The site’s home page displays several attractive objects for sale with closing times fast approaching. It is mesmerizing.

One winning strategy might seem to be this: Bid at the last second, just before an auction is about to end. To “help” you do so, the site offers an automatic bidding program called a Bid Butler that allows you to make bids in the last 10 seconds. Alas, others can also use this automatic program, and you soon discover that just as the clock is ticking down and you’re about to make your big score, a bunch of other Bid Butlers get busy, the price jumps by a few cents, and the clock adds more time. Items can remain “in their final seconds” for days.

Image Credit... David G. Klein

What makes this procedure so devilish is that while bidders are looking at what seem to be amazing bargains, the Web site is raking in the money. Because Swoopo collects 60 cents for each penny bid, its revenue is the selling price multiplied by 60. This means that if a computer you covet sells for $100, seemingly a bargain, Swoopo collects $6,000 in revenue, a very juicy profit.

Swoopo has even sold cash using this format  specifically, checks for $1,000. My colleague Emir Kamenica and I looked at 26 such auctions we found in a data set posted on the Swoopo Web site. For each of these, the average revenue to Swoopo was $2,452. Winning bidders also did well: Of the winners, all but two made money even after accounting for the cost of their bids, with an average profit of $658. Still, the important point to remember is that, collectively, bidders are losing money. Only the lucky last bidder is a winner.

It’s no surprise that Swoopo has attracted controversy. Bloggers have called it “evil,” but the company says that its winners save substantially since the winning bids are always well below the retail price of the product and that everyone else gets an exciting experience, which is worth the price of admission.

Frank Han, the North America general manager of Entertainment Shopping, Swoopo’s parent company in Germany, said, “The thrill of winning one of the auctions that ends at a very low price is what keeps customers coming back.”