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Penny Auctions" facts & Fictions

Below is a series of informational writings, blogs and posts about this new and exciting some call it the best thing that has happend since e-bay, some call it a scam. What ever the outcome, the facination with penny auctions is out of control. Swoopbug.com is one of those fast rsing internet penny auctions and swoopbug and only swoobug want you to get the whole story so you can make up your mind. We invite you to visit us for a free trial of our penny auctions but only after you have read the writings below.

Tips for live penny auctions Monday, Dec 14 2009
Uncategorized live penny auction, live penny auctions, penny auction, penny auctions, penny bid auctions jasonnash6881 12:36 am
Gambling hasn’t got anything to do with an always random chance that your investment will not pay off. Like with 21, gambling can be in a very controlled environment. I believe the outline of the site definitely constitutes gambling what with the chance versus reward system and it’s definitely a 0 sum game.
Folks keep bidding, as the costs seem so low — but since everybody has to pay to bid, the corporations ends up making a lot of money — often many times the exact value of the product. Basically, the company and whoever’wins’ the sale are probably going to make out okay — while each other bidder loses. Apparently, there are a number of such sites doing similar models, and the United Kingdom presidency is spotting that it’s pretty similar to betting and doubtless should be regulated as a gambling site.
The reasoning is that folks are paying money and may not get anything back for it — which makes it similar to gambling. However , dependent on how these sites are run, it’s not as though the results are a genuine gamble — it’s still about whoever bids the highest for a good, so it sort of feels like a stretch to call it gambling. It is a dumb move to get involved in any of these auctions in the 1st place ( in numerous ways worse than betting ), but that doesn’t necessarily mean that they need to be regulated like gambling sites.
This is actually a patent-protected method of auctions that was’invented’ in Israel around 8 years ago. It was quickly outed for being exactly that – betting.
I usually agree with Michael, but in this example he is the one with his head in the sand. In any gambling endeavor, there’s someone that wins. Nothing’different’ here.
In the final sense, this isn’t different ; it is equivalent to’liar’s poker’ and similar games - it is betting.
Bidding Tips – All You Need to Know About Bidding Techniques at Auctions
If you’re going to bid for something at penny auctions you should have a understanding of the basic techniques of bidding. There are a number of strategies utilised by bidders to maximise their success ; we’ve listed the hottest for you here :
Head Shake or Nod
One of the most important techniques to take into an penny auctions.
2. In this situation, the bid jumper wins.
it may be that the other bidders would have stopped bidding after $60 anyway, in which case the bid jumper wins the lot, but ends up paying $150 instead of $65.
3. Lighthouse Bidding
This is the term used when a bidder holds their paddle up leaves it there. This sends out a message to other bidders that they are serious about winning the lot, and will remain in the bidding for the long haul. This could have the effects of intimidating the other purchasers into dropping out of the bidding.
4. Cutting the Bid
Bidding has a tendency to increase in regular increments unless the penny auctionseer determines otherwise. If the bidding has been proceeding from $1,000 to $1,100 to $1,200, and you need to bid $1,250 instead of $1,300, you can indicate this to the penny auctionseer by raising your arm and holding your hand horizontally at your neck, with the palm down. This tells him that you would like to chop the increment by half. You can also do this by calling out the amount that you want to bid, although you should not attempt to do this too frequently. .

auction bargain
Online Auctions are great. Not only do you have a chance to win an item at a great price, but they’re fun and exciting. Online auctions have revolutionized the way that auctions are conducted in the U.S.A Whether it’s property auctions, government auctions, or police auctions, Internet auctions have become one of the largest most successful ways to auction items.
There are a wide variety of online auction sites. Largely unknown in the U.S.A are Penny Auctions, where the bid price increases only in increments of a penny at a time. Unlike traditional online auctions where a bidder can decide to bid as much or as little as they want for an item, in a penny auction you can only bid one penny higher than the previous bidder. So for example, a new big screen t.v. will start at a bid price of $0.00. When someone places a bid, they can only increase the price of the item by $0.01 cents. So the winning bid for the t.v is now 1 penny. Now someone else decides to place a bid, so the winning bid goes up to 2 cents, and so on.
Like all auctions, weather they’re online auctions or traditional live auctions, the bidding is over when the time expires on the item. However, with penny auctions because the bidding increment is so small, many penny auctions will have an expiration time that is shorter than the typical online auction, like 5, 10, or 30 minutes. In most cases, every time a new bid is placed on an item, the timer resets to it’s original expiration time. So using our example above with the big screen t.v. if the timer is originally set for 10 minutes, the clock starts counting down. When someone places a bid, the clock resets to 10 minutes, and begins counting down again. If someone else places a bid, then the clock resets, and begins counting down again. However if no one places another bid, and the time expires, someone just won a T.V for a GREAT BARGAIN!!
So what’s the catch? How can anybody really win a t.v. or an ipod, or any thing for that matter for pennies in an online auction? Well, you have to change the way you look at bidding. In traditional Internet auction sites, you can decide what you are willing to bid for an item in advance. If someone else bids higher than you, you don’t win the item and it didn’t cost you anything. With penny auctions however, because the bid increment only goes up by a penny, you have to pay in advance for your bids. In other words, you buy your bids first, and only when you decide to use a bid, will the bid price go up. What does this mean? Well, going back to our example from above with the television, if you wanted the opportunity to win that t.v. for pennies, you would have to first spend money on buying your bids. Then you would have to watch the clock, watch what others are doing, and decide on the most opportune moment to use those bids in order to win the t.v. This makes bidding on a penny auction site very interactive, and EXCITING!!!
So how much are bids? There are several different online auction sites u.s.a with different bid prices. Swoopbug.com,swoopo.com,telebids.com

