Penny Auction Sites Review

With eBay losing the faith many bargain hunters are discovering penny auctions as another good way to go.

There are some genuinely amazing penny auction deals for a very small investment, but there are also few scam sites out there as well. Here you'll not only learn the basics of what penny auctions sites are and how they work, you'll learn to tell the gems from the scams.

How penny auction sites work?

Merchandise is offered on a penny auction site. If the site has a lot of users, there could be eight or more auctions going on at once, at every hour of the day. If the site is just starting up, there may be just one auction at a time, they may be staggered in hour intervals, or the site may actually only feature auctions one hour per day.  Users interested in these sites have purchased bids, which they then use to try to outbid each other on the items. Unlike a standard auction site, each bid only jumps the price up by a penny. It also increases the time left on the item's auction clock, allowing other users to bid again. The last user to place a bid on the item wins it, generally for something between a few cents and a few bucks.

What kinds of items can I expect?

Personal electronics like iPod Nanos and Touches are big draws, and many of these sites have been regularly auctioning off Netbooks (a smaller, more lightweight take on notebook computers) and huge wall-mount plasma display TVs.  Gaming systems like PlayStation 3s and Gamecubes are common, and once in a while a site may penny auction off a car.  Different sites tend to follow their own themes and trends of merchandise; one site may specialize in electronics, another in home furnishings, still another in handbags, jewelry and fashion accessories. Part of finding the right penny auction site for you involves checking out their selection, and seeing if they auction off products you actually want.

How do penny auction sites make their money?

In short, they're banking on having (or gaining) enough users to keep the whole thing profitable.  You may have bought a PlayStation for $10.00, but the site has made more than that. Remember, for each bid you have used you have also spent the money you used to buy the bids from the site in the first place.  Depending on the sites, bids usually cost between three cents to a dollar a bid.  So on a site where bids cost, say, fifty cents each, the $10.00 that the PlayStation went up to in penny-bid increments also represents $500.00 earned by the site as each bidder threw in bids... meaning that the product actually went for $510.00.  Still, this is a more ideal case than most sites encounter, at least at first, because they haven't acquired enough users to pump the bidding up that far.  When you see a $50 gift card going for nine cents, you know the site probably lost their shirt on the deal, but that they are counting on getting enough users soon to make up the difference.  In the meantime, whoever got that $50 gift card with five bids of their own, each costing fifty cents each, has come out of it with quite a bargain.

What do scam penny auction sites do?

When a website is just starting out, be it a penny auction site or any other kind, it hasn't yet attracted a lot of users.  For a penny auction site, this means that their products are bidding for very low amounts, and a starting penny auction site can lose quite a bit at first while it's waiting for new users to trickle in.  Fraudulent penny auction sites create fake users to place fake bids on their items, in order to keep the final bid price high.  Any real user who logs in and buys bids ends up wasting their money on them, because either they will never win the item with all the fake bidding going on, or they will get it for an absurdly high price as a result.  Either way, the scam site has just defrauded them out of most of the money they have spent there.  Using this kind of fake bidding, either through a program (called a "bot") or by having friends or employees placing friendly bids (they are called "shills") defrauds people and makes the site less than worthless in terms of winning auctions. 

What should I look for in a penny auction site?

Are there items you'd actually want?

- Before registering with a site, make sure they feature products you actually have a use for. There's obviously little point in picking up a $50 McDonald's gift card for four cents plus shipping if you're a vegetarian. Another site may have that coffee maker you've been eyeing... but what happens once you've nabbed it? Does the site have enough things you'd want, frequently enough, to make it worth buying bids on it? Still another site may feature a selection of movies you'd never watch and games you'd never play (usually because DVDs can be very easy for a site owner to come by). Not particularly useful. That being said, as you peruse what's on offer keep in mind that you can also use penny auction sites to snag awesome gifts at even awesomer prices... doing that Christmas shopping early the whole year 'round has never been more fun, or less costly.

Does the site have enough auctions?

- There's little point in sinking money into bids on a site that has one auction a day. Look for sites that have at least one auction, preferably multiple simultaneous auctions, on a constant basis. (The flip side of this reasoning is that sites with less auctions tend to be that way because they don't yet have a lot of users, and that can be good for you. But even the few users it does have tend to focus on the one or two auctions a day it does have, and that's bad.)

The ideal amount of users - Sites with few users tend not to have many auctions, and tend not to have much selection in terms of their inventory. Contrariwise, sites with more users and more auctions tend to have bidding coming hot and heavy enough to drive up the prices and the number of bids necessary to win. So what's the right balance? Whichever you feel more comfortable with, actually. Settle on one and develop a bidding strategy around it. Even a packed site tends to have a dropoff at around 6am, when the majority of English speaking users who've been up all night have gone to bed, and before those in the daytime have gotten up and online. Nabbing auctions in off hours can be a good strategy.

Avoid sites with automatic user bidding

- A few sites have begun to offer free automatic bidding as a "service"... but for whom?  The idea goes that you set your userbot with a minimum and maximum price, and a maximum number of bids to use up.  You point it at a specific auction and let it go to town.  But this so-called service ends up benefiting the site owner at the expense of the users.  In a scenario in which two or more users have set their bid-bots at an auction, the automatic bidding only succeeds in jumping the auction price (and the number of bids used) quite a bit as the bid-bots battle their way back and forth.  All concerned lose their bids, and the site owner has just made a tidy sum as a result.  Even worse, sites which do this and show the bid history of a closed auction raise the suspicion that any supposedly legitimate user who's been bid-botting could be working for the site owner, and defrauding the other users in the process.  And as if that weren't bad enough, site owners who've installed user-bots on their site could just as easily have used botting scripts for themselves, creating completely fake users to automatically compete against legitimate users.  Once botting scripts are installed, there's no way to know how they're being used.  Long story short, bots of any kind can make even the best of penny auction sites look suddenly dicey.

In summary

Penny auction sites can offer extremely good bargains, if you do your research and plan ahead.  There's a plethora of sites to choose from, with new ones cropping up every day.  Choose one that everyone's heard about and you won't get much of a bargain with all the bidding.  Choose one that's just starting up and you risk finding the latest, greatest fraud.  Or at least... you would have, if you hadn't just learned how to tell legit sites from scams.  Now not only can you spot the difference, but you also have the option of catching a scam site in the act, calling up an attorney and pulling the plug on it... and making far more than a penny in the process.

Have fun!

Source: satori.hubpages.com

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