As it happens I thought I will give it a try to see what it is about and to see if it is really true. So I loaded $20 into the account and started bidding on an ipad. No more than 5 bids later I realized how their business works. First the bid amount starts with 1 cent and goes up by 1 cent everytime someone places a bid. The bid itself costs 75 cents. Even though the price shows as 2 cents the true price is 75 cents. Typically the auctions have a limited time by which the auction closes. In here there is no deadline for the auction. As long as there are bidders the auction goes on. Everytime someone places a bid, the auction time goes up by 30 sec. In essence, there is no guarantee when the auction would end. Moreover, if you run out of your bids (the ones you purchased initially), you are doomed, since loading them will take more than 30sec and you would loose on the item you were bidding on.
Lets see how the company makes money now:
1. You pay the company to buy bids; first source of income
2. On the item itself:
- to give an example, there was kindle-3 wi-fi graphite for sale. the so called sale price is around $13.90 in an 1 cent auction (meaning, the price goes up by 1 centeach time someone bids on it). So, there were already 1390 bids on it. Each bid costs 75 cents, which means company already got $1042 on someothing that costs aroud $140 on Amazon. phew.. if I had thought of it, it would have been great
3. How does the guy who bids win?
Now lets say I bid on the auction, and I only placed 50 bids to win the above item. I paid about $38 for it, plus the final $13.9 which totals to about $52. So, thats almost 50% less than the retail price. yay! great! i got a great deal. but wait there is more ....
4. What if I didnt win the bid?
I lost $38 on the item which I didnt get. but if the item happens to be retailable, then i can use $38 towards buying it. hmm.. the company makes either way :)
so, pay careful attention to these kind of websites. in fact, i feel that these companies should be shut down. very few people would understand what is going on and by the time you realize this, it would all be over. This is no different from gambling. I dont know which govt agency, but someone should pay attention to these kinda of websites and shut them down.
If you know who I can speak to on such things, let me know and I would love to follow it up.
Please pass this on to others ; make sure your friends are aware of this. If they want to go ahead and bid on it, please make sure they understand pros and cons.
P.S: I found some interesting books on Amazon; here are the links to them:
Corporate Fraud Handbook: Prevention and Detection
Fraud Casebook: Lessons from the Bad Side of Business
How to Smell a Rat: The Five Signs of Financial Fraud
Expert Fraud Investigation: A Step-by-Step Guide
1 comment:
I learnt about these penny auction sites recently. Apparently, some of the sites set up a program that automatically bids before the time resets and thus make the bidders keep going. No such thing as too good!! :-). This is chaitu, btw. I don't remember your old design but the new design looks good!!
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