One of the earliest phenomenon to hit the Internet was auctions, exemplified by eBay and with attempted copycats from companies like Yahoo. However, eBay has slowly shifted to more a “Buy it now” format.
Lately, other sites have sprung up, offering new types of auctions and offering what seems like pretty sweet deals. A $50 Visa gift card for 2 cents? How about a 24 inch iMac Desktop for under $20? These are two auctions I spotted earlier today on Web sites like BidCactus and Swoopo.
The business model of these sites are basically the same. You buy a stack of bids and then begin bidding on items. Each time you bid, the price of the item goes up a couple of cents. However, as the number of bids increases, the amount of time left in the auction also increases. If you’re the high bidder when time expires, the item is yours for the price visible.
What’s challenging about this model is that since additional time is added as the number of bids increase, you have to keep a closer eye on the item, and if you’re not the only one bidding, you could be stuck bidding repeatedly. This points out how the sites truly make money: through the bids.
As I mentioned, you have to buy a block of bids to be able to bid at all. These bids range in price from60 cents a bid on Swoopo to 75 cents a bid on BidCactus. You have to buy packs of bids; 25 bids minimum on Bid Cactus ($18.75 total) or 40 bids on Swoopo ($24 total). That makes that $50 gift card, at minimum, $24.02 (if you get it for the minimum bid, which you probably won’t).
Of course, people who get lucky on this system will do quite well, but gone is the ability to bid up an item just an auction ends to push out the high bidder; the extension of time takes away that advantage. So timing can pay off, although you’ll know pretty quickly if you’re fighting with a lot of people for an item (but it’ll cost you to gain this knowledge).
So is it worth it? It’s hard to say. There’s a real opportunity here to get items at a low price, especially if your timing is good. But for every person who manages to win three or four items with a bid pack, there will be people who will spend $24 on 40 bids and get nothing because someone just had a couple of more bids than they did, which brings it closer to a roll of the dice. Do you have more bids than the person you’re bidding against (or will they buy even more to get that expensive item)? Of course, as the sites get more popular, you’ll also be attempting to wrest an item away from even more people, lowering the chance that you could win. Caveat emptor, but if you have luck with a service like this, feel free to share with the class by E-mailing me.
There are people making a living buying products on these type of penny auction sites. It can be a little more difficult to win on the two popular sites you mentioned simply because of their market share. There are numerous sites out there that are a lot smaller but you definitely want to make sure they are legit before bidding. There are sites like BidBlink (www.bidblink.com) where you can get bid pricing as low as 10 cents. Definitely cheaper than the Swoopo’s of the world. Another thing to look out for are sites that offer the ability to buy the product if you lose (applying your bids placed). Swoopo and BidBlink do offer this. BidCactus does not.
Comment by Ryan — December 10th, 2009 @ 3:42 pm
The ability to apply what you’ve spent on bids towards an item is nice, and if you’re chasing a particular item, that is one positive and does lift one potential negative from this method of bidding on items.
I think the caution is still warranted, though, for points you even mention – if you happen to pick the wrong site (or even the wrong time on a site, when it happens to be busy), you can spend a lot on bids and win nothing (and smaller sites’ legitimacy is harder to verify).
Frankly, spending $500 on a stack of bids to qualify for the 10 cent pricing on bids is great, if you can afford it. But after that, can you get $500 in merch by winning enough auctions? Again, it’s a gamble.
If you spend $500 and all you ultimately win if a $50 gift card, even applying your bids as credit towards to purchasing the other items, it’s not really a deal. Hence my warning.
Comment by Josh O'Connell — December 19th, 2009 @ 10:12 pm
There are many penny auction sites now with more popping up each day, you’re very right to post your warning about the smaller sites Josh, please feel free to check out the consumer watchdog/directory blog & forum http://www.pennyauctionwatch.com & http://www.pennyauctionforum.com to learn more about penny auctions and about shill bidding that goes on in this industry.
Something needs to be done about it, for that reason I started Penny Auction Watch back in May of this year to act as a place for consumers to come together and discuss their experiences with this new online auction phenomenon.
