| Below is a series of informational writings, blogs and | | | | with no one else bidding. |
| posts about this new and exciting some call it the best | | | | In effect – when you place a bid you are hoping no |
| thing that has happend since e-bay, some call it a | | | | one else bids again in the next 2 minutes. I really fail to |
| scam. What ever the outcome, the facination with | | | | see the skill here, it’s a game of chance, the luck |
| penny auctions is out of control. is one of those fast | | | | that no one else will bid on that item. I observed some |
| rsing internet penny auctions and swoopbug and only | | | | live auctions, they go on for hours. |
| swoobug want you to get the whole story so you can | | | | I watched the 10 live auctions this afternoon for about |
| make up your mind. We invite you to visit us for a free | | | | half an hour, time after time the timers would get to |
| trial of our penny auctions but only after you have | | | | just 2 or 3 seconds before go straight back to the |
| read the writings below. | | | | max. Let’s remember that it costs about £1 to |
| Tips for live penny auctions Monday, Dec 14 2009 | | | | place a bid, if an item is shown as £15, that means |
| Uncategorized live penny auction, live penny auctions, | | | | there has been 1500 penny bids, each costing £1 – |
| penny auction, penny auctions, penny bid auctions | | | | when the site is giving away a sub grand laptop I know |
| jasonnash6881 12:36 am | | | | who’s winning! |
| Gambling hasn’t got anything to do with an always | | | | In the half hour I only saw 2 auctions actually end, their |
| random chance that your investment will not pay off. | | | | timers getting to 0. One was a “prize” of 50 |
| Like with 21, gambling can be in a very controlled | | | | extra bids, the other some spa day. The 3 free bids I |
| environment. I believe the outline of the site definitely | | | | got? I went for the newform factor MacBook of |
| constitutes gambling what with the chance versus | | | | course – the timer didn’t even get close to 0 |
| reward system and it’s definitely a 0 sum game. | | | | each time. |
| Folks keep bidding, as the costs seem so low — but | | | | The testimonials page of this site seems to suggest |
| since everybody has to pay to bid, the corporations | | | | Fiona Philips – the embodiment of the opinionated |
| ends up making a lot of money — often many times | | | | Daily Mail reading lower middle classes has told the |
| the exact value of the product. Basically, the company | | | | viewers of GMTV this site is “a sure way to beat |
| and whoever’wins’ the sale are probably going | | | | the credit crunch” – Fiona, you’ve let your |
| to make out okay — while each other bidder loses. | | | | people down. |
| Apparently, there are a number of such sites doing | | | | I’d steer clear – I wouldn’t go so far as to |
| similar models, and the United Kingdom presidency is | | | | say scam as they are pretty above board with how it |
| spotting that it’s pretty similar to betting and | | | | all works but don’t believe there is any skill. |
| doubtless should be regulated as a gambling site. | | | | Bidding on Swoopo auctions starts at 15c, with no |
| The reasoning is that folks are paying money and may | | | | reserve prices. |
| not get anything back for it — which makes it similar | | | | The price goes up by 15c with each bid placed. |
| to gambling. However , dependent on how these sites | | | | If a bid gets placed in the final moments, the auction is |
| are run, it’s not as though the results are a genuine | | | | extended automatically by up to 20 seconds. |
| gamble — it’s still about whoever bids the highest | | | | Each bid placed on an auction costs $0.75. |
| for a good, so it sort of feels like a stretch to call it | | | | As some netizens commented , this new way of |
| gambling. It is a dumb move to get involved in any of | | | | auction is “manipulating game theory to tap stupidity, |
| these auctions in the 1st place ( in numerous ways | | | | the greatest resource on this planet.” Think about a |
| worse than betting ), but that doesn’t necessarily | | | | tiny deal–if you buy something worth 20$ with a |
| mean that they need to be regulated like gambling | | | | successful bid of 15$, there have to be 100 bids, which |
| sites. | | | | equal to 75$. The bidders including yourself collectively |
| This is actually a patent-protected method of auctions | | | | have paid Swoopo $15+75=90$. Any item worth 150$ |
| that was’invented’ in Israel around 8 years ago. | | | | or more will bring Swoopo 750$ net profit. The auction |
| It was quickly outed for being exactly that – betting. | | | | is very much like a casino machine gamble. Only in |
| I usually agree with Michael, but in this example he is | | | | Swoopo’s design, human beings form the machine. |
| the one with his head in the sand. In any gambling | | | | And because of human stupidity, Swoopo is going to |
| endeavor, there’s someone that wins. | | | | run just like a machine, with the result and profit very |
| Nothing’different’ here. | | | | predictable. |
| In the final sense, this isn’t different ; it is equivalent | | | | Swoopo calls it “entertainment auction”–this is |
| to’liar’s poker’ and similar games - it is | | | | disgusting. Swoopo makes bidders reveal their stupidity, |
| betting. | | | | watches, and mocks them while money piles up on its |
| Bidding Tips – All You Need to Know About Bidding | | | | account. |
| Techniques at Auctions | | | | *** *** |
| If you’re going to bid for something at penny | | | | Now, how do we beat swoopo? |
| auctions you should have a understanding of the basic | | | | Since the design of swoopo is based on the |
| techniques of bidding. There are a number of | | | | assumption that human beings collectively will act in a |
| strategies utilised by bidders to maximise their success | | | | stupid way, we can beat swoopo if we somehow |
| ; we’ve listed the hottest for you here : | | | | reshape our collective action in swoopo auction. |
| Head Shake or Nod | | | | Here is how we do it: |
| One of the most important techniques to take into an | | | | Outside of swoopo, bidders have to form their own |
| penny auctions. | | | | association–Association of Swoopo Bidders |
