Criticism about Penny Auction Sites

Penny auction sites may appear tempting – after all, an iPad priced at $50 looks like a steal. However, these are not like eBay. Like so many supposed “quick and easy” sites, these are far too often smoke and mirrors tricks designed to take advantage of gullible players. Perhaps, the criticism sounds cynical, but here is an essential overview of how these websites work. When players bid on an item – say, an iPad – they must pay around $1 for each bid, available in “bid packages.” The player with the most bids wins the item. But not the item itself – that person only wins the opportunity to buy the item at the lowered price offered. Just from this summary, it’s easy to see how these websites are so lucky. Imagine ten players each bid $200, and one bids $250. The site itself has earned $2,250 from these players, plus the $50 that the winner now must pay for the iPad. If the true value of the iPad is $500, then the site has still earned a profit of $1,800. So, who is the real winner here?

It’s easy to imagine all of the problems that can result from this playground for rivalry and deceit. What if one gets caught in a bidding war and ends up shelling twice the retail price of the item, just so that $450 isn’t completely wasted. As if this isn’t twisted enough, for each bid, the site will extend the time that the bid exists, so the more people bid, the more time the site has for others to bid. So, if the time extended is one day per bidder, and the bid originally existed for ten days, each of the ten bidders extends the life of the offer. In this case, its life has been extended to ten more days, plenty of time for more bids to pour in. With this kind of manipulation, the website can manipulate an offer to last for months or years.

Turned off of penny auctions yet? There’s more. No one is monitoring these sites to catch robots or automated bidding machines. One of these could easily bid on an item to extend its bidding life, or even to win the auction, and cheat people out of their money. Too often, the winners never receive the items they supposedly “won” through the site. This is because the penny auction sites often close down without notice, leaving the “winners” with nothing. Even if customers do receive the item, they must first endure weeks, or months, of bad customer service.

Though offers on these websites may look appealing at a glance, the truth about such scams is often buried in legal technicalities and terms and conditions. Only those who are quick to pick up on these, and ready to conquer the details with a good strategy and an iron will succeed in these bids. But first, keep in mind that an individual penny auction site is being sued for passing off these sites as “thinly veiled gambling” – this sounds about right.


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