We go over why penny auctions are better than ebay

Why settle for slow auctions like ebay when you can go straight to live penny bid auctions and win right away?
You can sell thousands of items, but which are the best things to sell on eBay? Hopefully I can supply you with some creativity to get your thoughts flowing.
If you used to be a customer ( which you are, ) what would you purchase on the internet? ( I’m sure you’ve acquired something online before )
What would you purchase YOURSELF?
These are the types of questions that you have got to ask yourself or anyone that wants to buy something online, as it provides precious information that you can use to generate income by selling the things on eBay that will solve people’s’s issues.
folks go to eBay looking for something that will probably either create pleasure or solve a difficulty for them.
And yet another way to put it :
shall we say that you’re looking for a red ball. You go to eBay and type in RED BALL.
Would you be ecstatic and settle with that? No!
here’s a short list though to further spark your creativity on the best things to sell on eBay :
– Phones ( people are constantly looking for the newest phones )
- Sports equipment ( Rackets, etc )
People are always buying these, and if you can get them for a fair price yourself then you can make a killing! Here is a hint : iPods, mp3 players, and private media. Those sell like fire, and people will always desire them!
1 Cent auctions are hard to find now adays, and if there not hard most can’t be trusted. Penny auction talk with random person

auction talk with random person
Interview with a John about penny auctions :

What did you know about 'penny auctions'?

Penny auctions are a source for great products!
you buy packages for bids that you can use for expensive products. It is a inexpensive way to shop, I have been in bid wars at a lot of different penny auction sites and so far PennyBiddr has given me the best opprotunities. I have won some items valued in at over $800 in total for only $20!

What are the con's and pro's of online penny auctions?

I believe the pro's are you can win a Nintendo Wii for rather less than $8 and the con's, well the only con I will see is if you get into a bid war with someone. Then it's all about who has more bids or who can bid at the last 2nd.

Would you recommend online auctions to friends?

Absolutley yes! I am in love with auctions and think of them as a very good source to grab Nintendo Wii for dirt cheap. I know some of my friends are already hooked, they have been going crazy over at PennyBiddr and winning stuff left and right. I think the website is going to soon have a win limit, remember reading a news article about them coming up with an idea. One of my friends is a online adict and has told me about some sites to be cautious about, mainly "biduh".

All in all, do your research before bidding.

Richard Thaler on Swoopo.com and the rise of the penny auction
By nudgeblog ( Quote)
Richard Thaler’s latest Economic View column ponders the attraction of penny auction sites like Swoopo.com that let people bid for merchandise in one cent increments, while charging them lots of cents for the right to place a bid. In the end, the winner gets a great deal, $20 for a laptop or $15 for an iPod, with the rest of the item’s cost (plus the auction site’s profits) paid for by losing bidders. Consumer electronics aren’t the only items Swoopo has put up for bid.
Swoopo has even sold cash using this format — specifically, checks for $1,000. My colleague Emir Kamenica and I looked at 26 such auctions we found in a data set posted on the Swoopo Web site. For each of these, the average revenue to Swoopo was $2,452. Winning bidders also did well: Of the winners, all but two made money even after accounting for the cost of their bids, with an average profit of $658. Still, the important point to remember is that, collectively, bidders are losing money. Only the lucky last bidder is a winner.
Swoopo also has put up blocks of bids for auction. Since these bids cost Swoopo nothing, every penny earned is pure profit. One recent auction for 50 bids ended with a winning bid of $.60.
Sixty cents also happens to be the amount Swoopo.com charges people for each bid placed. As Thaler observes, it wouldn’t be hard for smaller competitors to come in and undercut Swoopo’s price. On the Times web page for Thaler’s column, three of Swoopo.com’s lesser known competitors are advertising through Google’s web ads. None of them seem to be competing with Swoopo on price: BidRodeo ($.70 per bid); Bidfire($1 per bid); BidCactus ($.75 per bid). Hard to imagine what else they are competing with Swoopo on. Free shipping? Strange, indeed