Comment by Penny Auction Watch — December 27th, 2009 @ 12:57 am
While an individual may be paying an apparently small amount, the collective payments on these items are astronomically high. At BidCactus, bids are .75 each. If each person bids a penny at a time, the collective payment is 75 times what is posted. Recent items “sold”:
500 bid pack $33.98 = 3398 x .75 = $2,548.50 for an item “valued” at $375
$100 gift card $4.90 = 490 x .75 = $367.50
$75 gift card $1.88 = 188 x .75 = $141
The amount you spend for bids on items you LOSE has to be added to the amount you spend on the items you win in order to know the true cost!!
Comment by Fern — December 29th, 2009 @ 2:09 pm
Fern, your math is right, but that’s showing how BidCactus makes its money. BidCactus can’t be faulted for coming up with a business model that works for them. Just because the $100 gift card was bid up to $4.90 doesn’t mean the winner made all those bids. They could have made one, 10 or 100. But you’re right to say that the bid costs should be included; that’s why my initial post factored in the cost of buying a bid pack in whether it was worth participating.
The big question for a consumer is whether they’re getting a good deal. If you’re the $100 gift card winner for $4.90, spent one bid for doing so and bought the cheapest bid pack, you’ve spent about $23 for a $100 gift card and still have 24 more bids to try to win more. That is where it becomes a good deal for an average user… but you have to win.
If you lose the auctions you bid on, you’ve spent money to get nothing; that’s the inherent danger, and why I wrote the original post.
Comment by Josh O'Connell — December 29th, 2009 @ 4:07 pm
Hey Josh,
Your summary of the penny auction model is excellent. Those who get lucky score deals at great prices. At the same time, many people don’t get lucky (or they don’t research carefully first), which leads them to believe these sites are all scams.
In January 2010, I started a carefully-filtered penny auction directory called the Penny Auction List. We only feature auction websites that meet a strict set of criteria.
Whenever I talk with someone about penny auctions, I encourage them to try out sites that have a bid to buy option first. Even if they don’t win the auction, they can still invest the value of their bids toward purchasing the item at retail price.
Thanks again for your post.
Josh from the Penny Auction List
http://pennyauctionlist.com
Comment by Penny Auction List — May 18th, 2010 @ 2:40 pm
The amount of bids you have combined with proven bidding strategies are the best way to win these types of auctions. It’s a numbers game that requires attention. One must not simply set bids and walk away. A user must monitor every aspect of any auction they are participating in.
It starts from the beginning of the auction. When were the first bids placed? How many users had to bid on the item before it went live? How long did it take to go live? These are all questions that need to be answered before considering an item.
Comment by Penny Auction Tips — May 26th, 2010 @ 11:17 pm
I love this site! I buy a 50 bid pack and win something every time, last night I won a Wal-Mart $100 Gift card for 10 bids plus 2.38 and shipping of $5.99. The next 40 bids were unsuccessful in winning the next auction because I ran out. The trick is to think of times when the site will be the slowest (i.e. during the superbowl) and let the crazy bidders bid up the item and I only bid when the screen says going, GONE” right on the GONE I bid.
This site is not for everyone, clearly. If you are not a gambler you may want to avaoid this site.
Comment by Bidcactus — August 27th, 2010 @ 5:12 am
Many thanks for the concise overview.
As with most things, shopping around is the key here.
Bargains can be won on Penny Auctions sites(we have plenty of examples at http://www.quick2bid.com/penny-auctions.php) but there are a few key things to be aware of:
Only play on sites that explain all the game and it caveats clearly, fully and from the outset.
Reliability is key – does the site make delivery times clear, display contact details (a mere email address/form is insufficient), show a full history of past auctions and feedback from winners.
Try out the site (with free credit, if they offer it) first, watch a few auctions and get a feel of it.
Do some research on the review sites to see what other people have to say. The administrators and forum users are generally very nice, helpful people who are more than happy to help.
A site that looks very busy either has shill bidders or lots of genuinely players. Either way its going to be difficult to win.
Essentially smaller Penny Auction sites with a good track record are the best, but you need to do your research first.
Hope that helps
Viraj
CEO
http://www.quick2bid.com
Comment by Viraj — August 27th, 2010 @ 8:25 am
Thanks for the article, there are many sites out there now, if you just read all the terms and conditions you should be fine. Theres always some sort of risk involved, but if you play your cards right you can win products at amazingly low prices that wholesalers cant even provide you with.
Comment by Online Auction — October 15th, 2010 @ 3:11 pm