Online bidding and penny auctions

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A couple weeks ago, a friend of mine came to me bragging about her brand new IPad and assuring me she got it for $50! I could only believe her after I saw her receipt, it was just incredible!

How did she manage to get such a good deal?

The answer might be surprising to some of you but she bought it by bidding on one of the many rising penny auction websites.

Quibids, Happy Bidday or ZBiddy are all part of this new trend of e-business: penny auctions.

Penny auctions are a type of pay-to-play auction format. Potential buyers must register with the penny auction site and purchase a number of bids that they can then use in the auctions. Bids commonly cost around $0.60 and most penny auction sites offer packages in which users can save money by purchasing larger quantities at one time.

What is particularly interesting is that those websites offer products varying from small gift cards to higher ticket items such as computers, tablets or TVs, however they always tend to start at very low values (often 1$) and each new bid adds one penny ($0.01) to the price.

Other than that, it's just like any other auction, people bid on items they’re interested in, and when the auction clock runs out, the final bidder wins the item for its closing price.

Another interesting fact is that some of those websites such as Quibids offer the option to buy the item for the full price if the bidder loses. That way, the bids count towards the full price, limiting the amount of money wasted on bids.

You still think it’s a scam? Well you’re not wrong!

In order to get her Ipad, my friend bided exact 453 times, at a price of 0.60$ a bid, my friend actually paid $271,8 in fees!

Considering the regular price of her IPad is around $400, it could still be considered a deal, just clearly not as appealing as the website lets it sound like.

The Washington post article linked below has a very interesting psychological view of how such websites exploit our mind.

http://www.onlineauctionreviews.org/strategies/auctions-101/

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/11/AR2009071100684.html