Each bid raises the price of the auction by a fixed amount and extends the time of the sale. When the time runs out on the auction, the last person to have placed a paid bid is the winner and gets to purchase the item at the auction ending price . Since this kind of auction model is quite new and blurs many lines of business, some consider them to be a grey area financial model.
The companies running the auction receives income both in the form of the fees picked up for each bid, and in the shape of payment for the winning bid. When taking a look at certain items, it may seem that these auctions are making giant profits. However , such sites also solidly lose money on some auctions. Users are much more likely to get excellent deals on newly opened sites, as there is not too much competition from other bidders and auctions tend not to last so long as on mature sites. If a pay per bid auction sites doesn’t attract enough bidders, it sells many items at a complete loss.
Example
as an example, an auctioneer might put a $100 gadget up for auction in a system that charges $1.00 per bid. Shall we say that the starting price of the sale is $1.00, and that the final (‘winning’ ) bidder manages to get the contraption at the price of $25.00. To get from $1.00 to $25.00 in $0.10 increments needs 240 bids. Each bid cost each bidder $1.00. Assuming the auctioneer paid $90 for the device, the gross profit is $175.00. However , it is not known what customer signup costs are to run an auction so even those auctions that have major profit may actually not generate a profit.
The bidder who placed the last bid ( for $25.00 ) has needed to spend at least $1.00 for the bid, as well as the $25.00 to get a gadget which retails for $100.00. He may have spent extra cash on prior, unsuccessful bids. All the other bidders who have placed the prior bids have spent $1.00 for each bid they placed prior to the winning bid and came away with nothing material.
Penny auctions online
as an example, one bidding fee scheme site placed a Net ad that advertised’A New PS3 at $40.59,’[citation needed] deceptively implying a new PlayStation three was available for any one to get at that cost.
This practice is not lawful in legitimate auctions, but is especially nefarious in bidding fee scheme auctions.[citation needed] because of the chance of shilling, even after the players have spent large amounts of money purchasing’bids’ in the auction, the auctioneer can still deprive any of the players of a winning bid by placing an additional bid of his very own. To protect oneself against the chance of such shill bidding, the best practice would be to use only credible established websites that divulge their management, investors or other details of the company.[citation needed] Those sites that do not instantly reveal who is running the site, complete with contact information, should be avoided.[citation needed]
there were allegations that Penny Auction Watch is actually owned by several of the penny auction sites ( which would result in a conflict of interest ) but these are denied by Penny Auction Watch.
Certain corporations that run bidding fee scheme websites show the same auctions on multiple websites.
These websites provide more details

Penny Auctions – a bit of analysis
By steveko
swoopo, bidray, bidstick (bids tick, apparently), bidrivals and dozens of others are running what we’ll call “penny auctions“. Using bidrivals.com as the example, they all work on the following principals:
There are consumer electronics for auction, usually at big discounts.
It costs a certain amount to make a bid, regardless of whether that bid is ultimately successful. For bidrivals.com, it’s 40 British pence.
Every bid raises the price by a fixed amount. In this example, by 1c. It also extends the auction to last another 15 seconds or so.
If you “win” the auction you must then buy the item at the final price.
It’s not a lottery. Because they say so.
At first glance, the auction looks great – buy a phone for $20! Buy a plasma tv for $1.53!
But not so fast. A couple of things that are not obvious to the beginner:
Every dollar of the final price represents $40 in bidding fees. A $1000 TV selling for $1 is a big loss for the site. The same TV selling for $25 is a small profit. Sold for $1000 it’s a $40,000 profit.
You can use a site-provided bot (“bidbot”, “bidbutler”…) to bid on your behalf. If two people do this simultaneously, they’ll both lose a lot of money with no apparent gain.
So, is it a scam? Well, there are really two quesions:
If the site is running completely as described, legitimately, and not using shill bidders (bidding on their own auctions), is this an honest way to make a living – and should you participate?
How do you know if a site is legitimate? Is it likely to be?
Is this honest?
I see very little to distinguish these penny auctions from gambling:
When you bid, whether you win or not depends entirely on whether anyone else bids in the next 15 seconds. Assuming you’re bidding on an item which is clearly a bargain (eg, $5 for a TV), then the normal considerations of auctions do not apply: any rational person would bid if they could so for free.
The house take is enormous. Frighteningly so. For example, imagine on average the site sells items at a 65% discount from RRP, and bids cost 40 times as much as the amount they increase the value by. This means that it costs on average (100-65)x40 to win a $100 item (whose value is now $65), or in other words (100-65)x40/65=$21.50 to win one dollar’s worth of value. By comparison, a skilled blackjack player in a casino can pay as little as $1.01 to win $1’s worth of value.
Most bids give no return to the bidder. This means that even if you don’t want to call it “gambling”, it should still be regulated, as the potential for dishonesty is great. You don’t want to be bidding for a dead donkey.

