How Penny Auction Websites Make Money

How Penny Auction Websites Make Money, 10.0 out of 10 based on 1 rating
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A lot of people have been asking us why these penny auction websites would be giving away products like new T.V.’s and computers at low prices. How could they possibly do it if these are brand new products? Wouldn’t they go out of business?

Some people have gone on to answer that question by saying that these sites are actually making a huge profit on products, because of the cost of bids to the consumer. If each bid costs $0.60, and a product ends up auctioning off for $20 that means the real price the penny auction site sold the item for was (20*100 = 2000 *.60 = $1200) $1200 dollars. ┬áSo if they sell an iPad for $1200, they’re making a huge profit on it. These same people go on to say that all penny auctions are therefore scams…

That’s blatantly false though. If you look at the financials of penny auction sites, they’re only making a small profit margin overall. If you monitor all the auctions on their website, you’ll see that most of the products actually only go for a couple of dollars, if not less. That means their taking a loss on a lot of the auctions that they have going.

Usually though, these penny auction sites makeup for the overall loss on the smaller products, by making a big profit on the larger ticket items like T.V.’s.

So, before you go around calling all penny auction sites scams because one product sold for $20+, you should take a step back and look at the other auctions they have going on. Sure they make money, but it’s not the huge profit people are claiming…

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