| 2. In this situation, the bid jumper wins.it may be that the | | | | (ASB)–make some decisions based on simple |
| other bidders would have stopped bidding after $60 | | | | calculations, and enforce the decision |
| anyway, in which case the bid jumper wins the lot, but | | | | Telebid Scam or not? |
| ends up paying $150 instead of $65. | | | | Firstly, what is Telebid? Telebid is an auction site, but |
| 3. Lighthouse Bidding | | | | an auction site with a difference. Firstly you cannot just |
| This is the term used when a bidder holds their paddle | | | | bid on any old auction that comes up, you have to pay |
| up leaves it there. This sends out a message to other | | | | to be able to bid. |
| bidders that they are serious about winning the lot, and | | | | So how does Telebid work? First you need to register. |
| will remain in the bidding for the long haul. This could | | | | Once registered you log in and buy bids. Bids cost 50p |
| have the effects of intimidating the other purchasers | | | | (£0.50) each and come in a variety of packs from |
| into dropping out of the bidding. | | | | £5 for 10 bids to £250 for 500 bids. Now you can |
| 4. Cutting the Bid | | | | use these bids to bid on auctions. An auction starts at |
| Bidding has a tendency to increase in regular | | | | £0.00 at a predetermined time. When someone |
| increments unless the penny auctionseer determines | | | | places the first bid the price goes up by £0.07 and |
| otherwise. If the bidding has been proceeding from | | | | the time that the action ends increases by a random |
| $1,000 to $1,100 to $1,200, and you need to bid $1,250 | | | | number of seconds from (anything from 1 second to |
| instead of $1,300, you can indicate this to the penny | | | | 20 seconds). The time will count down until the time |
| auctionseer by raising your arm and holding your hand | | | | reaches zero and whom ever is the last bidder at that |
| horizontally at your neck, with the palm down. This tells | | | | time wins the auction but every time someone bids this |
| him that you would like to chop the increment by half. | | | | adds time to the countdown timer. Let us explain this |
| You can also do this by calling out the amount that you | | | | further: |
| want to bid, although you should not attempt to do this | | | | An auction is due to start at £0 in 4 hours (time now |
| too frequently. .auction bargain | | | | 1300). Someone places a bid and the bid increases to |
| Online Auctions are great. Not only do you have a | | | | 4hours 10 seconds and the price goes to £0.07. |
| chance to win an item at a great price, but they’re | | | | When the count down timer reaches less than 1 |
| fun and exciting. Online auctions have revolutionized | | | | minute (in around 4 hours) others will start bidding |
| the way that auctions are conducted in the U.S.A | | | | (maybe sooner) and for every bid the price will |
| Whether it’s property auctions, government | | | | increase and so will the count down timer. When the |
| auctions, or police auctions, Internet auctions have | | | | count down reaches 1 second many people will |
| become one of the largest most successful ways to | | | | sometimes bid and push the timer high and the count |
| auction items. | | | | down continues. This carries on sometime for minutes |
| There are a wide variety of online auction sites. | | | | and sometimes for hours until everyone else gives up |
| Largely unknown in the U.S.A are Penny Auctions, | | | | and the count down time reaches zero and who ever |
| where the bid price increases only in increments of a | | | | is the bidder at that time wins the auction at what ever |
| penny at a time. Unlike traditional online auctions where | | | | price it has reached. |
| a bidder can decide to bid as much or as little as they | | | | An example: A wristwatch will start a Telebid auction |
| want for an item, in a penny auction you can only bid | | | | in 4 hours time. Someone has placed a bid which puts |
| one penny higher than the previous bidder. So for | | | | the price at £0.07 and ads 10 seconds to the timer. |
| example, a new big screen t.v. will start at a bid price | | | | With 2 hours to go someone else places a bid and the |
| of $0.00. When someone places a bid, they can only | | | | price goes to £0.14 and the time has increased by a |
| increase the price of the item by $0.01 cents. So the | | | | few seconds. Most bidders will not bill until less than a |
| winning bid for the t.v is now 1 penny. Now someone | | | | minute is left. With only seconds to go 10 bidders put in |
| else decides to place a bid, so the winning bid goes up | | | | bids and the price increases by £0.70 and the timer |
| to 2 cents, and so on. | | | | increases by 1 minute 10 seconds. And so it goes on |
| Like all auctions, weather they’re online auctions or | | | | until 1 bidder is left when the timer reaches zero (and |
| traditional live auctions, the bidding is over when the | | | | the price can have increased to £10, £50, or even |
| time expires on the item. However, with penny | | | | £300 depending on the value of the watch and what |
| auctions because the bidding increment is so small, | | | | people are willing to bid up to). Sometimes an item will |
| many penny auctions will have an expiration time that | | | | sell for a fraction of the value. A Nintendo Wii for |
| is shorter than the typical online auction, like 5, 10, or 30 | | | | example may sell for £20. The site also sells bids |
| minutes. In most cases, every time a new bid is placed | | | | called 'free bids'. 300 free bids (worth £150) are |
| on an item, the timer resets to it’s original expiration | | | | offered for sale at 100% off. In other words if you win |
| time. So using our example above with the big screen | | | | that auction you will receive 300 bids to use at future |
| t.v. if the timer is originally set for 10 minutes, the clock | | | | auctions but not have to pay for them. |
| starts counting down. When someone places a bid, the | | | | So how does the Telebid site make money? Ok, let us |
| clock resets to 10 minutes, and begins counting down | | | | do the maths. Each bid increases the auction price by |
| again. If someone else places a bid, then the clock | | | | £0.07 but COSTS £0.50. Many people are bidding |
