Penny Auctions

Over the past few years many penny auction websites have been popping up, the biggest one in the US being QuidBids. The reason I am posting about this here is I consider them to be gambling since they involve a risk to all the bidders. The way these website work is by offering popular products at a starting price of $0 on which people can bid in increments of $0.01 until someone wins the item. These websites typically charge around $0.60 per bid so if an iPad sells for $10 the website made $5,000 from the bids and all the non-winning bidders end up with a big loss.

I was wondering if any of you has a strategy to win more at these types of auctions. Ending prices vary a lot depending on the type of bidders involved and in many cases the winner pays more in bids than he saved from the retail price. Over here we have local websites that have a smaller pool of buyers than QuidBids and I was thinking of using a strategy of bidding on everything at a loss until people get too scared to bid against me but I noticed many people are already doing this and they seem to be losing money on most of what they buy. Since the ending price of all the past auctions along with the last 10 bidders is available, I am considering entering all that information into a database and try to bid against buyers that give up early rather than the crazy ones that want to win at all cost; how should I run this analysis and what would be the best ways to avoid getting into a never-ending bidding war?

Save your time, they are a rip-off. All it takes is a few shills to keep bidding against you if the bid-profit is not enough yet. Go to a site like allibabba or such if you want to buy in bulk at a discount. For smaller quantities, try eBay or eBay wholesale lots.

Who makes money?
The website providing the auction.
The Sellers?
Its probably a bunch of bots bidding things up and sucking rubes into the scheme of bidding for things.
Few if any items probably sell at a bargain to a real third party bidder. Its either a "bargain price" to a non-existent bot or its at a realistic price.
Think of the "auction" as entertainment for those who believe its real.

Quote: HKrandom

These websites typically charge around $0.05 per bid so if an iPad sells for $10 the website made $5,000 from the bids and all the non-winning bidders end up with a big loss.

For Quidbids each bid cost $0.60. And there are quite a few complaints about them, including this:

http://www.sitejabber.com/reviews/www.quibids.com

Among the complaints were auctions freezing at 2 seconds while refusing to take bids and then ending and what people perceived to be bots.

Sounds more like a lottery.

--------------------------------

Not really. In a lottery all tickets have some value that is the same to all purchasers, the winning ticket being unknown. In a penny auction its a time linked bidding process and all bids have a cost to the bidder but value is time dependent. Being an intermediate bidder just transfers money from your bank account to the Auctioneer's account. Only the final bidders seem to have a chance and the site has to be honest for even that to take place.

I bought two things from Quibids.com. I am not a fan of penny auction sites. I will tell of my experiences, my thoughts, and you can judge for yourself.

First, the two things I bought. One was a heart rate gps monitor from Garmin. Neat little product. After all was done, it cost me $34. I originally thought I was going to give it as a gift to someone, but that particular person ended up annoying me. I then sold it on eBay for $145. The second item I bought was a $50 gift card to Target. Total cost to me was around $12.

Is it possible to obtain items on penny auction sites for far less than their real value? Yes. Most penny auction sites are selling their own items, not items from other sellers like eBay. This is because the penny auction sites, as already noted, are making a HUGE amount of money on selling these items. Even if they paid retail prices, and I'm sure their not, the way the auction site works will ensure that they make well over the retail price on the item.

The original poster stated something about trying to start a reputation as a big bidder to scare out other parties. I don't believe this will work. First, you give too much credit for people remembering you and your actions. Second, if the opponents are still able to perceive their wins as being of value, then any reputation they may think of you will mean nothing.

