With the prices of everyday items increasing more and more each year, but wages remaining the same, everyone is looking for a deal on anything – necessities and luxuries. That is what is making new penny auctions so popular. A penny auction is one that occurs live, on an auction site. The goal for bidders is to gain a really cool item for a very cheap price. The problem, however, is that if bidders do not know the rules of these live auctions, the winners may end up spending more than the retail price for an item or the bidders may spend money and not win anything at all.
The way a penny auction works:
You may expect that these types of online auctions would work in a similar way to eBay, where the highest bidder at the end of the auction wins; however, they are actually much different. First, items up for auction are posted by the website owner and not third party sellers. Second, in order to place a bid, the bidder must pay a fee – for each bid – usually one dollar. Typically, the price of the item is increased by one penny each time a bid placed, which is why they are called penny auctions. The rules from here can vary from site to site. Generally, the countdown timer for the end of the auction can fluctuate. Sometimes the timer gets reset each time a bidder places a bid. Other times, the timer resets randomly. However, each auction site has a different way of doing this. When the timer finally runs out, the last bidder wins the item, hopefully at a discounted rate.
For example, let’s say that an auction site has an iPhone listed for an online auction. After all the bidders have placed their bids and the countdown timer has been reset numerous times, the winner is finally announced and won the item for just $11. This may sound too good to be true, but let’s look at how much money the auction site actually makes from this single sale. Since the winning price is $11, this means that 1,100 bids were placed. Since each bid cost the bidders $1, the website just made $1,100 just from bids plus another $11 for the cost of the item. Just for sake of example, let’s say this iPhone cost the website $300. This means that the auction site just made $811 from this single live auction.
But let’s look at how much you paid for this iPhone. You won the auction for $11, so you must pay this. Plus, let’s say you placed twenty-five bids on the item. This means that you paid just $36 for a brand new iPhone. Now that’s a deal.
The problem with these penny auction sites is that you will not always be the winner, no matter how many bids you place. That makes the whole process a bit risky and also a bit addicting. If you enjoy things like this, penny auctions may actually be a lot of fun for you. One cool feature of these types of sites is that you can sometimes earn free bids. Usually you can gain some free bids when you first register you account. Additionally, the sites offer free bids as referral incentives as well as for ‘liking’ their website on Facebook.
The types of products listed are usually quite valuable. Cell phones, iPads, televisions, videogames, jewelry and other expensive items are typical. In addition, you will also see a large amount of gift cards to popular restaurants or stores up for auction. Getting the winning bid on a $50 gift card for just $5 can be like winning free money. You can find more information on penny auctions here: Wikipedia Bidding Fee Auction