How NOT to get a great deal this Christmas

Jeff Atwood's blog turned me on to Swoopo.com this weekend, and I've been slack-jawed in horror ever since. Bear with me while I set the stage.

Swoopo is a "bargain shopping" website, and if you've ever used a service like Jellyfish or Woot (or even eBay) you'll be well acquainted with how fanatical users of these services can get. But Swoopo is a little different: All items offered for sale start at a price of $0. Users "bid" on the auctions but only in 15-cent increments. Each bid raises the price a mere three nickels, while extending the length of the auction by 15 seconds. If you win the auction, you (and only you) get to buy the item for the hammer price. Typically this is considerably below the retail price of the product.

The problem is that you pay 75 cents for each 15-cent bid, and once your bids are used, they're gone, whether you win the auction or not. So, in the case of the 21.6-inch Samsung LCD that sold earlier today for $107.70 (retail price: $337.38), Swoopo earned a total of $610.30, including $502.60 for all those 15-cent bids along the way.

How's that for a bargain?

This business model is so grotesque that it gives me chills just to write about it. (Atwood even intimates that Swoopo may not have the items they sell, that they use the money spent to simply buy the item after the end of the sale.) And yet a visit to Swoopo's immaculate and enticing home page makes it easy to see why many people get caught up in the bidding. As I type this, a Nintendo Wii is going for just $76.05, with 10 seconds left in the auction. If I spent just 75 cents on a bid and timed it just right, I'd get that Wii for $76.80 -- a huge discount! But of course that will never happen. There's simply no way to "time" your bid and be confident that it won't immediately be one-upped. As Atwood notes, "dumb luck" is the only way anyone wins a Swoopo auction, and by the time you get lucky, you'll long since have burned through your first book of 30 Swoopo bids, with nothing to show for it.

I'm intentionally not linking to Swoopo here because I don't want to help them out in search results or encourage you to waste your money there. If you really want to see it in action, check out swoopo.com, but make sure your credit cards are safely stashed in another room.