– Can you trust them?
There are two main risks:
The site may use “shill bidders” to bid on items that would otherwise go for a low price. This could prevent you ever winning, or cause you to spend far more than you want.
Even if you “win”, the site may never ship. The whole thing could be a scam.
Fortunately, there are sites on the look out for this kind of thing, such as pennyauctionwatch.com. There is evidence of dodgy sites, such as fake testimonials.
So, what are the incentives for a site to use shill bidding? Well, as we saw above, the difference between a $1000 item selling for $1 and $25 doesn’t look like much, but it’s the difference between breaking even and posting a big loss. Imagine there is fairly steady bidding activity, but there are just a few gaps before that $25 mark. If the site could shill just a few times, they would massively increase their profitability.
But how much should they shill? Consider two strategies:
bid whenever the time gets to 1 second; or
bid immediately after anyone else bids.
In 1), the shill bids guarantee almost any asking price, as long as there is still some demand. This has the potential to greatly increase profit, and decrease variance.
In 2), half the bids end up being shill bids. This causes two problems: first, you’re directly losing one bid fee for every shill bid. Second, by inflating the price, you’re accelerating reaching the point at which people no longer want to bid, because the prize at stake is shrinking. So if people might normally bid strongly up to half the value of the item, then shilling along the way is just replacing paying bids with free ones. You might even decrease the final sale value, and every dollar of sale value lost is $40 of bidding fees lost.
Conclusion: shill bidding seems likely to occur, in small doses, because the incentive is just so strong.
Can you beat them?
Probably not. It’s been tried. To beat it:
You have to find a site that is not a complete scam.
You have to find a site that is completely honest. Even a little bit of shill bidding will crush you.
You have to defeat an absolutely incredible house take of 95% (remember, normal house take for gambling ranges from 1% to 5%).
You have to know enough about the auctions and your fellow users to make you fairly confident that no one will bid in the next 15 seconds. In the $1000 TV at $25 case (40c to bid), you need there to be a greater than 1/250 chance that you will win the auction with this one bid. Sound easy? Think: if that were the case, how did the price get to $25? It would stop, on average, at $2.50.
If it is beatable, you’d think people would have done it. And, since they’re capped at 4 wins per month generally, there would not be much harm in them sharing their secret. Unless they have a network of penny auction-beating bots. There’s a thought.
But just in case you wanted to try:
Compare sites. Find a safe one that appears to be losing money.
Collect lots of data. Try GreaseMonkey.
Find the right time of day, with the least competition.
Track all the auctions, pick individual moments and place bids.
Don’t try and win a specific auction. Bid any time your positive expectation on that bid is positive. The moment could pass.
Consider the effect of distractions. A good moment might be when several auctions are closing at the same time. You could even engineer that by bidding on several simultaneously.
Consider using several accounts to bid with, to drive off other bidders. If you know they’re paying attention and will react appropriately, that is. I’m thinking you bid with a group, gradually spacing their bids further apart and hoping you can sneak a 15 second gap through.

Penny Auctions – Skill or Chance?
December 21, 2008 by techobserver
BBC News brought the whole area of Penny Auctions to my attention yesterday. These “auction websites” are being accused of really being nothing more than a lottery with 0 skill, I duely got myself an account on one of the biggest (madbid.com, swoopo.com is another) to see for myself.
The premise;
Lots of highly desirable items (laptops, cars, cash etc) are available to be bid on that look like crazy cheap prices at first, 1 or 2 pounds.
When you place a “bid” you don’t specify an amount, everyone just increases the item’s current price by 1p.
You have to *pay* to place a bid, about a pound a time.
Each auction has an “auction time” normally only about 2 minutes.
Each time a penny bid is placed, the timer resets back up to 2 minutes.
You win the item if you bid and the time reaches 0 with no one else bidding.
In effect – when you place a bid you are hoping no one else bids again in the next 2 minutes. I really fail to see the skill here, it’s a game of chance, the luck that no one else will bid on that item. I observed some live auctions, they go on for hours.
I watched the 10 live auctions this afternoon for about half an hour, time after time the timers would get to just 2 or 3 seconds before go straight back to the max. Let’s remember that it costs about £1 to place a bid, if an item is shown as £15, that means there has been 1500 penny bids, each costing £1 – when the site is giving away a sub grand laptop I know who’s winning!
In the half hour I only saw 2 auctions actually end, their timers getting to 0. One was a “prize” of 50 extra bids, the other some spa day. The 3 free bids I got? I went for the new

form factor MacBook of course – the timer didn’t even get close to 0 each time.
The testimonials page of this site seems to suggest Fiona Philips – the embodiment of the opinionated Daily Mail reading lower middle classes has told the viewers of GMTV this site is “a sure way to beat the credit crunch” – Fiona, you’ve let your people down.
I’d steer clear – I wouldn’t go so far as to say scam as they are pretty above board with how it all works but don’t believe there is any skill.