| resets, and begins counting down again. However if no | | | | on the same item. Because free bids are free, i.e. you |
| one places another bid, and the time expires, someone | | | | do not pay for them if you win, the price can rise to |
| just won a T.V for a GREAT BARGAIN!! | | | | much more than the actual value. Sometimes 300 free |
| So what’s the catch? How can anybody really win | | | | bids can end an auction at over £200. How much |
| a t.v. or an ipod, or any thing for that matter for | | | | does the site make for this? £200/£0.07=2857 bids |
| pennies in an online auction? Well, you have to change | | | | at £0.50 each bid=£1428 for something that has |
| the way you look at bidding. In traditional Internet | | | | cost them £150. Another example is a laptop |
| auction sites, you can decide what you are willing to | | | | computer valued at £899 but with 100% off finally |
| bid for an item in advance. If someone else bids higher | | | | sells for £400 (but the buyer only pays for delivery). |
| than you, you don’t win the item and it didn’t | | | | £400/£0.07=5714 bids at £0.50 per bid=£2857 |
| cost you anything. With penny auctions however, | | | | instead of the £899 it cost the site. |
| because the bid increment only goes up by a penny, | | | | What is the catch? Only one person can win each |
| you have to pay in advance for your bids. In other | | | | Telebid auction. Therefore there are numerous losers. |
| words, you buy your bids first, and only when you | | | | Is Telebid a scam? That depends on your definition of |
| decide to use a bid, will the bid price go up. What does | | | | Scam. Does the Telebid Auction site give you what |
| this mean? Well, going back to our example from | | | | you pay for? Well you pay for bids and that is what |
| above with the television, if you wanted the opportunity | | | | you get. When you use your bids do you get the items |
| to win that t.v. for pennies, you would have to first | | | | you bid for? Mostly, NO. Most people will lose an |
| spend money on buying your bids. Then you would | | | | auction. Is that a scam. No You do not have to bid. |
| have to watch the clock, watch what others are doing, | | | | Then why did you come here? To try to get |
| and decide on the most opportune moment to use | | | | something that has been suggested you could get it |
| those bids in order to win the t.v. This makes bidding on | | | | cheap. This site is playing on your own greed. Does |
| a penny auction site very interactive, and EXCITING!!! | | | | that make it a scam? No. Do people who win auctions |
| So how much are bids? There are several different | | | | get the items that they won? We do not know. We |
| online auction sites u.s.a with different bid prices. We | | | | only know that if you bid on and win an auction of free |
| go over why penny auctions are better than ebay | | | | bids then you will receive your free bids. Do Telebid |
| Why settle for slow auctions like ebay when you can | | | | have people or robots that bid and win their own |
| go straight to live penny bid auctions and win right | | | | auctions thus denying members a chance to win? We |
| away? | | | | do not know but why do they need to? As you can |
| You can sell thousands of items, but which are the | | | | see from the above figures they make enough profit |
| best things to sell on eBay? Hopefully I can supply you | | | | from each auction without resorting to cheating. Ok, |
| with some creativity to get your thoughts flowing. | | | | some auctions they will lose some money but overall |
| If you used to be a customer ( which you are, ) what | | | | they make large profits on most of the auctions. |
| would you purchase on the internet? ( I’m sure | | | | How to win? Don't buy bids. Seriously, only buy your |
| you’ve acquired something online before ) | | | | initial bids of say 250 bids. Then bid only on bids. Ignore |
| What would you purchase YOURSELF? | | | | the temptation to bid on other items. Only bid on free |
| These are the types of questions that you have got | | | | bids and then use the bids you win to bid on more bids |
| to ask yourself or anyone that wants to buy | | | | until you have several thousand bids. Then you can set |
| something online, as it provides precious information | | | | bid butlers to bid on other items knowing that you can |
| that you can use to generate income by selling the | | | | outbid others. Any bids you do not have to use are |
| things on eBay that will solve people’s’s | | | | returned to your bid account. For example if you have |
| issues.folks go to eBay looking for something that will | | | | 15000 bids and set a bid butler to bid for a laptop |
| probably either create pleasure or solve a difficulty for | | | | auction 100% free (an auction for a laptop that if you |
| them. | | | | win the Telebid auction you only pay for the postage). |
| And yet another way to put it :shall we say that | | | | You set the bid butler to bid starting from £500 up to |
| you’re looking for a red ball. You go to eBay and | | | | £1000 (7142 bids). The auction ends at £800 so |
| type in RED BALL. | | | | you used 4285 bids so 2857 bids are returned to your |
| Would you be ecstatic and settle with that? | | | | account. Don't forget to now bid on more bids to top |
| No!here’s a short list though to further spark your | | | | up your bid account. |
| creativity on the best things to sell on eBay : | | | | How it works |
| – Phones ( people are constantly looking for the | | | | In the typical case, players are asked to pay a |
| newest phones ) | | | | non-refundable fee each time to purchase "bids." |
| - Sports equipment ( Rackets, etc ) | | | | These "bids" can then be spent on "auctions." The act |
| People are always buying these, and if you can get | | | | of spending a "bid" on an "auction" raises the cost of |
| them for a fair price yourself then you can make a | | | | the item by a fixed amount. Additionally, the act of |
| killing! Here is a hint : iPods, mp3 players, and private | | | | spending a "bid" on an "auction" typically also extends |
| media. Those sell like fire, and people will always desire | | | | the deadline of the "auction," providing an opportunity |
| them! | | | | for a competing player to place another "bid", thus |
