Like my co-blogger, I'm a big fan of Penny Auction Watch, and like him, I was amused by the win of a Honda Insight for $1.24. Amused but a little dismayed.
The truth is, a penny-auction site makes money so long as the average product goes for 2% of the the purchase price (given the usual arrangement of a 50¢ bid and a 1¢ increment). That is not a very high bar and it's bad for everybody (except the winner) when a site can't maintain even that standard. First of all, it sets up unrealistic expectation in unsophisticated users, and a more-realistic skepticism in the sophisticated ones.
Second, if a site gets itself into financial jeopardy (as the aptly named Rocky Bid seems likely to do), its investors might very well pull the plug. When that plug gets pulled, what do you think the people who have bought big bid-packs will get? Let's not always see the same hands. That's right, Bobby: nothing. Bupkis, zip, nada, niente. And that's bad for all penny auctions and all penny-auction bidders.
And I wonder what's going to happen in with this auction of Michael Jackson tickets. I'm guessing that the King of Ped-- oops, I mean the King of Pop, I'm guessing that the King of Pop is not going appear, so: does the winner get his bids back? Do all the other participants get their bids back? What about people who bought bid-packs just so they could participate?
Probably, the bidder who paid $8.59 for a pair of tickets worth $12,000 is not going just accept his money back. If I were him, I would be all about, "Give me the $12,000 refund that the auction house is getting from the promoter!"
Otherwise, some lawyers are going to be getting rich.