Penny Auction Sites are NO DEAL

by cathy

Post image for Penny Auction Sites are NO DEAL

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.

 

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{ 18 comments… read them below or add one }

JaneneMurphy April 15, 2011 at 3:15 pm

Wow. Thanks for giving me the heads up. I always wondered what those ‘buy expensive stuff cheap’ were all about and now I do. Sorry you got sucked in, but take comfort in knowing others won’t!

Jon April 20, 2011 at 3:47 am

Thanks for the review. Alot of these sites look very attractive at first glance but I noticed that there were a lot of small details that made me question them. Most seem to be a no win situation for everyone but the owners.

Jen July 3, 2011 at 2:27 am

You’re absolutely right, Penny auctions serve primarily to profit the site owners. They make it look very appealing that’s for sure.
I found myself in a similar situation as yours not too long ago and lost some money, but hey, we learn from our mistakes.

Jodi August 3, 2011 at 1:25 pm

Thank you for the information! That’s exactly what I was looking for.

Connie Hazen August 15, 2011 at 5:54 pm

I’m sorry you lost your money but grateful for the post and the lesson! I’ve always wondered what these auctions were about and how they worked and more importantly how they could afford to sell these items so cheaply. Now we know.

Remodeling Honolulu August 18, 2011 at 8:10 am

everyone has lost money aat some point – thanks for the blog share -

Spelmaskiner September 7, 2011 at 12:36 pm

I have never heard of these penny auctions but now that i have you can bet ill be staying away from them

debbie fryback October 13, 2011 at 8:00 pm

Dealfun.com. Not a deal. You have to buy bid packages. if you add up the cost of how much you have to spend on bids or bid on vouchers, you will soon see how they are makin money. You would be better off shoppin a sale or finding the item online thur a better supplier. Good luck to anyone who is willing to give it a try. I also think they have employees pushing up bid under online names (don’t have proff, but if you just watch it seems fishey). Again Good Luck. I spent lots and never could even win a 20$ item

rmanbackup October 16, 2011 at 4:19 pm

Thanks for sharing , Great information

grocery coupons October 24, 2011 at 11:28 pm

Thanks for this share, much appreciated. Wow, I am sorry to hear about this. Thanks for putting this out there for others to avoid.

Jay November 2, 2011 at 6:50 pm

I would say that it’s definitively a gamble. I’ve seen my friend win a $100 giftcard, but I don’t think he’s “won” in the long run. And I’ve seen an iPad 2 go for over $4000+

- Jay
Find a Deal at Recessionitis.com

Jack Keenan April 8, 2012 at 1:50 am

I’m glad that you realized what was going on before sinking the equivalent cost of an iPad into this venture. Penny auctions are effectively legalized gambling, and to make matters worse, new penny auction websites pop up and go away so quickly that you can never be sure which ones are even following their own rules. What’s to stop an algorithm from driving the bid up if an auction hasn’t reached its target profit margin yet?

Janjirarities August 18, 2012 at 4:41 pm

Aloha,
Great information and thank you for shared your experienced. I always wonder how it work. Because the auction start very low and they close the acution in two or less.

Janjira

Moe Buchener September 21, 2012 at 1:37 pm

In some countries these penny auctions are forbidden by law because they are considered gambling. Though most of them have all there is to know in their fine print, most people simply won’t read it. I consider myself lucky because I just heard about penny auctions by reading warnings like yours – otherwise I would have been fooled too, because the deals they are offering just look very tempting.

Alex K. October 21, 2012 at 4:20 pm

Wonderful post about Penny Auction sites! Many people fall for that scam and don’t read FAQ! I hope they will learn it!

The Gift of Alcohol November 9, 2012 at 5:36 am

Agree – Penny Auction sites are definitely what they seem to make out. I’ve never known anyone to win! Sorry to hear you have lost money – if anything you probably have more luck gambling on a sports game! At least then you have a chance of picking the winning side :)

Coupon Lady January 1, 2013 at 3:56 pm

Cathy,

Its great to see people spreading the word about these penny auction sites. I’m sure you’ve heard about Zeek Rewards, which was not only a penny auction but also was a huge ponzi scheme that scammed their affiliates out of money also. Check into it.

Anyway, thanks again for the article, it was a great insight into how these websites work and their real value.

Thanks
-Coupon Lady

Niche Here January 7, 2013 at 5:58 pm

I have to totally agree with you, they seem like a scam to me. First of all it’s the factor of luck, and next, websites could create bots or something to auto increment the product.

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