Excluding a Major Cost

One thing that these folks are not factoring into Swoopo’s profitability is the cost of acquiring an auction bidder. Think back to how you first discovered Swoopo. Did you discover it through a Google advertisement?

Swoopo probably spends in the tens of thousands of dollars per day attracting potential bidders to it’s site. That’s a lot of scratch…

How Does It Look Now?

So let’s say Swoopo is spending $0.50 for every potential customer that clicks a Swoopo ad. And let’s say 1 in 10 of those buys Swoopo bids. Your cost for every single customer is now $5.

Some auctions can have 50, 100 or even 200 bidders participating. See how those customer acquisition costs add up fast!

What Does This Mean for Bidders?

The reason I’m discussing Swoopo profitability is to make a very important point. The Swoopo cynics are quick to point out that Swoopo makes a killing on every auction and needs only to continue to churn customers in and out to make a buck. Fortunately for us (and unfortunately for Swoopo) that’s not the case. If Swoopo is paying $5 for every bidder upfront (and that’s probably low) then they must focus not on an endless churn of new bidders…but a business model that makes sense and leaves many bidders happy and wanting to come back.

The Swoop It Now feature was a step in the right direction. It allows anyone who’s invested a lot in an auction to recoup that investment and still get the product. No, they won’t get it for bargain basement prices…but they don’t leave empty-handed either. And the winner still gets their often amazing deal.

I don’t know what Swoopo has planned for the next iteration of their site, but you can bet they will take steps (or even a dramatic leap) in the direction of a better user experience. Their very success depends upon it.