but the transaction cost (including my time which I really value) aren’t worth the hassle for just a few dollars. And those few dollars I’d receive in discretionary income I’d probably just turn around and buy more CDs, Books, etc.
But with Swaptree I can trade those items and get other items I want in return, with very little overhead. In other words, the marginal utility of selling my used stuff for cash isn’t that great (I’d rather keep the used stuff than get $3 for them and have to ship them to someone). But exchanging those items for different used items at no cost provides me a lot more utility than the cash I could get for them.
I’d readily trade a used book I’ve read for another used book I haven’t yet read for free (or CD, etc). This creates a high exchange of value for me. But I’m less interested in selling you the used book for $5 because I can’t turn easily turn that $5 into another used book (without hunting down a seller that has a book that I want).
I think Swaptree creates a more efficient marketplace for used media. As more and more people use the service, it will become more efficient. For the types of items traded (media), it’s more efficient than eBay.
Jay
GameTZ.com is the best trading site on the web.
I’ve traded 10 items so far on Swaptree and so far so good. There are dishonest people on Amazon and Ebay too. Swaptree used the same tools those sites use to encourage good behavior. Namely, user ratings of other users. If you are afraid of trading with someone who has no positive history, then you can refuse the trade. Granted, you will get a nastygram not to refuse too many trades or you will lose out on future trades. All economies rely on a certain levelof trust in order to function.
On another comment, I would like to see Swaptree add more filtering and sorting capabilities to the items that you can potentially receive.
Spacebas
Do you put your item in the mail box or what??
I am suppost to trade a game but i dont know how?
An friend of mine has started a new startup named mailbagmedia.com, and I believe he has taken the right approach to building a media trading website.
Instead of raising capital by the traditional methods, he has chosen to license his project, and let local partners offer the service in their state.
His goal is to have all fifty operators both running and promoting the service on a local level, using both online and offline methods.
With so many people promoting the service that have skin in the game, there’s a very good chance it will gain traction and become successful.
My friend is still looking for a few licensee’s, so if the thought of owning a media trading website appeals to you? It’s not to let to get in.
The link will bring you to the licensee offer page, or if you do a Google search on “Mailbag Media partners program” you can find it easily.
The cost to get in is very low, and you will be able to live the dream of working from home.
Swapster.com is doing a points based system to trade CDs, DVDs, Video Games and Books. You decide how many points your item is worth, and you determine how many points you are willing to pay for an item. Free market rules!
http://www.swapster.com