Bidding on Swoopo auctions starts at 15c, with no reserve prices.
The price goes up by 15c with each bid placed.
If a bid gets placed in the final moments, the auction is extended automatically by up to 20 seconds.
Each bid placed on an auction costs $0.75.
As some netizens commented , this new way of auction is “manipulating game theory to tap stupidity, the greatest resource on this planet.” Think about a tiny deal–if you buy something worth 20$ with a successful bid of 15$, there have to be 100 bids, which equal to 75$. The bidders including yourself collectively have paid Swoopo $15+75=90$. Any item worth 150$ or more will bring Swoopo 750$ net profit. The auction is very much like a casino machine gamble. Only in Swoopo’s design, human beings form the machine. And because of human stupidity, Swoopo is going to run just like a machine, with the result and profit very predictable.
Swoopo calls it “entertainment auction”–this is disgusting. Swoopo makes bidders reveal their stupidity, watches, and mocks them while money piles up on its account.
*** ***
Now, how do we beat swoopo?
Since the design of swoopo is based on the assumption that human beings collectively will act in a stupid way, we can beat swoopo if we somehow reshape our collective action in swoopo auction.
Here is how we do it:
Outside of swoopo, bidders have to form their own association–Association of Swoopo Bidders (ASB)–make some decisions based on simple calculations, and enforce the decision

Telebid Scam or not?
Firstly, what is Telebid? Telebid is an auction site, but an auction site with a difference. Firstly you cannot just bid on any old auction that comes up, you have to pay to be able to bid.

So how does Telebid work? First you need to register. Once registered you log in and buy bids. Bids cost 50p (£0.50) each and come in a variety of packs from £5 for 10 bids to £250 for 500 bids. Now you can use these bids to bid on auctions. An auction starts at £0.00 at a predetermined time. When someone places the first bid the price goes up by £0.07 and the time that the action ends increases by a random number of seconds from (anything from 1 second to 20 seconds). The time will count down until the time reaches zero and whom ever is the last bidder at that time wins the auction but every time someone bids this adds time to the countdown timer. Let us explain this further:

An auction is due to start at £0 in 4 hours (time now 1300). Someone places a bid and the bid increases to 4hours 10 seconds and the price goes to £0.07. When the count down timer reaches less than 1 minute (in around 4 hours) others will start bidding (maybe sooner) and for every bid the price will increase and so will the count down timer. When the count down reaches 1 second many people will sometimes bid and push the timer high and the count down continues. This carries on sometime for minutes and sometimes for hours until everyone else gives up and the count down time reaches zero and who ever is the bidder at that time wins the auction at what ever price it has reached.

An example: A wristwatch will start a Telebid auction in 4 hours time. Someone has placed a bid which puts the price at £0.07 and ads 10 seconds to the timer. With 2 hours to go someone else places a bid and the price goes to £0.14 and the time has increased by a few seconds. Most bidders will not bill until less than a minute is left. With only seconds to go 10 bidders put in bids and the price increases by £0.70 and the timer increases by 1 minute 10 seconds. And so it goes on until 1 bidder is left when the timer reaches zero (and the price can have increased to £10, £50, or even £300 depending on the value of the watch and what people are willing to bid up to). Sometimes an item will sell for a fraction of the value. A Nintendo Wii for example may sell for £20. The site also sells bids called 'free bids'. 300 free bids (worth £150) are offered for sale at 100% off. In other words if you win that auction you will receive 300 bids to use at future auctions but not have to pay for them.

So how does the Telebid site make money? Ok, let us do the maths. Each bid increases the auction price by £0.07 but COSTS £0.50. Many people are bidding on the same item. Because free bids are free, i.e. you do not pay for them if you win, the price can rise to much more than the actual value. Sometimes 300 free bids can end an auction at over £200. How much does the site make for this? £200/£0.07=2857 bids at £0.50 each bid=£1428 for something that has cost them £150. Another example is a laptop computer valued at £899 but with 100% off finally sells for £400 (but the buyer only pays for delivery). £400/£0.07=5714 bids at £0.50 per bid=£2857 instead of the £899 it cost the site.

