I admit it, I want and iPad 2, but don’t want to pay $700 plus for it. Despite hearing the stories of peers who’ve paid more than list price to own Apple’s newest toy, I went online today thinking I would find a great deal. Really, I should have know better. Instead of finding an iPad, I found myself caught in the deceptively guilded cage of greed, gambling and penny auctions. Please heed me when I tell you, penny auction sites are no deal.
After checking all the usual places without any luck, I found myself exploring alternative options for securing the iPad 2 at a good price. I have never paid much attention to auction sites other than Ebay. When an ad popped on my screen implying I could buy and iPad for $24, I was intrigued. Clicking on the ad, I was taken to a penny auction site where there were 3 iPad auctions right on the front page, all ending in less than two minutes where the highest bid was only $23…AND they were offering me 3 free bids. Free!! Woopee! (Of course, there is a reason Constant Contact and Google both have flagged that word as potential spam… really what product is free? )
Greed surged through me as I quickly signed up to get my three free bids. In the throes of techno lust, I barely registered typing in my credit card and purchasing 100 more bid opportunities for $60. Let me stop and clarify things here. Yes, I paid $60 for the chance to bid in an auction that might give me the opportunity to pay less than retail for an iPad. So, can you guess what I walked away with after I spent my 103 bids in just five minutes? Nothing! Just like a gambler, I was enticed by the potential to put down and little and win big. Penny auctions sites and others that you pay for the opportunity to bid are very different from auction sites where you are paying for a product. In an auction like Ebay, you only pay if you win the auction. In return, you receive the product for which you bid.
At Penny auction sites and others where you pay for the opportunity to to bid, you pay both for the chance to bid and the final bid price of the product if you win. If I had actually won the iPad for $24, I would have paid $60 for the 100 bids and $24 for iPad itself plus shipping and handling. Still sounds like a good deal…BUT…not really. Looking closer, every time I bid, I spent 60 cents. This added one penny to the auction price and 10 seconds to the time left on the auction. This means to get the auction price to $24, cumulatively all bidders had already spent $1440. No matter what the ultimate price, the auction site had already made a 200% profit on each of these 3 auctions. There were at least 1000 additional auctions happening simultaneously on this site. With a 200% profit on each auction, this penny auction was a great deal for the site owners.
Sobered by my $60 loss, I began reading the FAQ. The site owners refer to the auction format as ‘retail entertainment’. People are buying bids for the enjoyment of participating in an auction, not the purchase of a product. The FAQ also made it very clear that new bidders should NOT expect to buy their lowest bid package ($60) and win an expensive product like an iPad. According to the FAQ bidding on their site usually requires lots of experience and many more bid purchases to win anything of real value. They also cautioned people to bid responsibly on every page in small type.
Bottom line: I deserved to lose money. Penny auctions are gambling sites disguised as shopping sites. Buyers should beware. I give them some credit for providing warnings, but really…who reads the FAQ or the tiny print before doing something on a website. I applaud the sheer money making genius behind this site. They do an excellent job manipulating all the emotional triggers that promote participation. Shiny toys, the promise of a great deal, limited time to act and of, course , just like Pavlov’s dog a bone here and there to keep us coming back for more. Compete.com indicates this site enjoys more than two million visitors per month. I don’t know how many of those visitors make the same mistakes I did, but even just a few fish on that hook makes for a lot of lost money. Penny auction pushers are dealers that provide NO Deal. Do yourself a favor and JUST SAY NO.