So, how can you get a good deal on a penny auction site? It's pretty simple, just place one bid, the winning bid. For example, let's say you're bidding on a $50 gift card. You place the final bid, a winning bid, in the amount of $8. That bid will cost you 60 cents. Thus, you paid $8.60. Let's say that they add on some shipping amount, because they usually do, although it's reasonable, of $1. You will have paid $9.60 for a $50 gift card, thus profiting by at least $40. Not bad. (Note that the website still made a fortune. If your final bid was $8, then that means they had 800 total bids on the item. At 60 cents a bid, that $480. Even if they paid the full $50 for the gift card, they still profited $430. That's why they don't mind being reasonable on shipping charges; they're making good money.) That's assuming you use the gift card for yourself, to buy $50 worth of merchandise. You could probably turn around and sell the gift card for, oh maybe $40 if you want to be nice, and still profit yourself $30.

Of course, that assumes you can place the final winning bid, which is something that can't be guaranteed. As soon as you place that $8 bid, another 10 or 15 seconds is added to the countdown, and someone else could come along and bid $8.01. If that is the person's one and only bid, they are getting a deal nearly as good as yours, and worse by only 1 penny. So now you have to decide if you're going to bid again. Remember that your 60 cents from the first bid is gone. This is where a lot of people get "stuck", I think, because they feel they need to keep chasing and bidding more, because otherwise they are basically kissing that 60 cents goodbye.

You could always bid a few more times, against that other person or persons, and still end up with a good deal. Let's say you end up bidding 9 more times, so that your final bid amount is $8.18 (assuming there was one other bid from someone else between each of your bids), and you win at that amount. Now, let's look at total cost: $8.18 for the item + $6.00 in bids (10 at 60 cents each) + $1 in shipping = $15.18. You're still "good" to the tune of almost $35. So, while being able to bid one and only one time, the final last time, and winning, will ensure that you get the best possible deal, it's also possible to get a good deal by making a few bids, and keeping close track of your total costs.

Thus, I think it's possible to do the following:
1) For a particular item, and remember that these sites tend to sell the same items over and over, probably because they are buying in bulk, keep track of the final winning bid amount.
2) For that item, either generate an average winning amount, a mean amount, or maybe lean toward the higher amounts. I would probably lean toward the higher amounts.
3) When that item comes up to auction again, wait until it reaches that amount, before starting to bid. This may mean you miss out if it ends up selling for less than the amount you want to start at. Just wait for another one.

So, if you want a $50 gift card, and the past history shows it has sold for $3, $4, $4, $4.25, $6, $8, then I might wait until the current auction gets to $6 before even trying to bid. I would lose out if it sells for less than that, but I also won't be wasting a lot of bids.

I have a feeling that with higher priced items, you are going to have more difficulties. I've seen large screen televisions on these sites that retail for $1000. You may think it's a bargain to win it at $100, but someone else is going to think it's a bargain at $100.01. And while the two of you may fight it out, raising the bid over and over, until you are both bidding at a loss, another person could jump in at that point and get the deal at $150, or wherever the bidding is at.

All that being said, I still think it's best to avoid the penny auction sites. The sites are the ones making the money. And while it's possible to get a good deal, it's going to take a lot of luck.

According to Wikipedia, there was site (Swoopo) that was nearly banned from the UK. Leaders apparently believed that the site was a form of gambling. Of course, the "skill game" argument came up, trying to justify it, but many analysts point out that luck is still the primary factor, and maybe not if bots are involved.

I have never used eBay or any penny auction site. I have no intention of ever using an auction website. However, they intrigue me, so I did some research. Most of the reviews I've read are HIGHLY negative. To me, it seems like they con you into thinking you can be successful. I guess new users go into a "New Users" only bid, where nearly everybody wins a prize with one or two bids. Then they throw you into the main game, where bots (possibly set up from the website itself) push bids higher and higher. Sounds a little like 3-card Monte to me...

Recently there was an item in the news where someone detected a wireless network named FBI Surveillance Van #3 then looked out his window and saw two men in a van staring at his own window.

Something similar may happen when the PennyAuction site shows that fifty dollar gift card was won by a bidder named ShillBot7.

