Customers buy bids in advance (costing $0.75 each in the US, or 50 pence in the UK). Most "auctions" begin at $0.15 or 8 pence, and increase by the same amount with each "bid". Some items, known as "penny auctions", only increase by $0.01 for each bid, but still cost contestants $0.75 per bid. Each bid also increases the auction's end time by 10–20 seconds. Although the contest winners often pay a low price, Swoopo earns money from the bids placed.[1][2]
For example, if an item in a "penny auction" retails for $1000 sells for $80, 8000 bids must have been placed. For these 8000 bids (at $0.75 each), Swoopo earns $6000. If an item sells for $8, then 800 bids have been placed. For these 800 bids (at $0.75 each), Swoopo earns $600 and thus loses money on that specific auction.
In $0.15 auctions, Swoopo receives more than the retail price for the item from bidders as long as the final price is above 16.7% (one-sixth) of the retail price. This is because for each $0.15 of the final price, Swoopo is paid $0.90 total ($0.15 by the winner of the item plus $0.75 by a bidder). Because $0.90 ÷ $0.15 = 6, Swoopo is paid 6 times the final price each item in a $0.15 auction.
In one auction, bidders paid a total of $41.03, including the "fixed price" of $0.54, for a $700 item.[3]
In another auction, bidders paid a total of $27,675.50, including the "fixed price" of $98, for a $1300 item.[4]