| 1 Cent auctions are hard to find now adays, and if | | | | extending the "auction" again. The game is a |
| there not hard most can’t be trusted. Penny auction | | | | brinksmanship game: each successive "bid" lowers the |
| talk with random personauction talk with random | | | | value of the "reward", and the last player to decide to |
| person | | | | place a "bid" and lower the value of the reward wins |
| Interview with a John about penny auctions : | | | | that reward. |
| What did you know about 'penny auctions'? | | | | Once the "auction" has been won, the auctioneer |
| Penny auctions are a source for great products!you | | | | collects the final cost of the item in addition to the |
| buy packages for bids that you can use for expensive | | | | monies already collected by selling "bids". |
| products. It is a inexpensive way to shop, I have been | | | | Example |
| in bid wars at a lot of different penny auction sites and | | | | For example, an auctioneer might put a $100 gadget |
| so far PennyBiddr has given me the best opprotunities. | | | | up for auction in a system that charges $1.00 per bid. |
| I have won some items valued in at over $800 in total | | | | Each bid increases the auction price by $0.10. Let's say |
| for only $20! | | | | that the starting price of the auction is $1.00, and that |
| What are the con's and pro's of online penny | | | | the final ("winning") bidder manages to acquire the |
| auctions? | | | | gadget at the price of $25.00. To get from $1.00 to |
| I believe the pro's are you can win a Nintendo Wii for | | | | $25.00 in $0.10 increments requires 240 bids. Each bid |
| rather less than $8 and the con's, well the only con I will | | | | cost each bidder $1.00. Thus, the auctioneer has |
| see is if you get into a bid war with someone. Then it's | | | | collected $240.00 for the bids, plus $25.00 for the sale |
| all about who has more bids or who can bid at the last | | | | of the item, for a total of $265.00. Assuming the |
| 2nd. | | | | auctioneer paid $90 for the gadget, the gross profit is |
| Would you recommend online auctions to friends? | | | | $175.00. However, it is unknown what customer |
| Absolutley yes! I am in love with auctions and think of | | | | acquisition costs are to run an auction so even those |
| them as a very good source to grab Nintendo Wii for | | | | auctions that appear to have high profit may actually |
| dirt cheap. I know some of my friends are already | | | | not generate a profit.(unlikely) |
| hooked, they have been going crazy over at | | | | The bidder who placed the last bid (for $25.00) has |
| PennyBiddr and winning stuff left and right. I think the | | | | had to spend at least $1.00 for the bid, as well as the |
| website is going to soon have a win limit, remember | | | | $25.00 to purchase a gadget which retails for $100.00. |
| reading a news article about them coming up with an | | | | He may have spent more money on prior, |
| idea. One of my friends is a online adict and has told | | | | unsuccessful bids. All the other bidders who have |
| me about some sites to be cautious about, mainly | | | | placed the prior bids have spent $1.00 for each bid |
| "biduh". | | | | they placed prior to the winning bid and came away |
| All in all, do your research before bidding. | | | | with nothing material. |
| Richard Thaler on and the rise of the penny auction | | | | Online penny auctions |
| By nudgeblog ( Quote) | | | | In the last few years, there have appeared a number |
| Richard Thaler’s latest Economic View column | | | | of successful sites operating on this model, which they |
| ponders the attraction of penny auction sites like that | | | | usually call "penny auctions". Typically, consumer |
| let people bid for merchandise in one cent increments, | | | | electronics such as cameras, laptops and MP3 players |
| while charging them lots of cents for the right to place | | | | are sold. Bids typically cost 10-25c USD each(or 50p |
| a bid. In the end, the winner gets a great deal, $20 for | | | | on Swoopobug.com, $1 on and up to £1.50 on in |
| a laptop or $15 for an iPod, with the rest of the | | | | GBP), each increasing the final value of the auction by |
| item’s cost (plus the auction site’s profits) paid | | | | 1-2c(or 1p), and extending the time of the auction by |
| for by losing bidders. Consumer electronics aren’t | | | | another 10 seconds or so. For example, |
| the only items Swoopo has put up for bid. | | | | bid4vouchers.co.uk sells bids for 50 British pence, |
| Swoopo has even sold cash using this format — | | | | raising the price by one penny. This means that any |
| specifically, checks for $1,000. My colleague Emir | | | | item which sells for more than 1/40 the RRP is a |
| Kamenica and I looked at 26 such auctions we found | | | | guaranteed profit. Any item which sells for the RRP is |
| in a data set posted on the Swoopo Web site. For | | | | effectively selling at a 4,000% profit. Conversely, an |
| each of these, the average revenue to Swoopo was | | | | item that sells for 1c is clearly a loss of whatever the |
| $2,452. Winning bidders also did well: Of the winners, all | | | | site must pay for the item - it is generally presumed |
| but two made money even after accounting for the | | | | that the sites "drop ship" the items. The most well |
| cost of their bids, with an average profit of $658. Still, | | | | known examples are perhaps Tenderosity.com, |
| the important point to remember is that, collectively, | | | | bid4vouchers.co.uk, bidray.com, gozila.co.uk and |
| bidders are losing money. Only the lucky last bidder is a | | | | bidstick.com, with dozens now in existence. Due to the |
| winner. | | | | real possibility of people spending a lot of money on |
| Swoopo also has put up blocks of bids for auction. | | | | the sites with no gain, or spending more than the retail |
| Since these bids cost Swoopo nothing, every penny | | | | value of the item they end up winning, a number of |
| earned is pure profit. One recent auction for 50 bids | | | | blog posts and articles analyzing and criticizing the |
| ended with a winning bid of $.60. | | | | model appeared. Other articles support the concept as |
| Sixty cents also happens to be the amount charges | | | | a fun and innovative form of auction. One programmer, |