There has to be some kind of fraud going on. You could make a living
buying $50 gift cards for $12 to $20 and nobody is, at least as far as
I know.

No but zillions of gullible people were trying to spend fifty dollars to get a one hundred dollar gift card thru that card dilly site that only sent out cards in its first few days of operation and never sent anything after that it seems. I still don't know how they got money out of the fraud since the card companies just charge things back to them but it seems there were zillions of gullible idiots out there. So Penny Auctions may grow but I would imagine it would be thoroughly a scam with no legit auctions.

The key to winning seems to be to minimize the number of futile bids you make.

I would consider tracking all the completed auctions for a given item, and then bidding only when the price reaches, say, the 90th percentile of the ranges of previous final prices. (That is, the most expensve 10% of all auctions.)

This sounds counterintuitive, but in fact you want to bid only after everyone else has dropped out. This strategy should also maximize the value of your time, as you're greatly reducing the number of potential auctions you're participating in, and making fewer bids once you jump in.

How do you know there is not someone else who is following the exact same strategy only he has chosen 91 percent so will come in to the bidding war at the end just after you have bid? Above all else, how do you know that player is not a bot which will come in just at the end each and every single time!

Penny auction sites are cheap to launch and most
are frauds. They use bidding bots that appear to be
real customers and they constantly change. They
sell maybe 10% of what they look like they're selling
and make ton of money doing it.

Quote: FleaStiff

How do you know there is not someone else who is following the exact same strategy only he has chosen 91 percent so will come in to the bidding war at the end just after you have bid?

I don't. But I do know that human nature is such that there are fewer people with a threshold at the 90th percentile than at the 89th percentile, which is less than there are at the 88th percentile, and so on.

is this <link removed> a scam to, its somekind of prefunded system that i dont really understand..?

Quote: eyeotthetiger

is this <link removed> a scam to, its somekind of prefunded system that i dont really understand..?

I won't click the link however there may be some value in penny auctions if you're buying an item anyway. You're bid money is supposed to go towards the item if you choose to buy it. I'm not sure if the stuff is marked way up or not.

Quote: FleaStiff

Recently there was an item in the news where someone detected a wireless network named FBI Surveillance Van #3 then looked out his window and saw two men in a van staring at his own window.

Something similar may happen when the PennyAuction site shows that fifty dollar gift card was won by a bidder named
ShillBot7.

many of the penny action scripts have shill bidding bots built in. I've seen the admin panel for one script. It can be turned on/off by the owner. If it's on it will randomly use some pre-made user names and bid an item up if it's not at a certain point with a certain amount of time left.

I have never and never will use a penny auction site. They are complete ripoffs in most cases.


ZCore13

AFAIK there are two kinds of these websites. Ones that use shills and ones that lose money. Also, past auction ending prices do not predict future auction ending prices well. In the case of only human bidders, a lot of compulsion and emotion and luck go into deciding the final price.

I did Qbids once about 3-4 years ago, just to see what what up with that. I won 2 auctions for silver jewelry that was worth about what I paid for it, not what they claimed it would retail for. Found the endless .01 raise/reset a boring situation that seemed scammy and never went back. I have to say they were prompt in shipping the stuff, and never came back spamming me to return, so those are both plusses in my book.

Quote: beachbumbabs

I did Qbids once about 3-4 years ago, just to see what what up with that. I won 2 auctions for silver jewelry that was worth about what I paid for it, not what they claimed it would retail for. Found the endless .01 raise/reset a boring situation that seemed scammy and never went back. I have to say they were prompt in shipping the stuff, and never came back spamming me to return, so those are both plusses in my book.

I never understood why people get so upset with spam, unless they are phone calls. It's really simple 1 email for important stuff you're unlike to get spam from and one Email you don't care about. Spam can sometimes be you're friend.

I get the feeling that people who get upset with spam are people who can't say no.

No solicitors on private residence usually means please don't knock on my door because I will buy anything and everything.