I know, sounds too good to be true. After reading a few article to find out where the catch was, I realized the catch is right in front of your face. How these sites operate is you have to buy credits (pennies) that in turn are used to place bids in the auction. So for example, you would have to pay .60 cents for each pennie to in turn be used to bid on items. So to buy 100 bids would cost you $60. We are not even to the genius part yet. So while bidding, you can only bid .01 cent each bid and when you make a bid it usually adds 10 seconds back onto the countdown timer, allowing someone to bid again, and also keeping people from making that last minute bid (Sniping) and winning like on ebay.
So how are they able to give high priced merchadise away for nothing?
The answer is in the bidding. Take the Apple Ipad I mentioned earlier, it sold for $22.53, which is 2253 bids. Now multiply those bids by .60 cents each for a whooping $1351.80 + the winning bid of $22.53 of course. So from a business point of view, what they are doing is genius, that they are selling products with a huge mark up. Good for them. However, some may view this as a scam though, only for the reason that if you never win anything you are out a chunck of change and someone else is profiting from your misfortune. I did notice that some sites will still sell you the product you were bidding on at a discount of what you spent on bids. The IPad 2 retails for $619.99 and you made 400 bids (400 x .60 = 240). They would sell you the IPad 2 for $619.99 - 240 =$379.99. I am assuming they are ordeing these items in bulk and most likely getting a large discount, so they still profit with this offer while trying to be fair to the bidder.Personally, I would be nervous to start exploring penny auctions They seem like they could be great for getting quality merchandise at a low price, but I don't think my pockets are deep enough to stand toe to toe with the pros. I would be concerned with getting caught up in the hype of it. I also see an arguement that could compare these sites to online gambling. They both require money and offer an immidiate sense of gratification for your win (If you Win). They are clever though, most sites have a tiering system from beginner to expert. So the beginners have a higher chance of getting that first taste of victory; auctions restrict bidders that have won any previous auctions from participating. They have covered their bases pretty good. Would I call it a scam? No, just cleverly marketed to keep your focus on the end dollar amount and not the true cost.
Cheers,
Eric D.
