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What You Should Be Aware Of And Look For If You Are Planning To Take Part In Penny Auctions?

By Jeff Clerk

Republish: EasyPublish™ Published: 17Mar2012 Word count: 1217 Viewed: 38 time(s) Get Free Content For Your Site

There are a lot of people out there writing articles about penny auction sites, there pros and cons and some articles claim that they are scams. To that point I am writing to share some information with readers that points out what you should take notice of if you participate in penny auctions.

Likewise I want to state that just like any other opportunity out there, there are good sites that really make a difference and, of course, there are some site owners that find a way to give everyone else a bad name. You will need to make that call for yourself. However, I can tell you that there are some very good and honest sites out there that can save you a great deal of money on items that you want. You just need to find the right ones. With that said, I want to tell you about things that you should look out for in a dishonest site.

First of all whenever you find a new penny auction site, take a look at the previous auctions that have closed on the site. Especially take note of the winners. If you see the same people winning auctions all of the time, especially if the auctions they always win are larger auctions. This could be an indication that the auction owner has something dishonest going on behind the scenes. Remember auction platforms are computer programs and can be programmed to make sure that they raise enough money to cover the cost of an item before they let the item sell. This is a form of "shill bidding" where the auction owner has someone or even the program itself bidding the item up against the customers until they make enough money to cover the items cost. This does cost the customers something on the pay-per-bid sites because each time they have placed a bid it costs the customer 60 cents or more. So the auction owner makes the money at 60 cents per bid and doesn't have to supply the item because he was actually the winner. This is a scam and by law it is considered racketeering.

Another way to look for this kind of action is to figure out at what point the cost of an item is paid for and then watch several auctions to see if they just get beyond this figure and then end. Let me give you an example. Say you are involved in an auction for a $100 gift card and each auction bid takes the price up 1 cent. However, each bid cost the customer 60 cents to purchase it. In order for the auction owner to break even he would need the bid price to get up to $1.67.

Here is how you can figure out this price point for each auction that you are involved in. Take the price of the item and divide it by the cost of a bid. In this example it is $100 divided by .60 which equals about 167 bids to make the $100 needed to cover the cost of the item.

At that point the cost of the item has been covered by the bids placed. But, that is only if real customers are bidding against each other for the item. If there is a robot or people paid by the auction house bidding against just one customer, you, then they need to get double that. So the auction will not end until it gets above $3.34 to cover the cost. Now $3.34 seems like a great price for the item, however be aware if you are in a bidding war with a robot and the item is won at $3.34 you have spent 60 cents times 167 bids or $100 plus the final auction value of $3.34 for the $100 gift card. You actually didn't save any money.

Not all systems use this type of auction, however there are some dishonest ones out there that do. That is why I like seat based auctions because I know what my costs are going to be up front.

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