What is the catch? Only one person can win each Telebid auction. Therefore there are numerous losers. Is Telebid a scam? That depends on your definition of Scam. Does the Telebid Auction site give you what you pay for? Well you pay for bids and that is what you get. When you use your bids do you get the items you bid for? Mostly, NO. Most people will lose an auction. Is that a scam. No You do not have to bid. Then why did you come here? To try to get something that has been suggested you could get it cheap. This site is playing on your own greed. Does that make it a scam? No. Do people who win auctions get the items that they won? We do not know. We only know that if you bid on and win an auction of free bids then you will receive your free bids. Do Telebid have people or robots that bid and win their own auctions thus denying members a chance to win? We do not know but why do they need to? As you can see from the above figures they make enough profit from each auction without resorting to cheating. Ok, some auctions they will lose some money but overall they make large profits on most of the auctions.

How to win? Don't buy bids. Seriously, only buy your initial bids of say 250 bids. Then bid only on bids. Ignore the temptation to bid on other items. Only bid on free bids and then use the bids you win to bid on more bids until you have several thousand bids. Then you can set bid butlers to bid on other items knowing that you can outbid others. Any bids you do not have to use are returned to your bid account. For example if you have 15000 bids and set a bid butler to bid for a laptop auction 100% free (an auction for a laptop that if you win the Telebid auction you only pay for the postage). You set the bid butler to bid starting from £500 up to £1000 (7142 bids). The auction ends at £800 so you used 4285 bids so 2857 bids are returned to your account. Don't forget to now bid on more bids to top up your bid account.

How it works
In the typical case, players are asked to pay a non-refundable fee each time to purchase "bids." These "bids" can then be spent on "auctions." The act of spending a "bid" on an "auction" raises the cost of the item by a fixed amount. Additionally, the act of spending a "bid" on an "auction" typically also extends the deadline of the "auction," providing an opportunity for a competing player to place another "bid", thus extending the "auction" again. The game is a brinksmanship game: each successive "bid" lowers the value of the "reward", and the last player to decide to place a "bid" and lower the value of the reward wins that reward.
Once the "auction" has been won, the auctioneer collects the final cost of the item in addition to the monies already collected by selling "bids".
Example
For example, an auctioneer might put a $100 gadget up for auction in a system that charges $1.00 per bid. Each bid increases the auction price by $0.10. Let's say that the starting price of the auction is $1.00, and that the final ("winning") bidder manages to acquire the gadget at the price of $25.00. To get from $1.00 to $25.00 in $0.10 increments requires 240 bids. Each bid cost each bidder $1.00. Thus, the auctioneer has collected $240.00 for the bids, plus $25.00 for the sale of the item, for a total of $265.00. Assuming the auctioneer paid $90 for the gadget, the gross profit is $175.00. However, it is unknown what customer acquisition costs are to run an auction so even those auctions that appear to have high profit may actually not generate a profit.(unlikely)
The bidder who placed the last bid (for $25.00) has had to spend at least $1.00 for the bid, as well as the $25.00 to purchase a gadget which retails for $100.00. He may have spent more money on prior, unsuccessful bids. All the other bidders who have placed the prior bids have spent $1.00 for each bid they placed prior to the winning bid and came away with nothing material.
Online penny auctions
In the last few years, there have appeared a number of successful sites operating on this model, which they usually call "penny auctions". Typically, consumer electronics such as cameras, laptops and MP3 players are sold. Bids typically cost 10-25c USD each(or 50p on Swoopobug.com, $1 on Winners24.com and up to £1.50 on MadBid.com in GBP), each increasing the final value of the auction by 1-2c(or 1p), and extending the time of the auction by another 10 seconds or so. For example, bid4vouchers.co.uk sells bids for 50 British pence, raising the price by one penny. This means that any item which sells for more than 1/40 the RRP is a guaranteed profit. Any item which sells for the RRP is effectively selling at a 4,000% profit. Conversely, an item that sells for 1c is clearly a loss of whatever the site must pay for the item - it is generally presumed that the sites "drop ship" the items. The most well known examples are perhaps Tenderosity.com, bid4vouchers.co.uk, bidray.com, gozila.co.uk and bidstick.com, with dozens now in existence. Due to the real possibility of people spending a lot of money on the sites with no gain, or spending more than the retail value of the item they end up winning, a number of blog posts and articles analyzing and criticizing the model appeared. Other articles support the concept as a fun and innovative form of auction. One programmer, Andy Garcia, and Rupert Elder, a Graduate in Economics from the University of Warwick tried to "game" Gozila and MadBid, but failed to win any auctions before abandoning the attempt.
While penny auctions appear to have much in common with lotteries and other forms of gambling, they appear to avoid being regulated as such. Bidrivals.com, for example, operates from Malta, provides a legal advice statement explaining why it is not a lottery.
Features common to some of the sites include:
Automatic bidding: bots provided by the site bid (called "AutoBidder,"bidagent" "autobid", etc.) on your behalf up to a maximum value. Multiple bots can end up bidding against each other until all but one reach that maximum value or run out of funds to bid with.
Bidding on bid packs: some of the items at auction include packs of bids themselves.
Discounts for purchasing larger numbers of bids.
Rookie auctions for people who have not won any auction
Risks
The primary risk of the bidding fee scheme website is that it is misunderstood as a regular auction Unsophisticated participants will not understand the distinction between a regular auction and a pay per bid auction, and so might apply poor judgment when participating. This has the secondary impact of polluting internet advertising with ads where a customer is unable to distinguish between regular stores or traditional auctions from pay per bid auction sites. As a consequence, the value of internet advertising and price comparison sites are diminished.
For example, one bidding fee scheme site placed an internet ad that advertised "A New PS3 at $80.35,deceptively implying that a new PlayStation 3 was available for anyone to purchase at that price.
Bidding fee scheme sites also exploit the sunk costs fallacy that is endemic in the human psyche. The fallacy causes players to psychologically feel that the past progress of a bidding fee scheme game affects future behavior, thus biasing the player towards larger wagers.
Some bidding fee scheme websites provide automatic agents that automate the placing of "bids". These agents are marketed in a way to make them seem comparable to the kinds of bidding agents (for example, PhantomBidder) used on auction sites such as eBay. However, in practice, these agents facilitate the rapid investment of large wagers by unsophisticated players who might not fully understand how the contest they are participating in works
Because bidding fee scheme websites exist in a legal gray area, there is little to no verifiable enforcement of rules.
Much like any auction site, there is no protection from the practice of bid shilling, in which the auctioneer uses a puppet to place bids in his own auction. This practice is illegal in legitimate auctions, but is particularly nefarious in bidding fee scheme auctions.Due to the risk of shilling, even after the players have spent large quantities of money purchasing "bids" in the auction, the auctioneer can still deprive any of the players of a winning bid by placing an additional bid of his own. To protect oneself against the risk of such shill bidding, the best practice would be to use only reputable long-standing websites that disclose their management, investors or other details of the company.Those sites that do not readily divulge who is running the site, complete with contact information, should be avoided.
Penny Auction Watchis a consumer watchdog blog and community that helps bidders distinguish between legitimate and fraudulent auctions.
Certain companies that run bidding fee scheme websites show the same auctions on multiple websites .
Since the profit is made through bidding fees, the bidding fees are not refundable. Also, as with any other site, bidding fee sites can appear and disappear quickly so it could be possible for a bidding fee site to collect bidding fees for several auctions and disappear before awarding the prize. In contrast, in Dec. 2009, Swoopbug.com began a "buy-it-now" function which allows losing bidders to apply all their lost bids towards the purchase of an item. Additionaly Swoobug.com intitited their Bid till you win option which will replace all lost bids( paid ) to the members account until they win an auction This constitutes a significant change in the business model by decreasing risks for the bidder.