| people for each bid placed. As Thaler observes, it | | | | Andy Garcia, and Rupert Elder, a Graduate in |
| wouldn’t be hard for smaller competitors to come | | | | Economics from the University of Warwick tried to |
| in and undercut Swoopo’s price. On the Times | | | | "game" Gozila and MadBid, but failed to win any |
| web page for Thaler’s column, three of | | | | auctions before abandoning the attempt. |
| Swoopo.com’s lesser known competitors are | | | | While penny auctions appear to have much in |
| advertising through Google’s web ads. None of | | | | common with lotteries and other forms of gambling, |
| them seem to be competing with Swoopo on price: | | | | they appear to avoid being regulated as such. |
| BidRodeo ($.70 per bid); Bidfire($1 per bid); BidCactus | | | | Bidrivals.com, for example, operates from Malta, |
| ($.75 per bid). Hard to imagine what else they are | | | | provides a legal advice statement explaining why it is |
| competing with Swoopo on. Free shipping? Strange, | | | | not a lottery. |
| indeed | | | | Features common to some of the sites include: |
| Each bid raises the price of the auction by a fixed | | | | Automatic bidding: bots provided by the site bid (called |
| amount and extends the time of the sale. When the | | | | "AutoBidder,"bidagent" "autobid", etc.) on your behalf up |
| time runs out on the auction, the last person to have | | | | to a maximum value. Multiple bots can end up bidding |
| placed a paid bid is the winner and gets to purchase | | | | against each other until all but one reach that maximum |
| the item at the auction ending price . Since this kind of | | | | value or run out of funds to bid with. |
| auction model is quite new and blurs many lines of | | | | Bidding on bid packs: some of the items at auction |
| business, some consider them to be a grey area | | | | include packs of bids themselves. |
| financial model. | | | | Discounts for purchasing larger numbers of bids. |
| The companies running the auction receives income | | | | Rookie auctions for people who have not won any |
| both in the form of the fees picked up for each bid, | | | | auction |
| and in the shape of payment for the winning bid. When | | | | Risks |
| taking a look at certain items, it may seem that these | | | | The primary risk of the bidding fee scheme website is |
| auctions are making giant profits. However , such sites | | | | that it is misunderstood as a regular auction |
| also solidly lose money on some auctions. Users are | | | | Unsophisticated participants will not understand the |
| much more likely to get excellent deals on newly | | | | distinction between a regular auction and a pay per bid |
| opened sites, as there is not too much competition | | | | auction, and so might apply poor judgment when |
| from other bidders and auctions tend not to last so | | | | participating. This has the secondary impact of polluting |
| long as on mature sites. If a pay per bid auction sites | | | | internet advertising with ads where a customer is |
| doesn’t attract enough bidders, it sells many items | | | | unable to distinguish between regular stores or |
| at a complete loss. | | | | traditional auctions from pay per bid auction sites. As a |
| Exampleas an example, an auctioneer might put a | | | | consequence, the value of internet advertising and |
| $100 gadget up for auction in a system that charges | | | | price comparison sites are diminished. |
| $1.00 per bid. Shall we say that the starting price of the | | | | For example, one bidding fee scheme site placed an |
| sale is $1.00, and that the final (‘winning’ ) bidder | | | | internet ad that advertised "A New PS3 at |
| manages to get the contraption at the price of $25.00. | | | | $80.35,deceptively implying that a new PlayStation 3 |
| To get from $1.00 to $25.00 in $0.10 increments needs | | | | was available for anyone to purchase at that price. |
| 240 bids. Each bid cost each bidder $1.00. Assuming | | | | Bidding fee scheme sites also exploit the sunk costs |
| the auctioneer paid $90 for the device, the gross profit | | | | fallacy that is endemic in the human psyche. The |
| is $175.00. However , it is not known what customer | | | | fallacy causes players to psychologically feel that the |
| signup costs are to run an auction so even those | | | | past progress of a bidding fee scheme game affects |
| auctions that have major profit may actually not | | | | future behavior, thus biasing the player towards larger |
| generate a profit. | | | | wagers. |
| The bidder who placed the last bid ( for $25.00 ) has | | | | Some bidding fee scheme websites provide automatic |
| needed to spend at least $1.00 for the bid, as well as | | | | agents that automate the placing of "bids". These |
| the $25.00 to get a gadget which retails for $100.00. | | | | agents are marketed in a way to make them seem |
| He may have spent extra cash on prior, unsuccessful | | | | comparable to the kinds of bidding agents (for |
| bids. All the other bidders who have placed the prior | | | | example, PhantomBidder) used on auction sites such |
| bids have spent $1.00 for each bid they placed prior to | | | | as eBay. However, in practice, these agents facilitate |
| the winning bid and came away with nothing material. | | | | the rapid investment of large wagers by |
| Penny auctions onlineas an example, one bidding fee | | | | unsophisticated players who might not fully understand |
| scheme site placed a Net ad that advertised’A | | | | how the contest they are participating in works |
| New PS3 at $40.59,’[citation needed] deceptively | | | | Because bidding fee scheme websites exist in a legal |
| implying a new PlayStation three was available for any | | | | gray area, there is little to no verifiable enforcement of |
| one to get at that cost. | | | | rules. |
| This practice is not lawful in legitimate auctions, but is | | | | Much like any auction site, there is no protection from |
| especially nefarious in bidding fee scheme | | | | the practice of bid shilling, in which the auctioneer uses |
| auctions.[citation needed] because of the chance of | | | | a puppet to place bids in his own auction. This practice |
| shilling, even after the players have spent large | | | | is illegal in legitimate auctions, but is particularly nefarious |
| amounts of money purchasing’bids’ in the | | | | in bidding fee scheme auctions.Due to the risk of shilling, |
