2 Part Series Are Penny Auctions A Scam Or A Bargain

Jan. 12, 2010 - PRLog -- Are Penny Auction  a scam or a bargain?

Conceptually Penny Auction sites are very smart money makers which will probably be only gaining more popularity, or notoriety in the future

10 ways Penny Auctions are  Different than EBay’s
Bids cost from  .60 to $1.00 each
The site admin controls supply and demand
Product price increases .01 cents per bid / to .10 cents per bid
Products start at $.01 to .10
Placing a bid at the last second resets the timer 10 to 20 seconds
'Bid Butlers' can be used to automatically place bids within certain price ranges.
Bid butlers not allowed in nail biter auctions
If another bid butler matches your bid butler's price range all bids are automatically placed and auction time is extended significantly (usually) as all those bids add 10 - 20 seconds each.
beginner auctions allow you to compete with only people who haven't won an auction
One auction site swoop bug.com offers several options that are much different from the traditional penny auctions. Swoopbug along with the buy it now option also offers a bid til you win option ( members with paid bids get to bid on auctions and if the member fails to win the auctions the bids are returned to that members account until such time as the member has won an auction ) this option does not apply to the nail biters or non profit auctions.
Speaking of non profit auctions Swoopbug also offers a free service to registered non profit or charitable organization. All proceeds minus the cost of the item being auctioned is sent directly to the Non profit.( No administrative fees or deductions )



Verdict: Penny Auctions are  not a Scam and Definitely not a Bargain
These Auctions make too much money using gambling psychology and marketing. It doesn't need to do anything illegal to add icing on the cake, its profits are already enormous. While it can be profitable to setup bots that bid up the price until a target is met, penny auctions can do this legally by Google ad bombardment of certain products and keeping the supply of products low most penny auctions have  a limit to the auctions There's no real way to know for sure if they have any shady methods, but in my opinion they're already making too much money to risk anything stupid that might arouse suspicion and lead to a PR disaster.
It should be noted the question isn’t how much the penny auction site make on any particular item, rather can you actually win an expensive item for the cost of a dollar ? The answer is yes. Just because an item costs 5 hundred dollars at a retail store and there are 900 bids ( at a dollar each ) doesn’t mean squat. The last bidder to make the one dollar bid wins the item and that’s that. Sure the others lose but the winner sure isn’t about to complain, such is the case with lottery tickets. When you purchase a ticket and do not win, you may feel bad, but the next day your back at that counter buying another ticket or two right.. People seem to be fixated on how much the site is making and losing site of the fact that not matter how much the site makes there are winners and as such there are going to be losers.


Logical Pitfalls
There's several ways you can fail at these auctions Understanding these 5 points should increase your chances and make your expectations more reasonable.
Pitfall #1: Gambling psychology
Penny auctions are a modern, more aggressive implementation of the dollar auction which is designed to make logical people waste an irrational amount of money. Most auctions have a big red 'last 10 to 20 seconds' countdown flashing hundreds of time before the auction ends. Most of the time on items that are worth something: many people lose, 1 person wins. Like gambling, people are much more likely to remember how many times they almost won or won rather than all the times they lost, getting hopes they'll learn to play the system or if they did something just a little bit differently it will lead to success. If a person has submitted a majority of their bids, and they only joined the site to buy a particular item, it may seem logical to continue bidding more than the item is worth just to try and avoid having to buy more bids or risk a clean start with few bids on another auction. It's easy to not think clearly when you constantly have a resetting big red flashing 10 second count down. Pull away from the page when you need to think about something and don't act until you're completely sure. Calculate the cost to risk analysis and be aware of how many people are bidding. Lurk if you're a new user.

Pitfall #2: Sold for Only $x! I should have bid
Many higher price items sell for low in the case of a single bid butler. Single bidders get scared away when their bids are instantly beaten over and over again with a depressing amount of bids being thrown after repeated countdowns. Just because it sold for a low price doesn't mean you would have won at that price. Many of the people that setup bid butlers are just hardcore ebayers that resell the item. $10 - $15 resell profit will suffice at minimum and at that rate they can afford have hundreds of bids on some of the upper priced items. Other people don't want to use bid butlers while one is already active because it can eat several dollars instantaneously depleting your bids and increasing the auction time to unreasonable levels to where more single bidders can track it and join at a later time. To kill a bid butler you hurt yourself and let the single bidders gain an advantage. Be the first one to throw one out on an auction set to end near 3 in the morning and you might just be lucky.
Pitfall #3: Cheapest bid package + bid smart
Be ready to waste a ton of bids and money if you want to even try to be successful on some of these sites is basically a rich man's game rather than a poor man's opportunity. The advertising speaks for itself, "Entertainment Shopping" not "Bargain Penny Bids". Though there's a few lucky people, wasting $20 - $100 on bids and not winning anything should be taken lightly, because that will be the case for a majority of new users. If that's not something you can do then probably penny auctions aren’t for you. Bidding at the last second multiple times tends not to help. In fact, sometimes the server lags out and you'll get an auction ended even if you bid a couple of seconds before the end. Sometimes the timer displayed on the browser isn't perfectly in sync with the actual ajax time, also the latency of how long their packets take to reach you can severely hurt your timing and ultimately expectations. If your plan is to bid at the last second, the only bids you might be getting in will be losing ones if the server is slow and or the latency is bad. It takes about 300 milliseconds to get data back after a request. If the server is slow then maybe 500 milliseconds - 1 second. Compound that if your connection is slow or you're far from their server. The average human reaction time is about 200 milliseconds. You can try to time your click exactly but that's not quite how it works. When your competing with other people instantly beating their bid is more depressing than letting them 'almost win' (last sec bid). People with limited means trying to get a one time bargain on something in particular will be disappointed. Ebayers and craiglist resellers that play the system and will be satisfied even with minimal returns are the type that will ultimately gain the advantage and profit the most. The terms and conditions make it clear no resellers are allowed, but why else would many of the winners keep buying the same console systems over and over.
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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..