By Ted Dziuba
2nd January 2009 17:02 GMT

I have never expected much out of a Silicon Valley startup with a name that sounds like a baby word, but Swoopo is a rare exception. It's an online auction site with a dastardly twist. When you bid on products at Swoopo, you don't specify a price.

You pay 75 cents for the bid, and that bid increases the price of the item by 15 cents, while extending the auction for around 20 seconds. When the clock runs out, the auction is over. By this mechanism, the winning bidder can buy, for example, a brand new Nintendo DS game system for around $30, when the item is valued at well over $100. And Swoopo cashes in on all of the losing bidders who drop 75 cents every time they fail to win.

If you don't want to spend your time giving this company your money, you can activate their automatic Bid Butler, as lightening your wallet is a task best left to machines (a fundamental law of the internet first proven by Google). Most of the items up for bidding are real products like TVs, computers, and iPods. But to make things interesting, Swoopo has some specialty auctions, such as “FreeBids,” where bidders bid on bids.

Since they're valued at 75 cents a piece, Swoopo can sell bids like real products. Even better than that, they run auctions for cash – where users spend their money trying to win a couple hundred dollars. This is very close to gambling, but the nondeterminism comes directly from the actions of other users, not the randomness of a dice roll or a deck of cards, so while Swoopo hasn't quite crossed the line, they can see it from where they stand.