The following guest blog is from someone who had firsthand experience with running a penny auction. Here’s his insight and thoughts on penny auctions from a business that wasn’t able to make it:
“Hello. I’m one of the IT persons formally with a penny auction site that has since closed it’s doors. We never used bots or ripped any of our customers off. In fact, we ran a contest for an xbox 360 prior to our official opening. The winner cashed it in for amazon credits and never posted that he’d gotten it, but he was sure to keep in touch with IT on a daily basis to ensure he was still in the winning. Nice customer.
The issues that Bidrail suffered from which caused their eventual closure happened on our site too. The majority of bidders will not bid against their friends and this kills startup sites.
The collusion and tagging even though most of you don’t want to admit it, basically allows you to rape new startup sites and that’s exactly what many of these bidders set out to do.
How you can say that the site itself is responsible and should have taken better care to prevent this situation is beyond me. How do you prevent something that the majority of you are proudly and knowingly doing? You want something for as close to free as you can get it, and startup sites are easy pickings for the known tactics.
We were virgin to this during our beta testing stages. All of our users bid against each other, as long as we gave them free credits. When we opened for real tho, that all stopped. Somebody would bid once and basically tag an item on our site and that was that.
Some of our customers who seemed to like us alot during beta testing, immediately accused us of running bots when we opened for real and they had to buy bidpacks. They’d tag something and somebody would rarely bid against them. As the person wasn’t using a “known nick”, they assumed we had bots bidding against them.
For the most part, when we opened for real and came out of beta testing, the bidders (our loyal userbase or so we thought) would tag items and that was that. We took steps to block powerbidders by usernames to prevent this; that forced people to use new nicks and us be accused of running Bots. We never ran bots on our system.
startup bidding sites don’t really have a chance. The pool is infested with sharks. You pillage rape and plunder and blame the site. There’s next to nothing the site administration or IT staff can do to make this better. Power bidders will intimidate others, they’ll use their status to lie about your site and kill you that way when they’re done pillaging your resources. Bidrail ran longer than we did, but in the end, the rogue bidders killed it too.
You won’t bid against each other, You won’t bid against so called power bidders, etc. How do you expect a site to function under those conditions? How long do you think a site without a huge userbase can run? The answer is: It can’t. It’ll either shut down, or have to resort to shady activities. We like Bidrail, chose to shutdown.
On our opening day, we had 20 auctions running. We observed one bid placed on each item and on the first day, each item sold for that single bid. Not one bidder stepped up and fought for it. We did a little research and found various bidders on social media sites chatting it up with their bidding buddies; they’d agree not to bid on so and so, etc. So we took steps to remove specific usernames from being able to signup, to increase the chances of fair play for all. That caused bot running accusations.
If you’re thinking about running a penny auction site, don’t. Unless you have a huge cash resource to pay for heavy advertising and a constant influx of new users who signup and buy bidpacks, you’re already sunk. When you open, you’re fresh meat. The power bidders will tag you and you’ll go under.
Sorry if this offends some of you but the truth does have a tendency to do that. The business model cannot sustain itself without competitive users and you guys don’t want to compete with each other.”
What do you think about his advice and thoughts on the model?
Photo credits by jakerome
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clembowski January 6, 2014, 1:43 pm
Sounds a lot like TheBidSpot. The speaker here only has part of the story right.
Amanda Lee January 9, 2014, 12:15 pm
Hmm interesting. Do you have any insight Clem? 🙂
Anon Ymous January 14, 2014, 6:30 pm
I was a developer at another PA site – what the author is saying is pretty much spot on..
Nabber Nabber January 16, 2014, 10:45 am
I also ran a PA for a short time. We tested it for almost a year before going live. What this other PA owner says it basically what goes on.
I did not use bots as well and decided to take our loss and close instead of cheat others. The reason for opening a PA was to run an honest site. I personally don’t think it can be done for a long period of time. Sooner or later the power bidders will fight off all bidders and then the site will want to fight them at their own game, hense “the bots”.
Ushantha January 17, 2014, 8:56 am
I’m not sure is this. However I feel its true. I have seen this on many times as popular power bidders just Tag the auction and no one bids. It may be because they are friends, but sometimes its the fear on other bidders. Fear to loss all their bids. I think start up sites should come up with Reserve auction + Random Win auction + Win Limits.
Josh January 21, 2014, 9:16 am
There are multiple perspectives to view this from.
Successful bidders often argue that its the site owners who have to figure out how to make the site competitive/profitable. They claim they are in no way responsible.
Site operators often point out the shadiness/downright dishonesty that sometimes originates with the bidders. They claim that the business model isn’t sustainable with its current clientele.
As someone who once considered starting a penny auction site (2009), I am continually reminded that there’s a reason why a few sites have made the business model work (QuiBids, Beezid) while many other great sites have been forced to walk away.
John January 22, 2014, 9:55 am
Hmmm – I don’t understand the tagging? What is it and why would it stop other non-friends from bidding?
Symon February 6, 2014, 9:33 am
I can understand some of what is stated and advised, thank you.
What I would like to have is a better understanding of why “tagging” and the “Powerbidder” has sufficient influence to cause a site to fail, especially if the creators of the site have prepared the membership mechanisms efficiently and monitored this activity with care and sufficient due diligence.
The ideas above “Reserve auction + Random Win auction + Win Limits for startups is something that we are looking to include in the charity penny auction site that we aim to launch in 2015.
More comments from techies and site owners would be appreciated to find a common shareable solution to launching new auction sites.
We appreciate a huge budget is of course very useful and apparently essential, but a dreadful waste of valuable resources if it is to satisfy rogue members and communities of members.
We do have a number of solutions to overcome the accusation of “bid bot” use, guaranteeing transparency of all auction activities.
Troy Mason April 1, 2014, 8:21 pm
All this stuff about bidders ruining auction sites is true!
But as a business person you have to be clever… it took me awhile but I figured out how to make it work, where no one has an advantage! I DID IT!
I changed the game for the better! As I said before you have to be clever.
Check it out… http://www.cashclub.cc
posterx May 18, 2014, 3:12 am
Troy, your website http://www.cashclub.cc is amazing! It is the most original penny auction site i’ve seen. The rules have been well thought. You are a smart man. I wish you success.