Question from a Reader: Will Penny Auctions Have a Future?

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Recently we received this question from a member in our forum asking what the future of penny auctions could be and whether or not the industry is dwindling.

Discuss the future of penny auctions in our forum.

Here’s the post:

“I hardly write on forums but something has been bothering me that I thought I would like to share with you.

I have been noticing a something with the major Penny Auction sites that may indicate that the whole Penny Auction phenomenon might be coming, albeit slowly, to an end. I know most of you would probably disagree, I for one would hope not but see my analysis of some of the major players out there. For the past 3 weeks I have been noticing what seems to be a downward trend on most of the top Penny Auction sites, I would welcome your opinions.

Swoopo: Clearly the biggest Penny Auction site out there. For the past 3 weeks I have noticed that although they still make a profit, this has been declining. In the past, auctions of big ticket items usually ended after 15-20,000 bids had been placed, a lot are now ending with far less than 10,000 bids. Just take a look at their ended auctions for the last 2 or so weeks and compare with auctions of months ago. They have also resorted to doing promos where they give users a further 30% free bids when they buy bids. Are they beginning to lose people?

Bidcactus: Now this is a company that must have a lot of cash behind them as I cannot see how they keep surviving taking so much loss. They lose money on most of their auctions and they must be spending a significant amount of money on advertising. Their traffic is huge but it seems people just go to their website but do not participate in auctions. This is probably why they do so many bid packages in order for them to recoup losses on items they put up for auction. I would never bid on a site like this because their losses scare the living daylight out of me, surely a site cannot survive on the long term if they continue to make such losses. Any thoughts?

Madbid ( UK ): This is one company that has had huge success in the UK market. Their growth has been phenomenal, they are the UK ’s biggest Penny Auction site and far bigger than swoopo in the UK . This is a company that charged £1.50 ($2.00) per bid and got away with it for quite a while. But things are changing…..during the winter Olympics they had a “promotion” where you could buy bids at half price, does that mean madbid were beginning to lose bidders? After the Olympics ended prices returned to normal but within a couple of days they had another promo stating that you could buy bids at 0.60 per bid, I keep asking myself that why would they do that, it seems they are on the road to bringing their bid costs down. Why? Are they losing market share, are they losing bidders?

Bidrivals: Ok, now this is the one that confuses me the most, if anything they seem to be growing and making HUGE profits on just about every auction. They run about 150 auctions a day and make a profit on just about all of them, and when I say profit I mean huge profits. I have two thoughts about this company:

• Are these guys for real?
• Do they employ unethical tactics such as shrill bidding?
• They have something on their front page that states “Watch our TV Commercial”, nice but what they have failed to point out is WHERE was this “commercial” aired? Anyone can make a commercial but that major cost comes when you want to air it. So where was bidrivals “commercial” aired, did they ever air that commercial? This may or may not be a ploy to lure bidders into thinking that this is a sound corporation. Why would they do this? Well to give bidders the “confidence” that they are a solid cooperation so would never employ unethical tactics.
• If what we see on bidrivals is all real. Then most Penny Auction sites really need to take a look at this site because they seem to have worked out how to make huge profits in the Penny Auction industry. If you calculate their daily profit, you will find that this company could be classed as one of if not the most profitable Penny Auction site. Any Penny Auction owner should really look at them and work out how they do it.

These are just my 2 cents on the current state of the Penny Auction industry, any contribution would be appreciated.”

Discuss in the forum

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