The eBay of swap, but better
Swaptree is the latest startup that's stealing a page from eBay's playbook -- and doing it one better by engineering trades that eBay can't.
Michael V. Copeland, Business 2.0 magazine senior writer

(Business 2.0 Magazine) - Like millions of people before him, Greg Boesel devoured The Da Vinci Code in a matter of days. After turning the final page, he faced a dilemma: He didn't really want to keep the book, but he wanted to pass it along without the hassle of selling it. So Boesel decided to lock himself indoors for a few days and do some coding -- not to develop another esoteric conspiracy but to build an online company.

Boesel's startup, called Swaptree, is now creeping out of superstealth mode with a new take on e-commerce. Its high-tech bartering system lets consumers get the goods they want without paying a dime.

Swaptree isn't the first to try online bartering -- Peerflix, Bookins, and La La help people trade movies, books, and CDs, respectively, while SwapThing lets users combine goods, cash, and services.

But it is, significantly, the first site to pull off direct trades between more than two people: Thanks to a nifty algorithm designed by Boesel, Swaptree can engineer three- and even four-way trades among users who want different things.

Swaptree is one of several new ventures aiming to capitalize on the business model pioneered by eBay (Research): Bring together online a huge number of like-minded buyers and sellers, and an economy will flower. San Francisco-based Prosper, for one, enables person-to-person loans, while IPswap, based in Pleasanton, Calif., lets software developers bid on projects. In each case, the key is facilitating exchanges that eBay doesn't handle.

Speeding up trades

Boesel and Mark Hexamer -- now Swaptree's VP for sales and marketing -- cooked up a bartering prototype in 2004 and raised a quick $300,000 from 18 angel investors. Boesel then headed to India, where he recruited seven people to program an application for configuring four-way trades.

For instance, one person sends a book to a second person, who sends a CD to a third, who sends a DVD to a fourth, who then sends the first person a videogame. Of course, ferreting out possible trades among tens of thousands of items requires intense computing. "The first four-way trade took 20 minutes to complete," Boesel says. His team has since squeezed the time down to one-fifth of a second.

Flush with a new $1.4 million infusion, Swaptree unveiled an invitation-only beta version of its service at swaptree.com in early May. Trades will be limited initially to books, CDs, DVDs, and videogames, though Boesel says he's open to adding other categories. Items will be valued equally, on the premise that they're all worth about the same to people who have already read, viewed, or otherwise consumed them.

"Swapping is a much simpler transaction," says Scot Wingo, CEO of ChannelAdvisor, which helps companies sell on eBay and other sites. "You get the same result as you would selling a videogame to some guy in Maine just to get cash to buy another game."

To start a swap, users enter the UPC codes of the titles they want to trade and create a list of those they might want. Swaptree's engine will constantly look for matches and present users with potential swaps. A nifty plug-in on Amazon.com (Research), eBay, and nine other sites can notify users if the book or CD they're seeking is available on Swaptree. When users find a swap they like, they can initiate trades: Within two days, all parties get e-mail instructions on where to send their stuff.

How does cashless Swaptree make money? Unlike eBay, Peerflix, and others, it won't charge fees. Instead, it's planning to survive solely by selling ads. Indeed, the targeting possibilities could be attractive to marketers: You already have both Spider-Man movies, so you get a preview for the next installment.

"We know what you have and what you want," Boesel says. And while previous attempts at online swap -- namely, WebSwap and SwitchHouse -- have failed, many say it was because they used complicated valuation schemes to enable trades of everything under the sun. Boesel & Co. believe Swaptree's scheme solves that problem.

All that remains is building a devoted community. Too bad that's something that can't be bartered for. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.