I came across a Time Magazine article today on penny auction sites, specifically Quibids.com. The article is a great resource for those who are new to the penny auction industry. Below is the news article:
Losing Your Cents
By Belinda Luscombe Thursday, Jun. 17, 2010
Mario0717 was going down in flames. Of that I was sure. If he wanted a fight over the Hamilton Beach True-Air Tower Ionic Purifier, I'd bring it. The purifier, which retails for about $100, was being auctioned at QuiBids.com just at that second for 14¢. Brazenly, I bid 16¢, before Kellyochico shot me down with 18. Mario hit back, with 20. Walker2197 volleyed with 22. But there was Mario again at 24. As soon as anyone else bid, he was all over it like mayo on cheap egg salad.
Clearly, I thought, Mario is a QuiBids rookie. He's playing this game wrong. The way to win at online penny auctions, the handsome ne'er-do-well offspring of Internet shopping and Internet gambling, is not to bid too often. Items sell for very small amounts, but you have to pay a fee — typically about 60¢ — each time you bid. And you can up the bid only a cent or two at a time. (See pictures of a grocery store auction.)
Here's how it works. Before you can participate in an online penny auction — which I'm going to urge you, right here at the top of the story, not to do — you have to buy a pack of bids. The smallest pack on QuiBids is $27 for 45 bids. Then you hit the auctions, where items appear to be selling extremely fast and mind-bogglingly cheaply: a $100 gift card for 16¢; a $150 knife set for $1.82; a $1,700 HD TV for $32.19. A clock counts down the seconds before these insane deals are gone forever. For anybody who finds a bargain even mildly stimulating, this is like pure heroin. In recessionary times, it's like heroin that will also save puppies.
The problem is that other people are bidding too. And each time you bid, that little 60¢ fee is subtracted from your balance and a bit more time is added to the clock so these other, very annoying people can try to beat you. Thus, even though you bid one whole dollar on an air purifier with only one second left to go, Mario0717, may he die in a fire, has time to outbid you by one lousy cent. This in turn makes you furious, competitive and reckless — all very bad emotions to have when an online merchant is holding your credit-card details. (See how Americans are spending now.)
QuiBids is not the only online penny auction or even the biggest, but it has grown the fastest, passing older sites such as Swoopo.com and BidCactus.com Launched in October in Oklahoma City, QuiBids has auctioned off almost 200,000 items and is already profitable, says co-founder Matt Beckham.
And unlike some penny-auction sites that use robot bidders to inflate prices, QuiBids is pretty respectable, according to Amanda Lee, a 22-year-old Minnesotan who monitors most auction sites on her blog, PennyAuctionWatch.com Despite QuiBids' questionable marketing techniques (like creating ConsumerTipsDigest.org which looks like a buyer's guide but is actually an advertorial), the company has a B — rating from the Better Business Bureau.
QuiBids obtains the goods it auctions from different distributors and retailers, and it gives losing bidders the option to buy those products at sticker price minus what they spent on bids. Beckham says that while the site makes money on big items and on packs of bids, it loses money on most things that sell for under $25. "But we keep those things on there, because we want people to have fun and win something."
I won a $25 pair of earbuds for 6¢ — a markdown, QuiBids let me know, of more than 99% from the retail price. But I spent more than $30 bidding on stuff I didn't win: a screwdriver, a Wii Fit, a tent, a watch, a cappuccino maker, a nonstick pan, an AV cable (apparently I'll bid on anything that's 14¢) and ... the air purifier. Mario got it for $4.84. Hope it chokes him.
Read more: http://www.time.com/time/magazine/article/0,9171,1997462,00.html#ixzz10k3brBBh