 

Penny Auctions Comparing apples to oranges at swoopbug.com

After reading this account of traditional style penny auctions and doing a comparrison here is what you will find once a member registers he or she receives free bids to get aquainted with how the auctions work if a member decideds to purchase bids, the member places his bids and here is where the simularity ends, if the member does not win the auction his purchased bids are returned to the members account , this policy continues until the member wins an auction.
if the member choses to end the auction and purchase the item, any bids the member has made is applied to the purchase price of the item.( so the member still takes no loss) and quite often the purchase or buy it now prices is much less than what the member would have paid in a retail store.. the member is also rewarded for the bidding process by getting free bids just for participating. Swoopbug has done all possible to make sure the member has more than a fair chance at winning an auction.

For example, an auctioneer might put a $100 gadget up for auction in a system that charges $1.00 per bid. Each bid increases the auction price by $0.10. Let's say that the starting price of the auction is $1.00, and that the final ("winning") bidder manages to acquire the gadget at the price of $25.00. To get from $1.00 to $25.00 in $0.10 increments requires 240 bids. Each bid cost each bidder $1.00. Thus, the auctioneer has collected $240.00 for the bids, plus $25.00 for the sale of the item, for a total of $265.00. Assuming the auctioneer paid $90 for the gadget, the gross profit is $175.00. However, it is unknown what customer acquisition costs are to run an auction so even those auctions that appear to have high profit may actually not generate a profit.

The bidder who placed the last bid (for $25.00) has had to spend at least $1.00 for the bid, as well as the $25.00 to purchase a gadget which retails for $100.00. He may have spent more money on prior, unsuccessful bids. All the other bidders who have placed the prior bids have spent $1.00 for each bid they placed prior to the winning bid and came away with nothing material.

