Watch CBSN Live

VCs Pump Money Into eBay Rivals Like Swoopo

This story was written by Tameka Kee.
Look out *eBay*VCs keep lining up to invest in your competitors. The latest auction site is Swoopo, which has nabbed $10 million in a second round of funding. August Capital led the round, bringing the startup's total raise to $14 million; its first round was from Wellington Partners in 2006.

This follows luxury goods auction site Portero's $6.6 million in funding in February (via TechCrunch), and a surge in popularity (and profits) for niche social marketplace Bonanzle (per ReadWriteWeb). Of course, eBay (NSDQ: EBAY) dwarfs all of these niche players in terms of traffic, but each new site chips away at the giant's pool of available buyers and sellers as it gains popularitya trend of market share loss the e-commerce powerhouse can't afford.

eBay is facing a number of challenges: its shift away from catering to smaller merchants that thrived on auctions, to a focus on mass sellers and on-the-spot sales has cost eBay some of the brand equity that separated it from the other major online retailers like Amazon (NSDQ: AMZN). As such, Compete reports that fewer shoppers are returning to eBay, and the average amount of money they spend per visit has stagnated. This was also reflected in the company's lackluster Q4 performance.

Founded in Germany in 2005, Swoopo launched its U.S. site (and Cupertino, Calif. office) in 2008. Designed to combine "entertainment" and e-commerce, the company says it auctions over 10,000 items like computers, to game consoles and even cars per month; the trick is that buyers actually pay to bidthey can buy bids, which cost $0.75 in "packs" of up to 500creating a somewhat high-stakes game. Release.

Photo Credit: trendykidsshop

By Tameka Kee

View CBS News In