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TC50: Gift Card Auction Site Rackup Aims To Shake Up Market

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Leveraging the power of the Web, behavioral economics and an applied branch of game theory called auction theory, Rackup is surfacing today at TechCrunch50 with a bold play on online auction platforms and the audacious goal to disrupt the $100 billion gift card market with it.

Unlike most web services in this field, Rackup isn’t about offering a trade or resale platform for gift cards but does something unique, basically offering the auction winners a way to always get more value than they pay for no matter what.

The goal: bringing the ‘Black Friday’ feel into people’s lives online, every day.

How it works: basically people bid on the value of gift cards in very fast auctions. The person who bids first, gets the advantage of gaining more value on his or her gift card the more bidders join in. As long as the person stays in the top 10 for a gift card, there’s an additional bonus on top of the value of the gift card. Rackup offers a dashboard where people can manage and see the history of their auction activity.

The bottom line: the money is already being spent on these brands, so why not take a couple of seconds in our lives to get more value out of existing gift cards of retailers.

Although the company has remained in stealth up until today, it has signed up over 20 customers for the beta product, including many familiar brands like American Airlines, Nespresso, Nike Golf and Travelocity.

Rackup’s team is lead by Marc Rochman and is supported by a board that includes Stanford Prof. Paul Milgrom, one of the most prominent experts in auction theory, and Duke Prof. Dan Ariely, author of “Predictably Irrational”. The company raised early-stage funding from the founders and some private investors, amounting up to $3.5 million.

Expert panel Q&A:

Q – Jason Calacanis: is this legal?

A: Yes, because it’s not gambling. You don’t pay to participate, can only win more value, and you can’t lose money.

Q-Paul Graham: So People don’t have to pay to bid, not like Swoopoo?

A: The average discount is around 18 percent, the discount for retailer is flat. We charge an auction fee to the retailer.

Q-Mark Andreessen: What do you think about your marketsize?

A: Last year the figr car market was was $100 billion so this is a growing segment. Sending online gift cards is a new way to give and spend spend money.

A: We get around 8 percent of each transaction. We are signing contracts with retailers, will get hope to get a large portion of giftcard transactions.

Video:

http://www.ustream.tv/flash/video/2163197

Pictures:

Extra coverage:
TC50: RackUp sells gift cards in fast online auctions VentureBeat.

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