Swoopo claim to lose on 70% of auctions and "try to make their money back" on the other 30%.
In reality, they do indeed often lose on the lower value items, but they do damn well on the big ones.
Take the flat screen TVs for example. These high-value items are usually "fixed price" auctions (these are the ones that confuse and mislead observers who can't work out why someone is bidding £2000 for a £900 TV).
Example:
42" HD tv worth £900, fixed price £49.99 (i.e. winner pays £49.99 no matter how high the auction goes).
The TV eventually goes to someone when it gets to £2100.00. At 7p per bid this means that 30,000 bids have been placed on it.
Swoopo says bids cost 50p each - they do this to make the savings look even better than they are - but in reality, they're a bit cheaper than that. e.g. 60 bids costs £25.00. Let's be charitable and say bids cost an average of 48p.
So swoopo has made £14,400 from the bids by the time the auction closes. They then also get the £49.99 + shipping from the winner.
You can see why the "30%" make them money!
Again, I will stress, this is gambling - not an auction. I do have sympathy with the view of people who say it should fall foul of gambling legislation, but I don't think this means they should be closed down. After all, it's still just using human psychology to make money, just like the online casinos. But perhaps they should be a bit more transparent in their t's and c's, i.e. swoopo needs a mixture of luck and strategy to win.