Penny Auctions…Are They Really Worth It?

I’ve noticed a recent onslaught of radio commercials, and website pop-ups adverstising online penny auction sites lately.  They say that their sites can save you 90%, 95%, maybe even 99% off the retail price of their bid items.  While I’m not currently in the market for anything specific, I’m always looking for good deals on just about anything.  Normally I don’t lend pop-ups much credit, but when I saw a local company that opened in the Metro Detroit area was being covered by the Detroit News and many local radio stations, I figured why not give it a look.

I was reading the news online last week, as I often do, and I saw an advertisement for Bid Dogz.  They are a local company in Pontiac, Michigan, not far from where I live.  I’m a fan of anything Michigan, and I try to support our local economy first and foremost.  Upon arriving at the site I quickly signed up for my free membership.  They give you a sign-up bonus that equals 10 free bids on items.  Yes, this is how they make their money, when you buy bids.  They only have a handful of items to bid on at any given time, and as they are sold off, they are replaced with more items.  Immediately I was shocked to see an iPad being auctioned off at $0.03, with only an hour left!  I also saw a Coach handbag for $0.10, and a 25 bid package for only $0.01.  They conveniently list the retail prices and bid history for each item.  Unless you buy in extreme bulk (300 or more), bids are $0.75 each, so a package of 25 will cost you $18.75.  

So let’s get down to my first penny auction experience.  I used my first free bid on the iPad, and I was outbid several times and lost, the final price was a mere $.50.  Can you believe that???  I know you’re thinking, “hey, I can just bid in the last couple seconds and eventually I’ll win.”  Unfortunately, it’s not that easy.  When you place your bid within the last 10 seconds, the clock then adds an additional 10 seconds on.  So essentially you will never get lucky enough to bid in that last second before the buzzer goes off.  Instead, you place your bid in the final 10 seconds, and hope that everyone else eventually gives up, or they wait too long to click on the bid button and miss out on their chance.  Well I realized that if I wanted a chance at a hot ticket item I was going to need more bids.  So I clicked over to the bid package item next.  I noticed the previous auction on a 25 bid package fetched $.52, so I didn’t want to prematurely throw my hat in the ring.  I waited until it hit $.32 and began my clicking.  The end result, I blew through my remaining 9 bids, lost the auction, and the final price ended at $1.05…slightly further off my earlier estimation.  That’s 105 total bids ($78.75) on an item the company values at $18.75.  What’s even more amazing is that the winning bidder had to bid on the item 21 times.  That’s not to say that losing bidders didn’t place even more, one member bid over 25 times.  Essentially, the winner bid 21 times for a 25 bid package, and then paid an extra $1.05 for the winning auction price.  That’s a total price of $16.80 on an $18.75 item.  Sure he saved himself almost $2, but he just as easily could’ve lost, like the other less unfortunate bidders.

My Recommendation

Stay the $#%$% away from these sites!!!  Yes, there are deals to be had, just as there is money to be won inside the casino.  These sites are little more than a legalized form of online gambling.  The business model is almost genius, low overhead, high demand, and the addiction and thrill that comes with the bidding process.  However, this is not for the financially prudent consumer.  It won’t do you any harm to go and sign up for the 10 free bids and see if you can turn them into a great deal.  However, before you throw your money away on purchasing a bid package, donate it to charity, you will have done something good with it and receive a tax write-off to boot.  I knew nothing good came from pop-up advertisements!

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17 thoughts on “Penny Auctions…Are They Really Worth It?

  1. Evan

    Wow. I have been very curious about these sites but have yet to try one. This is as you said “genious”. The winning bid probably ended up with a good deal, but the site has made more money than the item is worth to begin with. This is really another form of gambling, except with sites like these and being able to bid so often means you can lose a ton of money very quickly. Good article

  2. Paul

    Ads for these sites are on XM Radio all the time, but I always dismissed them as some kind of scam. Great to read about someone that’s actually tried it. Sounds like if you really new how to work the system, there could be good deals here, but most typical users would be wasting a lot of money. Curious, how much personal info did you have to give to sign up for free? sharing my info is what worries me most about sites like these.

    1. admin Post author

      They ask for name, address, and email…. address because they assume they will need to ship to your house at some point. I have an extra email account I created just for this type of spam, so I always use that. They dont take any payment information at least!

  3. Ross @ Go Be Rich

    You’re right; these sites rely on the same exact mentality that casinos and other forms of gambling rely on. It would be interesting to see exactly how much some of these penny action sites make. I’m predicting that eventually as least a few of these types of sites will become targets for legal battles, similar to the recent trouble with online poker.

    1. admin Post author

      I bet these sites will become more regulated as time goes on, but there are too many loopholes for them to ever be legally considered as gambling, since they provide tangible products other than cash. It’s just amazing how they actually ARE gambling though.

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  9. Justin

    It’s funny the way AdSense pulls context from your post, so here you are warning your readers against penny auction sites and Google is serving up ads for Quibids (a penny auction site) right next to it (I’m just noting the humor in the irony, not calling you out).

    I tried to warn my uncle about these kind of sites, I think he mentioned swipebids, but he swore up and down that as long as you only bid on low dollar items like gift cards he was coming out ahead but I’m still dubious.

    1. admin Post author

      How ridiculous, right? I don’t often go on my own page so I never see the ads they are putting on there. But it’s funny you mention it, because I have seen it happen on others many times. It’s a shame though, because I sincerely only try to advertise, promote, or endorse products/services that I genuinely have tried and liked.

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