Penny Auction Sites like Swoopo, Gift Cards for a Penny, or Bid Cactus are a new internet phenomenon where the price for the item only increases one penny for each bid. It is not uncommon for a HD Television valued at $1,000 to sell for around $50 or $60. So how does this work?
Penny auction sites make money by making you purchase a bid before you can try to win an item. Bids cost anywhere from $.50 – $1.00 for each depending on what site you use and how many you buy at one time. There is usually a bulk discount.
The numbers behind Penny Auction Websites
So for this example let’s pretend we’re using Swoopo where bids cost around $.60 each. A Canon Digital Camera up for auction retails for around $500, and ends up selling for $62.34. The sales price of $62.43 really equals 6,243 bids. Those 6,243 bids cost $.60 each, so 6,243 x .60 = $3745.80. This means Swoopo just generated $3245.80 profit from one single item.
So who really wins?
There are two winners at penny auction websites. The winner every time is the house, which never actually loses. No matter what item they sell, they’re making an obscene amount of profit from it. The second winner is whoever actually won the auction, because they’re getting a premium item at a minimum price. Everyone else in between is a loser, because you’ve just wasted money (bids) and time.
Is it worth playing?
It’s definitely worth joining in the newest internet phenomenon and engaging in some entertainment shopping. You might score a really good deal, but then again you might not. It’s important to realize your limits and play within them. I recommend that you devise your own strategy on how to win penny auctions and follow it.
Thinking of starting your own website?
Think again. Penny auction websites are easy to create and there’s even a script on the web that Swoopo uses for around $15. But, like gift card exchange websites, they’re easy to start but even more difficult to maintain. If you look at the gift card exchange resource list over at Gift Card Advocate, you’ll notice all of the businesses that have started and since then closed down. It’s going to take a significant financial investment