Project Fair Bid, a stealth startup that is creating a Swoopo-like Auction platform, has raised $4.5 million in funding, according to a SEC filing. The funding was raised from the Mayfield Fund, First Round Capital, and Foundation Capital, with Raj Kapoor, Charles Moldow and Josh Kopelman joining the board of directors.
Details on Project Fair Bid are limited but we hear the startup hopes to reinvent and legitimize the Swoopo business model by using a different auction methodology to improve consumer engagement and retention. Swoopo’s business model has been criticized for its alternative bidding system.
Swoopo uses a unique pricing model that lets you to purchase virtual “bids” for 75 cents, which can then be used to bid on goods ranging from video games to high-end televisions. Whenever you bid on an item, its price increases by fifteen cents and an extra 20 seconds are tacked on to the duration of the auction. Oftentimes items wind up selling substantially below their market value, but this lower price comes with some risk: if you bid on an item, you don’t get that 75 cent bid back when the auction concludes. Even if the item winds up selling below its normal market price, Swoopo can make money from these bids (the site does sometimes lose money on an auction, but relies on the proceeds of other auctions to cover them).
But Swoopo may be on to something—since launching in late 2008, the site has grown to almost 2 million members in Canada, Germany, the U.S., Austria, and Switzerland and closed a $10 million funding round led by August Capital.
Photo credit/Flickr/walkinboston.
It seems that the Swoopo auction model is less like an auction and more like gambling. It’s no wonder that it’s becoming successful…it preys on peoples need to *beat the system*.
Not to be dense, but what is the incentive to sell something there if for the most part you get below market value?
For all its warts, eBay has reached the critical mass where there aren’t many amazing deals to be had especially amongst gadgets and tech where there may be 5 or 6 of the same items in a queue.
Why sell something for 20 or 30 bucks less than you could get somewhere else?
Swoopo doesn’t work like eBay – you can’t auction your own stuff on it… it only auctions its own items.
bit of competition won’t hurt – ebay might lower their prices then
ebay is buying so many small companys.
There are new companies like this that are already running, like bidfire, but since they have just launched, the number of bidders is so low that just a few different member have really been cleaning up.
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there are already dozens of penny auctions out there