The other day, I was checking the latest posts on TechCrunch and came across a promotion promising a free pack of MySpace branded playing cards. I love free things and I clicked, hoping that my next game of poker would have a MySpace theme.
Listia's credits system works like this:
- 50 credits are offered free.
- To get 100 more, you need to sign up and list an item that you are willing to give away.
- If that's not enough, you can earn 50 credits each time you convince a friend to sign up.
- If that's still not enough, you can buy credits for 10 cents a pop, sold in $1 increments.
- Credits cannot be redeemed for cash, and unused credits that were purchased are only refundable within 7 days of purchase.
I wasn't impressed, especially because Listia's homepage reads "Everything is FREE on Listia" and proclaims "No Fees. No Money. Just Free Stuff!" But this is all for a good cause (the American Red Cross) so I figured it probably wasn't worth making a fuss over. Then I read the fine print:
When a seller lists a charity auction, we donate all of the profits generated from that auction to charity. The profit is calculated from the number of paid credits the winner uses to complete the auction. In addition, since there may not be any paid credits involved in every charity auction, unpaid and promotional credits are also transferred directly to the charity's Listia account. The credits can then be used to bid on items the charity needs. This is done either by Listia or someone who represents the charity directly.
In other words, the charity only gets actual cash if paid credits were used in the bidding. The rest of the credits that it receives? They have to be used to bid on something that somebody else is 'giving away'. Incredibly, the fine print indicates that Listia has the discretion to bid on items on behalf of the charity! Not exactly the best deal for the charity, no?
Clearly, this isn't what I expected when I clicked on the ad to claim my "free" pack of MySpace branded playing cards. There's nothing free about it really. With bidding currently at 150 credits, the only chance I'd have to win is to join Listia and list an item that ostensibly has some monetary value, spam my friends for referral credits and/or shell out real money for credits that I can't convert back into cash if I don't win. And if I win, I have no idea how much benefit the Red Cross would actually derive from the auction. Listia's fine print leaves me with the impression that if the Red Cross isn't on Listia (which seems likely), somebody at Listia will bid on an item he thinks the Red Cross needs and then have it donated it to them.
How are you getting it for free if you have to buy points?
Then there is the 11 day auction on a nice TV (a promotional item)... you have to buy points to bid on it and those points are ONLY refundable within 7 days. So, if you bid early on you are stuck with your points. One member spent $70 on points, and got outbid... and now she can’t do anything to get her money back. Great for the owners, terrible for the customer.
Ok. so i wanted to check out the Listia solution this morning... I signed up and was going to bid for the free Techcrunch T-Shirt. I was given 500 credits as a new user on Listia but can only use 100 credits of these on each item i bid for. Since the current bit on the T Shirt was 251 credits i had to buy at least 160 credits in order to have a chance to bid...
IDK, the site is very misleading. Any worthwhile item will require the user to pay for more credits, so essentially, you are just participating in a paid auction. In addition, their methods of interacting with charities aren’t clearly outlined, and I’m not sure how things work.
That’s a really stupid concept… Use a middle person to manage giving stuff away, and allow the middle person to charge what the market will bear for that stuff? By the time the stuff gets to the end user, it isn’t free anymore… far from it… if it is free, then it’s something that certainly has very little value, assuming this marketplace is efficient.
While I applaud them for coming up with (or at least expanding on a previously existing) good idea, I agree with many others who have commented on the fact that monetizing points for free stuff seems to defeat the purpose of the site, at least from the user’s perspective.
I’m glad someone else sees the huge, gaping hole to this business plan. Looks like a charity leach, if anything. The only real winner in the process is Listia.
Another comment raises some questions about potential tax implications of the Listia service, which are interesting.
The bottom line: if you called Listia 'scummy', you probably wouldn't be alone. And for good reason: in most cases, Listia's auctions for "free stuff" aren't going to be free when all is said and done. After all, users will likely need to put something of value up for auction, or purchase credits that can't be exchanged for cash or refunded after seven days. The charity stuff? Clearly just a marketing ploy because there is no guarantee that a charity receiving credits that weren't originally purchased is going to be able to use them to bid on items that it truly needs. Throw in the fine print revealing that Listia itself may bid on items for the charity and the charity angle seems quite dubious.
Which brings us back to TechCrunch. Combine everything you now know about Listia with TechCrunch's ad promising a free pack of MySpace branded playing cards and you might just have an offer that Michael Arrington would call a 'scam' if it was displayed in, say, Farmville.
Okay, maybe that's a little bit of a stretch, but I think the point stands: there are lots of services that can leave a bad taste in your mouth, and it's very easy to create ads that aren't 100% true or accurate. While I'm certainly not suggesting that this example here is the moral equivalent of scammy/scummy mobile offer that you might find on a CPA network, it would be hard to argue that TechCrunch's ad isn't deceptive. It'd also be hard to deny that some parts of Listia's system seem like they were well-designed to take advantage of less-savvy consumers.
That said, instead of calling on TechCrunch to pull its ad or for Listia to be expelled from the internet, my next game of poker simply won't be with MySpace branded cards. And as it stands right now, it looks like I'm not the only one who has decided to keep the deck of cards I already have. TechCrunch's auction, which as I write this is stuck at 150 credits, now has a special welcome message: "Welcome TechCrunchers - Everything is Free on Listia! All TechCrunch readers Receive a Free 50 Credit Extra Bonus When You Join Today!" The amount of credits being offered when you sign up and list an item has also been boosted to 150.
Now I could go on about how foolish it is for any service that has a credits-based economy to treat credits like pork barrels, especially when credits can be purchased for cash, and I could point out that if Listia keeps giving away more points to 'move' an auction that isn't going anywhere, the people who bid first would be unfairly put at a significant disadvantage and pressured into purchasing credits if they want any shot at winning. But I think this auction's status speaks for itself: it looks like consumers just might be smarter than some of us give them credit for after all.
[Update: the ad has been removed from TechCrunch. Additionally, the promotional language on the Listia auction page has been removed along with the 50 "bonus" credits.]