| auction, the auctioneer can still deprive any of the | | | | even after the players have spent large quantities of |
| players of a winning bid by placing an additional bid of | | | | money purchasing "bids" in the auction, the auctioneer |
| his very own. To protect oneself against the chance | | | | can still deprive any of the players of a winning bid by |
| of such shill bidding, the best practice would be to use | | | | placing an additional bid of his own. To protect oneself |
| only credible established websites that divulge their | | | | against the risk of such shill bidding, the best practice |
| management, investors or other details of the | | | | would be to use only reputable long-standing websites |
| company.[citation needed] Those sites that do not | | | | that disclose their management, investors or other |
| instantly reveal who is running the site, complete with | | | | details of the company.Those sites that do not readily |
| contact information, should be avoided.[citation | | | | divulge who is running the site, complete with contact |
| needed]there were allegations that Penny Auction | | | | information, should be avoided. |
| Watch is actually owned by several of the penny | | | | Penny Auction Watchis a consumer watchdog blog |
| auction sites ( which would result in a conflict of | | | | and community that helps bidders distinguish between |
| interest ) but these are denied by Penny Auction | | | | legitimate and fraudulent auctions. |
| Watch. | | | | Certain companies that run bidding fee scheme |
| Certain corporations that run bidding fee scheme | | | | websites show the same auctions on multiple |
| websites show the same auctions on multiple | | | | websites . |
| websites. | | | | Since the profit is made through bidding fees, the |
| These websites provide more details | | | | bidding fees are not refundable. Also, as with any other |
| Penny Auctions – a bit of analysis | | | | site, bidding fee sites can appear and disappear quickly |
| By stevekoswoopo, bidray, bidstick (bids tick, | | | | so it could be possible for a bidding fee site to collect |
| apparently), bidrivals and dozens of others are running | | | | bidding fees for several auctions and disappear before |
| what we’ll call “penny auctions“. Using as the | | | | awarding the prize. In contrast, in Dec. 2009, began a |
| example, they all work on the following principals: | | | | "buy-it-now" function which allows losing bidders to |
| There are consumer electronics for auction, usually at | | | | apply all their lost bids towards the purchase of an |
| big discounts. | | | | item. Additionaly intitited their Bid till you win option |
| It costs a certain amount to make a bid, regardless of | | | | which will replace all lost bids( paid ) to the members |
| whether that bid is ultimately successful. For | | | | account until they win an auction This constitutes a |
| bidrivals.com, it’s 40 British pence. | | | | significant change in the business model by decreasing |
| Every bid raises the price by a fixed amount. In this | | | | risks for the bidder. |
| example, by 1c. It also extends the auction to last | | | | |
| another 15 seconds or so. | | | | Penny Auctions Comparing apples to oranges at After |
| If you “win” the auction you must then buy the | | | | reading this account of traditional style penny auctions |
| item at the final price. | | | | and doing a comparrison here is what you will find |
| It’s not a lottery. Because they say so. | | | | once a member registers he or she receives free bids |
| At first glance, the auction looks great – buy a | | | | to get aquainted with how the auctions work if a |
| phone for $20! Buy a plasma tv for $1.53! | | | | member decideds to purchase bids, the member |
| But not so fast. A couple of things that are not obvious | | | | places his bids and here is where the simularity ends, if |
| to the beginner: | | | | the member does not win the auction his purchased |
| Every dollar of the final price represents $40 in bidding | | | | bids are returned to the members account , this policy |
| fees. A $1000 TV selling for $1 is a big loss for the site. | | | | continues until the member wins an auction.if the |
| The same TV selling for $25 is a small profit. Sold for | | | | member choses to end the auction and purchase the |
| $1000 it’s a $40,000 profit. | | | | item, any bids the member has made is applied to the |
| You can use a site-provided bot (“bidbot”, | | | | purchase price of the item.( so the member still takes |
| “bidbutler”…) to bid on your behalf. If two people | | | | no loss) and quite often the purchase or buy it now |
| do this simultaneously, they’ll both lose a lot of | | | | prices is much less than what the member would have |
| money with no apparent gain. | | | | paid in a retail store.. the member is also rewarded for |
| So, is it a scam? Well, there are really two quesions: | | | | the bidding process by getting free bids just for |
| If the site is running completely as described, | | | | participating. Swoopbug has done all possible to make |
| legitimately, and not using shill bidders (bidding on their | | | | sure the member has more than a fair chance at |
| own auctions), is this an honest way to make a living | | | | winning an auction. |
| – and should you participate? | | | | For example, an auctioneer might put a $100 gadget |
| How do you know if a site is legitimate? Is it likely to | | | | up for auction in a system that charges $1.00 per bid. |
| be? | | | | Each bid increases the auction price by $0.10. Let's say |
| Is this honest? | | | | that the starting price of the auction is $1.00, and that |
| I see very little to distinguish these penny auctions from | | | | the final ("winning") bidder manages to acquire the |
| gambling: | | | | gadget at the price of $25.00. To get from $1.00 to |
| When you bid, whether you win or not depends | | | | $25.00 in $0.10 increments requires 240 bids. Each bid |
| entirely on whether anyone else bids in the next 15 | | | | cost each bidder $1.00. Thus, the auctioneer has |
| seconds. Assuming you’re bidding on an item which | | | | collected $240.00 for the bids, plus $25.00 for the sale |
| is clearly a bargain (eg, $5 for a TV), then the normal | | | | of the item, for a total of $265.00. Assuming the |
