Penny Auction Sites and Reviews

Penny Auction Sites: Too Good to be True?

If you’ve ever seen an ad for a penny auction site such as beezid.com, you’ve wondered if the claims are too good to be true. An iPad for $26? Before you get too excited, sign up, and start spending money, you need to take a look at how these auction sites work.

First, you have to buy a “pack” of bids. Often the site will offer you a special deal such as 100 bids for only $60, which ends up costing you 60 cents per bid. Now you need to understand how bidding works. Each item is begun with a minimum bid, often $0.01. The bid can only increase in one cent increments; so if you want to raise the bid to $1.00, this will cost you 99 bids at $0.60 per bid, or $59.40. Yes, you’re paying almost $60 to bid $1 on an item, and you will probably be outbid anyway.

Let’s say that you have used your bids judiciously, and have managed to win a laptop for only $50. You have spent $60 on bids, plus $50 for the laptop; still, $110 is not a bad price to pay for a laptop. But how can the bid site justify selling you a laptop for only $50?

Remember that each bid can only increase the price by one cent. If the laptop sells for $50, that means that 5000 bids were placed on the item. At 60 cents per bid, the auction site has brought in $3000, plus the $50 winning bid. Even considering the cost of the laptop (let’s say $500) the auction site has still netted $2550.

The next question is, is it really possible for you to win that laptop for $50? According to some accounts, you will never be able to win a high value item. These accounts theorize that the auction sites use shill bidders, people or bots employed by the auction site to bid on the items to drive up the final price, keep customers bidding, and ultimately keep customers from actually winning. While many auction sites vehemently deny these allegations, critically thinking consumers cannot help but wonder if the allegations are true.

Penny auction sites have been likened to online gambling or a pricey raffle. Chances are that the average buyer will end up spending far more money trying to bid on items than he would have spent buying the items outright. Plus, no matter how many bids you have invested into an item, another buyer could outbid you at anytime, and the money you’ve spent bidding is wasted.

Many reputable sites and organizations warn against these sites. Says a Consumerist.com article about Swoopo.com, one such penny auction site, “Swoopo will feed into every gambling and spending impulse buried in the irrational parts of your brain, and suck up your money.” While we won’t say that it’s impossible to come out ahead using a penny auction site, we will call it highly improbable.