The Number 1 Mistake New Bidders Make: Not Understanding How Penny Auctions Work

dealdashhomepageThen crying “scam” anyway…
Ok, so these may seem pretty simple to some of you who have been bidding and winning penny auctions for quite some time, however many of you may be making the biggest mistake when diving in and trying penny auctions for the first time
The number one problem bidders have when it comes to penny auctions is not understanding how penny auctions work.
Penny auctions are online auction/alternative e-commerce websites that allow consumers a chance to win popular consumer electronics, household gadgets and gear, gift cards and other desirable items at a discount. But in order to get a discount bidders must take heed and learn how penny auctions work and mistakes that cause many bidders to lose a lot of money.
Unlike the traditional auction such as eBay, where bidders register and receive a bidding name, place a bid and if they’re the highest bid when the time runs out wins, wins. In penny auctions, bidders purchase bid packages ahead of an auction (or if skillful – refill in the midst of bidding). Bid packs, depending on the site, can range from a few set packages to sites that allow bidders to customize their bidding experience by specifying a set number of bids.
On DealDash bids range in packages and are currently $0.20 a piece. Bids on DealDash are currently, as of today, January 25th, 2014 sold in the following bid pack amounts 180 for $32.40, 400 for $72, 800 for $144, 1500 for $270, 2500 for $450To purchase bids bidders select the amount of bids desired and can use either PayPal or a credit card, depending on the penny auction site. Again, no bidding is not free on penny auctions, this is where the penny auction greatly differs from the standard online auction model. So once you have purchased your bid pack you need to know how to bid and how the timer works.
Unlike eBay, where the timer counts down, and the bidder who has bid the highest when the time runs out, penny auctions have timers that count down, BUT – and this is what you must understand If you want to dive into penny auctions: The auction clock may show 10 seconds left, but time will be added, or reset (depending on the site) with each new bid placed. So really, when is 10 seconds left not really 10 seconds left? Any time a bidder places a bid in an actively counting down auction. Not only does the timer increase, or reset with each new bid, the “auction price” increases by $0.01 (hence the name penny auction) with each bid placed.
I’m sure by now, if you’re reading this you’ll have seen the penny auction ads and ending auctions stating end prices for items from anywhere to $0.01 to $100 and beyond. This is what you MUST understand – a penny auction that ended for $45.99, really took in 4,599 bids from all participating bidders.
So let’s back up… A penny auction is an online auction site with a twist. Bidders pay for a chance to win, with each bid placed money is being spent and there is only one winner per auction, so money spent in bids could be “wasted” when you’re not a winner,
So in actuality, when a site advertises items that end of $45.99, the bidder may have “won” the item for the end price of $45.99, but this is in addition to any purchased bids. Say biddertommy won the item, let’s say it was a brand new MacBook pro – awesome deal right?, a MacBook pro retails for $X, well, biddertommy was bidding against just a few other bidders, and he really wanted to win, so he bid a lot… in fact, he placed 998 bids and had to open up another browser window to keep reloading his bid count by purchasing new bidpacks throughout the duration of the auction.
Bids on the penny auction site he was bidding on, were $0.75 a piece (not an uncommon bid price) so biddertommy spent $748.50, plus the auction cost (remember: this price was a result of a culmination of all bids placed by all participating bidders) of $45.99 + any shipping costs if applicable. So when you see that the new MacBook ended for $45.99 and think wow, tommy got an amazing deal – now you’ll know how penny auctions really work. Remember, bids on DealDash are often discounted, with current prices at $0.20 a piece.
Tommy spent $794.49, which still a great discount off of the retail say a MacBook valued at $1,300 but really not the huge final end price savings that you presumed he got based on only looking at the end price.
#1 thing you can learn from this – there are definitely deals to be had on penny auctions, but if you do not win an item for $19 or an iPad at 90% remember – the % off retail and savings price is in most cases a reflection of the final end prices.
Try and let us know what you win!