| considerations of auctions do not apply: any rational | | | | auctioneer paid $90 for the gadget, the gross profit is |
| person would bid if they could so for free. | | | | $175.00. However, it is unknown what customer |
| The house take is enormous. Frighteningly so. For | | | | acquisition costs are to run an auction so even those |
| example, imagine on average the site sells items at a | | | | auctions that appear to have high profit may actually |
| 65% discount from RRP, and bids cost 40 times as | | | | not generate a profit. |
| much as the amount they increase the value by. This | | | | The bidder who placed the last bid (for $25.00) has |
| means that it costs on average (100-65)x40 to win a | | | | had to spend at least $1.00 for the bid, as well as the |
| $100 item (whose value is now $65), or in other words | | | | $25.00 to purchase a gadget which retails for $100.00. |
| (100-65)x40/65=$21.50 to win one dollar’s worth of | | | | He may have spent more money on prior, |
| value. By comparison, a skilled blackjack player in a | | | | unsuccessful bids. All the other bidders who have |
| casino can pay as little as $1.01 to win $1’s worth of | | | | placed the prior bids have spent $1.00 for each bid |
| value. | | | | they placed prior to the winning bid and came away |
| Most bids give no return to the bidder. This means that | | | | with nothing material. |
| even if you don’t want to call it “gambling”, it | | | | In the last few years, there have appeared a number |
| should still be regulated, as the potential for dishonesty | | | | of successful sites operating on this model, which they |
| is great. You don’t want to be bidding for a dead | | | | usually call "penny auctions". Typically, consumer |
| donkey. | | | | electronics such as cameras, laptops and MP3 players |
| – Can you trust them? | | | | are sold. Bids typically cost 10-25c USD each(or 50p |
| There are two main risks: | | | | on Swoopo.co.uk, $1 on and up to £1.50 on in |
| The site may use “shill bidders” to bid on items | | | | GBP),swoobug.com, each increasing the final value of |
| that would otherwise go for a low price. This could | | | | the auction by 1-2c(or 1p), and extending the time of |
| prevent you ever winning, or cause you to spend far | | | | the auction by another 10 seconds or so. For example, |
| more than you want. | | | | bid4vouchers.co.uk sells bids for 50 British pence, |
| Even if you “win”, the site may never ship. The | | | | raising the price by one penny. This means that any |
| whole thing could be a scam. | | | | item which sells for more than 1/40 the RRP is a |
| Fortunately, there are sites on the look out for this kind | | | | guaranteed profit. Any item which sells for the RRP is |
| of thing, such as There is evidence of dodgy sites, | | | | effectively selling at a 4,000% profit. Conversely, an |
| such as fake testimonials. | | | | item that sells for 1c is clearly a loss of whatever the |
| So, what are the incentives for a site to use shill | | | | site must pay for the item - it is generally presumed |
| bidding? Well, as we saw above, the difference | | | | that the sites "drop ship" the items.[1] The most well |
| between a $1000 item selling for $1 and $25 | | | | known examples are perhaps Tenderosity.com, |
| doesn’t look like much, but it’s the difference | | | | bid4vouchers.co.uk, bidray.com, gozila.co.uk and |
| between breaking even and posting a big loss. Imagine | | | | bidstick.com, with dozens now in existence.[2] Due to |
| there is fairly steady bidding activity, but there are just | | | | the real possibility of people spending a lot of money |
| a few gaps before that $25 mark. If the site could shill | | | | on the sites with no gain, or spending more than the |
| just a few times, they would massively increase their | | | | retail value of the item they end up winning, a number |
| profitability. | | | | of blog posts and articles analysing and criticising the |
| But how much should they shill? Consider two | | | | model appeared.[1][3][4][5] Other articles support the |
| strategies:bid whenever the time gets to 1 second; | | | | concept as a fun and innovative form of |
| orbid immediately after anyone else bids. | | | | auction.[6][7][8] One programmer, Andy Garcia, and |
| In 1), the shill bids guarantee almost any asking price, as | | | | Rupert Elder, a Graduate in Economics from the |
| long as there is still some demand. This has the | | | | University of Warwick tried to "game" Gozila and |
| potential to greatly increase profit, and decrease | | | | MadBid, but failed to win any auctions before |
| variance. | | | | abandoning the attempt. [9] |
| In 2), half the bids end up being shill bids. This causes | | | | While penny auctions appear to have much in |
| two problems: first, you’re directly losing one bid fee | | | | common with lotteries and other forms of gambling, |
| for every shill bid. Second, by inflating the price, | | | | they appear to avoid being regulated as such. |
| you’re accelerating reaching the point at which | | | | Bidrivals.com, for example, operates from Malta, |
| people no longer want to bid, because the prize at | | | | provides a legal advice statement explaining why it is |
| stake is shrinking. So if people might normally bid | | | | not a lottery |
| strongly up to half the value of the item, then shilling | | | | Discounts for purchasing larger numbers of bids. |
| along the way is just replacing paying bids with free | | | | The primary risk of the bidding fee scheme website is |
| ones. You might even decrease the final sale value, | | | | that it is misunderstood as a regular auction.[citation |
| and every dollar of sale value lost is $40 of bidding | | | | needed] Unsophisticated participants will not |
| fees lost. | | | | understand the distinction between a regular auction |
| Conclusion: shill bidding seems likely to occur, in small | | | | and a pay per bid auction, and so might apply poor |
| doses, because the incentive is just so strong. | | | | judgment when participating. This has the secondary |
| Can you beat them? | | | | impact of polluting internet advertising with ads where |
| Probably not. It’s been tried. To beat it: | | | | a customer is unable to distinguish between regular |
