In my story about Swoopo.com earlier this week, I wrote that August Capital, the Silicon Valley venture capital firm that's invested in the auction site, should be ashamed of themselves for getting involved with this kind of company. Well, that got their attention. Yesterday Howard Hartenbaum, the August Capital partner responsible for the investment, called me to make the case for Swoopo and made a couple of points that are worth passing on.

Hartenbaum told me that he's actually quite proud of the investment, and—more important—that Swoopo is in the midst of changing its model. I said in the story that Swoopo auction losers can shell out money for hundreds of bids and wind up with nothing. Hartenbaum, to his credit, recognizes this as a problem and has been very involved in modifying the system to make it fairer and more appealing to bidders.

The new bidding model was rolled out last week on Swoopo's German site (on a test basis, according to the site, but Hartenbaum expects it to become permanent), and should come to the United States in the next few weeks. It adds a new layer of protection for bidders: Under Swoopo's new rules, losing bidders have the right to buy the same item at the regular retail price-and the money they'd already spent to bid on it gets subtracted from the purchase price. So if, for instance, you spent $400 in bidding fees on a $1,299 MacBook and failed to win the auction, you'll still have a chance to buy it by paying another $899.

This is a meaningful change. It means that if you bid only on items that you're genuinely willing to buy at the regular retail price, Swoopo becomes a more appealing proposition. You have a chance of getting an item at a deep discount, and if you lose, you can still get it at close to the price charged by other sites. So—again if you stick to items you'd buy anyway—the new model gives you a reasonable shot at a discount. Many folks will still probably spend money on losing bids, but the risks of a "face-off"—in which you spend hundreds of dollars bidding against other committed buyers and end up with a big loss—diminish.

Does this kind of change make me more comfortable with Swoopo? Yes. It does eliminate the most troubling aspect of these kinds of auctions. Do I think the new model will work? I'm not sure. I suspect that not very many bidders will take up Swoopo on the "buy at the regular price" guarantee. But I do feel that if the guarantee is there, Swoopo has a much stronger case to make that it's not ripping people off.

Hartenbaum says that he wants to make Swoopo's operations clear and transparent for bidders. I don't think Swoopo is yet close to this ideal. Here's one example: In checking out the German site today, I decided to take a look at some of the completed auctions and realized that some of the winning bidders' names seemed familiar. What was really, really strange, though, was that while the list clearly included the same bidders and bids, the items being auctioned were different. Check out, for instance, this auction for a MacBook on the U.S. site and this one for an MSI X-Slim in Germany. The same bids, the same winner ... but two different computers. So someone who goes to the German site and bids on an MSI computer is actually bidding against folks who go to the U.S. site and are bidding on Mac. Huh? This is so befuddling that I suspect it even defeats my attempt to explain it—you just need to go to the two sites and take a look for yourself to see what I mean.