In the last few years, there have appeared a number of successful sites operating on this model, which they usually call "penny auctions". Typically, consumer electronics such as cameras, laptops and MP3 players are sold. Bids typically cost 10-25c USD each(or 50p on Swoopo.co.uk, $1 on Winners24.com and up to £1.50 on MadBid.com in GBP),swoobug.com, each increasing the final value of the auction by 1-2c(or 1p), and extending the time of the auction by another 10 seconds or so. For example, bid4vouchers.co.uk sells bids for 50 British pence, raising the price by one penny. This means that any item which sells for more than 1/40 the RRP is a guaranteed profit. Any item which sells for the RRP is effectively selling at a 4,000% profit. Conversely, an item that sells for 1c is clearly a loss of whatever the site must pay for the item - it is generally presumed that the sites "drop ship" the items.[1] The most well known examples are perhaps Tenderosity.com, bid4vouchers.co.uk, bidray.com, gozila.co.uk and bidstick.com, with dozens now in existence.[2] Due to the real possibility of people spending a lot of money on the sites with no gain, or spending more than the retail value of the item they end up winning, a number of blog posts and articles analysing and criticising the model appeared.[1][3][4][5] Other articles support the concept as a fun and innovative form of auction.[6][7][8] One programmer, Andy Garcia, and Rupert Elder, a Graduate in Economics from the University of Warwick tried to "game" Gozila and MadBid, but failed to win any auctions before abandoning the attempt. [9]

While penny auctions appear to have much in common with lotteries and other forms of gambling, they appear to avoid being regulated as such. Bidrivals.com, for example, operates from Malta, provides a legal advice statement explaining why it is not a lottery

Discounts for purchasing larger numbers of bids.

The primary risk of the bidding fee scheme website is that it is misunderstood as a regular auction.[citation needed] Unsophisticated participants will not understand the distinction between a regular auction and a pay per bid auction, and so might apply poor judgment when participating. This has the secondary impact of polluting internet advertising with ads where a customer is unable to distinguish between regular stores or traditional auctions from pay per bid auction sites. As a consequence, the value of internet advertising and price comparison sites are diminished.

For example, one bidding fee scheme site placed an internet ad that advertised "A New PS3 at $80.35,"[citation needed] deceptively implying that a new PlayStation 3 was available for anyone to purchase at that price.

Bidding fee scheme sites also exploit the sunk costs fallacy that is endemic in the human psyche. The fallacy causes players to psychologically feel that the past progress of a bidding fee scheme game affects future behavior, thus biasing the player towards larger wagers.

Some bidding fee scheme websites provide automatic agents that automate the placing of "bids". These agents are marketed in a way to make them seem comparable to the kinds of bidding agents (for example, PhantomBidder) used on auction sites such as eBay. However, in practice, these agents facilitate the rapid investment of large wagers by unsophisticated players who might not fully understand how the contest they are participating in works.[citation needed]

Because bidding fee scheme websites exist in a legal gray area, there is little to no verifiable enforcement of rules.[citation needed]

Much like any auction site, there is no protection from the practice of bid shilling, in which the auctioneer uses a puppet to place bids in his own auction. This practice is illegal in legitimate auctions, but is particularly nefarious in bidding fee scheme auctions.[citation needed] Due to the risk of shilling, even after the players have spent large quantities of money purchasing "bids" in the auction, the auctioneer can still deprive any of the players of a winning bid by placing an additional bid of his own. To protect oneself against the risk of such shill bidding, the best practice would be to use only reputable long-standing websites that disclose their management, investors or other details of the company.[citation needed] Those sites that do not readily divulge who is running the site, complete with contact information, should be avoided.[citation needed]

Since the profit is made through bidding fees, the bidding fees are not refundable. Also, as with any other site, bidding fee sites can appear and disappear quickly so it could be possible for a bidding fee site to collect bidding fees for several auctions and disappear before awarding the prize.[citation needed]. In contrast, in August 2009, Swoopo began a "Swoop-it-now" function which allows losing bidders to apply all their lost bids towards the purchase of an item. This constitutes a significant change in the business model by decreasing risks for the bidder.

Since the webmaster is the only one who can see the bids, it is also possible for the webmaster to bid on the item himself, which would be unfair to others but hard to detect. This would, however, be illegal and once again, bidders can protect themselves from this by only bidding at sites operated by long-standing reputable companies.

About the Author

We are a penny auction site offering Name Brand items for auction at an almost 95% savings from retail store prices. A most significant difference between swoopbug and most other auctions is we deliver all our merchandise from our own warehouse..

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