| You have to find a site that is not a complete scam. | | | | stores or traditional auctions from pay per bid auction |
| You have to find a site that is completely honest. Even | | | | sites. As a consequence, the value of internet |
| a little bit of shill bidding will crush you. | | | | advertising and price comparison sites are diminished. |
| You have to defeat an absolutely incredible house | | | | For example, one bidding fee scheme site placed an |
| take of 95% (remember, normal house take for | | | | internet ad that advertised "A New PS3 at |
| gambling ranges from 1% to 5%). | | | | $80.35,"[citation needed] deceptively implying that a |
| You have to know enough about the auctions and | | | | new PlayStation 3 was available for anyone to |
| your fellow users to make you fairly confident that no | | | | purchase at that price. |
| one will bid in the next 15 seconds. In the $1000 TV at | | | | Bidding fee scheme sites also exploit the sunk costs |
| $25 case (40c to bid), you need there to be a greater | | | | fallacy that is endemic in the human psyche. The |
| than 1/250 chance that you will win the auction with | | | | fallacy causes players to psychologically feel that the |
| this one bid. Sound easy? Think: if that were the case, | | | | past progress of a bidding fee scheme game affects |
| how did the price get to $25? It would stop, on | | | | future behavior, thus biasing the player towards larger |
| average, at $2.50. | | | | wagers. |
| If it is beatable, you’d think people would have done | | | | Some bidding fee scheme websites provide automatic |
| it. And, since they’re capped at 4 wins per month | | | | agents that automate the placing of "bids". These |
| generally, there would not be much harm in them | | | | agents are marketed in a way to make them seem |
| sharing their secret. Unless they have a network of | | | | comparable to the kinds of bidding agents (for |
| penny auction-beating bots. There’s a thought. | | | | example, PhantomBidder) used on auction sites such |
| But just in case you wanted to try: | | | | as eBay. However, in practice, these agents facilitate |
| Compare sites. Find a safe one that appears to be | | | | the rapid investment of large wagers by |
| losing money. | | | | unsophisticated players who might not fully understand |
| Collect lots of data. Try GreaseMonkey. | | | | how the contest they are participating in works.[citation |
| Find the right time of day, with the least competition. | | | | needed] |
| Track all the auctions, pick individual moments and | | | | Because bidding fee scheme websites exist in a legal |
| place bids. | | | | gray area, there is little to no verifiable enforcement of |
| Don’t try and win a specific auction. Bid any time | | | | rules.[citation needed] |
| your positive expectation on that bid is positive. The | | | | Much like any auction site, there is no protection from |
| moment could pass. | | | | the practice of bid shilling, in which the auctioneer uses |
| Consider the effect of distractions. A good moment | | | | a puppet to place bids in his own auction. This practice |
| might be when several auctions are closing at the | | | | is illegal in legitimate auctions, but is particularly nefarious |
| same time. You could even engineer that by bidding on | | | | in bidding fee scheme auctions.[citation needed] Due to |
| several simultaneously. | | | | the risk of shilling, even after the players have spent |
| Consider using several accounts to bid with, to drive | | | | large quantities of money purchasing "bids" in the |
| off other bidders. If you know they’re paying | | | | auction, the auctioneer can still deprive any of the |
| attention and will react appropriately, that is. I’m | | | | players of a winning bid by placing an additional bid of |
| thinking you bid with a group, gradually spacing their | | | | his own. To protect oneself against the risk of such |
| bids further apart and hoping you can sneak a 15 | | | | shill bidding, the best practice would be to use only |
| second gap through. | | | | reputable long-standing websites that disclose their |
| Penny Auctions – Skill or Chance? | | | | management, investors or other details of the |
| December 21, 2008 by techobserver | | | | company.[citation needed] Those sites that do not |
| BBC News brought the whole area of Penny Auctions | | | | readily divulge who is running the site, complete with |
| to my attention yesterday. These “auction | | | | contact information, should be avoided.[citation needed] |
| websites” are being accused of really being nothing | | | | Since the profit is made through bidding fees, the |
| more than a lottery with 0 skill, I duely got myself an | | | | bidding fees are not refundable. Also, as with any other |
| account on one of the biggest (madbid.com, is another) | | | | site, bidding fee sites can appear and disappear quickly |
| to see for myself. | | | | so it could be possible for a bidding fee site to collect |
| The premise; | | | | bidding fees for several auctions and disappear before |
| Lots of highly desirable items (laptops, cars, cash etc) | | | | awarding the prize.[citation needed]. In contrast, in |
| are available to be bid on that look like crazy cheap | | | | August 2009, Swoopo began a "Swoop-it-now" |
| prices at first, 1 or 2 pounds. | | | | function which allows losing bidders to apply all their |
| When you place a “bid” you don’t specify an | | | | lost bids towards the purchase of an item. This |
| amount, everyone just increases the item’s current | | | | constitutes a significant change in the business model |
| price by 1p. | | | | by decreasing risks for the bidder. |
| You have to *pay* to place a bid, about a pound a | | | | Since the webmaster is the only one who can see the |
| time. | | | | bids, it is also possible for the webmaster to bid on the |
| Each auction has an “auction time” normally only | | | | item himself, which would be unfair to others but hard |
| about 2 minutes. | | | | to detect. This would, however, be illegal and once |
| Each time a penny bid is placed, the timer resets back | | | | again, bidders can protect themselves from this by |
| up to 2 minutes. | | | | only bidding at sites operated by long-standing |
| You win the item if you bid and the time reaches 0 | | | | reputable companies. |