What are online penny auctions? Penny auctions are online auctions where all of the listings start out at one cent. The bid increments are also one cent per bid. These auction sites boast that winning bidders can walk away with an average savings of 90% or more.
The final prices of the online penny auctions are so low, that they become the obvious marketing hook for the site’s “advertising.” By now most people have probably seen or heard some of the ads. There’s at least one of the online penny auction companies that has a full-blown national ad campaign with radio, internet, and TV spots.
How low are the final prices of the penny auctions? To list a few; There’s $100 gift cards for $5 or $6, full-size HDTVs for $30-$40. A Nintendo WII for $20, even cars for pennies on the dollar. There is a catch, of course. There usually is.
What does a penny auction really cost? Let’s look at a hypothetical example using a gift card from a fictitious pizza shop. We’ll call our shop Tony’s Terrible Trash Pie Emporium. This is a $100 gift card, good for $100 worth of pie’s and sodas at Tony’s. Let’s further assume that you were the winning bidder for the pizza gift card, and the final price of this penny auction is $3.00. That’s great. You can take your family to Tony’s about 3 times. You could, that is unless you have teenagers. This might cut it down to 1 trip, but I digress. So, what’s the problem?
First of all, you have to pay for every bid. This could be $.50, $.75, or even a dollar. Well then, you say,”I’ll just wait till the timer is close to zero and then bid.” Not so fast. Every time there is a bid, more time is added to the clock. They claim that this more closely resembles the process of a traditional auction. I don’t know about that. What I do know is that with more bids, there’s more time, and with more time there’s more bids. This means more of those one dollar fees to the online penny auction site. I think you get the picture. You might jump on when the timer is at 5 seconds and the price is at $2.00 and have to ride that train all the way to $5.00 if you want to win. That’s 300 more bids, or 300 more dollars that goes to the company. They’re giving us the “privilege” of selling us a $100.00 gift card for the absurd price of $500.00, albeit these costs are spread among all the bidders. Furthermore, your chances of winning are so bad that some of the penny auction sites have special auctions for bidders who have never won. Sounds a little like Las Vegas to me.
What does an online penny auction really cost? It will cost a lot more than you think it will, or should. Let the games begin!
