The Idea Behind a Penny Auction
Gambling, lottery, slots…man has always been fascinated by the magic of hazard that would blessingly award him with money and expensive objects earned through labor-free methods. And while Vegas became a legendary place, people kept running around to taste its zest straight to the core or all over the world. Excessive shopping, on the other hand(or should we say on the same one?!), has also been since forever a life-consuming drug that may wreck one’s mind and pocket. The two things combined have created few years ago a business that blew the art of brain-washing the intellectually challenged away: penny auction sites.
Also called a bidding fee auction, a penny auction is actually a waiting game in which the wait might make you poorer during a long long stare at the display of your computer, the places where this kind of auctions mainly carry on being internet websites. The way they work is pretty simple, as pretty simple it is to indulge people that desire fast winnings: the object to be bid on is usually a gadget, something expensive that can easily allure anybody. The sale price is a significantly low one, maybe even the tenth part of its retail price.
Whoever wants to bid for it has to buy bids first, moreover to buy their right to bidding with relatively small amounts of money. Every bid placed increases the sale price of the object with a very low percentage of it and also extends the time of the auction by a few seconds. The person lucky enough to bid the last gets to buy the item at the final price, but the auctioneer gets the money from all the bidders that paid their fees to enter the bid and the price that totals for the object to be bid on. Still not sure who gets out of this affair more wrinkled up?Lets talk numbers for a little bit:say there is an Ipad at stake sold for the amazing price of $50 instead of its real one of $800.
With 1000 bidders that each pays a fee of 1 dollar, the price of the item increases with 5 cents a bidder and therefore its final price is $100 dollars. Every bid also adds up 15 seconds to the auction period and finally, after a very unstable time and money wise deal, the person who wins the auction and already invested $30 dollars in bids gets to buy a $130 Ipad. The auctioneer draws together $1000 from bidding fees and $100 as for the item’s final price-the retail price of it being $800, the profit adds up to $300. Yes, it takes only simple math and symptoms of the endowment syndrom in order to make this type of business very successful.
One of the most well-known site that ever worked based on this scheme was swoopo.com, operated by Entertainment Shopping AG and based in Munich, Germany. Before it changed its name in 2008 in the one that became famous, it was called Telebid. This site turned penny auction into a fab that crazed people all over the world and developed in such manner that thousands, regardless their time zones, would log in and bid against each other. Besides the mechanism already described above, the website had other features designed to raise bidder’s hopes such as the Bidbutler-a service that would automatically place bids for you(in exchange of extra fees, of course)in the last 10 seconds of the auction.
When several Bidbutlers would bid against each other, the one with the more bids left at the end would win. The site managers claimed swoopo.com didn’t make as much money as expected within the years it worked and even filed for bankruptcy after closing the site in 2011. There is a controversy over the fact that the owners of the site might’ve dug their own holes in order to escape dealing with the law.
Penny auction, online or however they would take place, are to be forbidden in more and more countries. The United States are the first ones to take action in this direction and there are good hopes that this addictive so called „devilish” activity will be banned within their territory for good as a blinding, unhealthy vice like many others.